YFP 219: How to Negotiate Your Salary and Benefits as a Pharmacist


How to Negotiate Your Salary and Benefits as a Pharmacist

Alex Barker talks about why pharmacists should negotiate their salary and benefits, benefits of negotiation, and two practical negotiation tips.

About Today’s Guest

Alex Barker helps pharmacists create fulfilling careers and lives. For a time, he was a burned-out clinical pharmacy specialist. Now, he is the Founder and Head Coach at TheHappyPharmD.com where, alongside his team, he creates classes to help over 750 pharmacists find and create new career paths. The Happy PharmD’s goal is to help 500 pharmacists transition into new jobs by January 1st, 2022.

He recently published the book Indispensable: The Prescription for a Fulfilling Pharmacy Career. When he’s not working with pharmacists, he spends time with his wife, Megan, and two lovely girls, Izzie and Addie.

Summary

Alex Barker, the Founder of The Happy PharmD, is back on the show discussing salary and benefits negotiation. He talks about why pharmacists should negotiate their salary and benefits, the benefits of negotiation, and two specific tips that you can use when having those difficult conversations with your supervisor. Alex also shares some insight from his e-book, “A Pharmacist’s Guide to Salary and Benefit Negotiation.”

Through the discussion, Alex breaks down the four benefits of negotiating. Your salary determines your future. Your salary can control, to some extent, when you retire. Your benefits depend on negotiation. Lastly, your salary now affects salary negotiations at future jobs.

Alex walks through some of the eight steps for negotiating salary and benefits listed in the guide. Pharmacists should do their research and document it. Research salary and benefits internally, externally, regionally, and for specific skills. Alex also suggests that pharmacists discuss compensation after the offer is made, and once you receive the offer, you do not have to act right away. Alex shares a typical response for negotiating a higher salary. In his example, the candidate expresses thanks to the hiring manager for the offer then takes some time to reflect. With some time to evaluate, you will be better able to discuss salary and benefits that you feel you are worth, based on your experience and the value that you add to the company.

In closing, Tim Ulbrich shares two real-life examples from the YFP Facebook Group, and Alex provides his advice and guidance for each.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Alex, welcome back to the show.

Alex Barker: Tim, it’s always a joy being with you, buddy. Thanks for having me again.

Tim Ulbrich: Absolutely. Glad to have you back as this time, we’re going to dig into salary, negotiation, as well as other things to negotiate beyond salary. But this is a good segue from our last conversation on Episode 205, not that long ago, where we talked about the pharmacy job market and considering the current state of the market, which we’ve talked about before, Alex, the Bureau of Labor Statistics projecting a decrease of about 10,000 pharmacist positions between 2019-2029. Some folks may hear that data point, may have listened to our previous conversation and be thinking, negotiation? What negotiation? Is that even possible? So let’s start there, Alex. Why should someone listening, you know, resist the urge to throw their hands up and say, ‘Not worth trying,’ right, considering the supply and demand changes that we’ve been seeing over the last several years. Is this even a relevant topic?

Alex Barker: I think it is. We put a post the other — a few months ago now on LinkedIn asking, ‘Do you feel comfortable negotiating your role, salary, or benefits?’ And obviously it was just geared at pharmacists. Vast majority of people said, ‘Absolutely not. No way.’ And I don’t think I blame them. You know, I’m actually working on as of this recording, we’re working on our Quarter 2 job market report. And things have kind of taken a downward turn, and I think it’s because of the COVID pandemic kind of wrapping up the hiring sequence as I think we all were predicting. And I think the tone of the market, particularly with newer grads and students is, ‘I’ll just take anything. Please just give me anything.’ And you know, you’ve been at a couple of universities, you’ve taught at different places. I don’t believe salary negotiation is taught.

Tim Ulbrich: That’s correct.

Alex Barker: Yeah. And there’s also this mindset of a residency is a major career pathway. And that role is non-negotiable in most cases. Most people I think enter the market now with this expectation of the market’s tough, so I’m just going to take whatever I can get. And whatever it is, I’m going to be happy because I’ll be able to pay off my loans, I’ll not be indebted, I don’t have to claim bankruptcy, you know, whatever the worst possible case scenario people go through in their minds. Why is negotiating important? It’s because you have value. And the pharmacy market is — yes, it’s in flux. But you have a doctorate or the equivalent of a doctorate for those BS pharms listening. And you are going to provide a lot of value to a company when you are offered a job. And you should be able to negotiate for the things that you want. And recognize as well that this is a long-term game. This is not, ‘I need to demand for the things that I want.’ Having this discussion in the beginning when you’re offered a position is laying the seeds for the things that you want for your career in the future.

Tim Ulbrich: That’s right. That’s right. Alex, I think that’s spot-on, right? You’re laying the seeds for what lies ahead, you’re initiating some of this conversation, the expectations. And we’re going to talk about other reasons and benefits to negotiation. Alex, I remember — I’m going to date myself a little bit here but 2008, graduated from pharmacy school, took a residency position, which as you mentioned, was non-negotiable, for a whopping $31,000. And thankfully, salaries have come up a little bit since then in residency, although not a whole lot. And then took that first position for an even $100,000. And it’s interesting, you know, here, we’re talking about 2021. You mentioned the Q2 report coming out here soon, which is showing that continued trend. Well, this was a different market in 2009. And I did have leverage to negotiate. But I didn’t know that. I wasn’t comfortable with that. I didn’t have the school, I didn’t have the skills, I didn’t have the tools, I didn’t have the mentorship, right? And I was excited. It was the first offer. The answer is yes. But as we’ll talk about here in a moment, remember, this is the starting point. And this is so important. It’s not just about the dollars. It could be benefits, it could be some of the confidence, the self-worth, the positioning, the value that you’re bringing to the organization. So some of these I think are very tangible monetary benefits and some of them may not be tangible monetary but very important, in some cases more important. Alex, you mentioned the LinkedIn post, right, and the answer was, ‘No, like I’m not comfortable.’ And I think this topic is one that folks either say, ‘You know what, I’m not comfortable.’ Maybe it makes folks a little bit uneasy. Maybe they squirm when they think about that conversation with their supervisor. It could be awkward, it could be overwhelming. Why is that the case? Is this unique to pharmacy? Or is this just something overall? Like we’re not comfortable, fear of rejection, lack of self-confidence, like what’s the why behind that?

Alex Barker: All of the above, I think. In pharmacy in particular, if you were to do an analysis of our personality as a profession, we would be the people that like avoiding conflict. We would like to be the people who everyone’s on the same team, we’re all working together towards the same goal. And so conflict is not something we’re typically taught in our education, conflict resolution, conflict management. But by and large, I think in most western societies, honestly, our value is placed on a dollar amount. And getting told that you make a certain amount is a reflection of self-worth and to change that, to think about negotiating for that self-worth when you may not feel like you are worth that, is a problem. So if you don’t feel confident in your ability to do that, then you’re probably not going to take actions towards that end. In fact, there’s quite a bit of growing research on this concept called professional identity in pharmacy in that pharmacists have a weak professional identity, which essentially means that we don’t tie ourselves strongly to the identity of a pharmacist. This has all sorts of consequences for our profession. One of the main ones — don’t want to deviate too much on this — but is the fact that our role is changing. You know, pharmacy, we’re trying to change our perception of who we are and what we do. And unfortunately, this just creates confusion for us as pharmacists. What do we do? What is our value? Are we just dispensing automatons? Or are we prescribers? We don’t know. And because we don’t know, that creates a lack of confidence in what we do. And that lack of confidence translates into, again, what we kind of talked about earlier, we’ll just take whatever we can get. I can relate to your story, by the way. I did the same exact thing. I remember the phone call. I was working a clinic, they gave me the call, and they said, “We’d like to offer you the position.” “Oh! Well, OK. Great.”

Tim Ulbrich: Yes.

Alex Barker: Yeah, tell me more. “Well, it’s $115,000 a year.” And dead silence on my end. “Oh, yeah. Of course.” You know? I’ll take three times my salary. OK, what’s next?

Tim Ulbrich: Yeah.

Alex Barker: It’s so foolish, but if you’re not informed, if you’re not trained to kind of handle that situation, why wouldn’t you take that?

Tim Ulbrich: Yeah, and I think, you know, one of the thoughts that comes to mind, Alex, as you were just talking about — of course we’re overgeneralizing — but when we talk about some of the personality of a pharmacist or folks that may not be comfortable negotiating, I would have put myself in that bucket, especially early in my career. I think we need to be careful that we’re not pursuing an outcome of avoiding conflict or avoiding an uncomfortable conversation because while that may feel OK in the moment that you don’t have to be in that uncomfortable conversation, if it leads to resentment down the road or you feel like you’re undervalued, that can have significant ramifications, right? We’re not just talking anymore about dollars and am I making a fair market value? But do I feel valued as a part of this organization and do I feel like I’m advocating for myself? I think that’s a part of negotiation that often gets overlooked for a variety of reasons of which we probably all individually struggle with for different reasons of which is a different discussion but I think is important that we really, honestly evaluate and reflect of why might we be avoiding this conversation? What’s behind that, right? Let’s peel back the layers of the onion a little bit to inquire further. Alex, so your guide, “A Pharmacist’s Guide to Salary and Benefit Negotiation,” and folks that are interested in receiving that guide, 29-page e-guide that you put together, great resource — we’re going to hit some of the high points here on this episode, certainly not go into the full details of that — folks can get a copy of that for free by sending an email to [email protected]. Again, that’s [email protected]. Let him know you listened to this episode, get a copy of that. One of the things you start out with, Alex, is four benefits of negotiating. I think some of these are obvious but some maybe not as obvious. And we’ve alluded to a couple of these. But talk to us about what are these benefits of negotiating, laying the groundwork for why we think this is important before we get into the strategy.

Alex Barker: Yeah. You’re going to love them because you’re Mr. Money Man. So your salary, it determines future raises. Right?

Tim Ulbrich: Yep.

Alex Barker: If you start off at $100,000 versus $110,000, every raise you get thereafter will be more if you are at $110,000. This is obvious. But over time —

Tim Ulbrich: Compound effects.

Alex Barker: Exactly.

Tim Ulbrich: Compound effect of that.

Alex Barker: Yeah. It’s huge. You know, I remember starting that job at $115,000. And I think the year before I quit, it rose to $127,000. Now I worked at a very bureaucratic, very rule-driven, union-driven organization. So this may not be as negotiable in terms of salary as other organizations. But whatever you start with often determines the future. So if you’re thinking about a career transition, if it’s your first job, you need to understand you have to negotiate — you should negotiate because it’s going to determine what you get paid in the future. Depending on whatever strategy you take, the next reason is that your salary often determines when you retire. You know, I know you’ve talked about different retirement strategies on your podcast a lot. I’m in your community on Facebook and I see a few people wanting to follow the FIRE movement. So this may not be relevant, depending on how I guess driven you are to retire early versus later. But obviously a higher salary, if you decide early on in your career to save the majority of that, can help you retire earlier if you choose to. And one of the things that I think most people look at — because when you think about I guess like the salary aspect of pharmacy, there’s a lot of hullabaloo about it. I polled 500 people on LinkedIn, and over 76% I think said that they think salaries are decreasing. Now the data is actually contrary to that. The data actually suggests there’s a very small increase, if not over time flattening, of our salary. But the rumors obviously are more popular than data. A lot of people focus on it, but benefits matter too. If you don’t negotiate for those benefits, you could be missing out on some really just life-changing and lifestyle things. One of the best things I ever did during my pharmacist career working as a clinician was getting the change to the four-day work week.

Tim Ulbrich: I remember you doing that.

Alex Barker: Yeah, back when you and I both were working day jobs.

Tim Ulbrich: Yeah, I couldn’t believe you pulled that off, actually, because you know, within the organization — that’s challenging if there’s not precedent for it.

Alex Barker: Absolutely. Yeah, so just full disclosure, I used to work at the Veteran Affairs. I don’t represent them obviously now. Never did, really, before online. But I loved the three-day work week. And it just felt like even though the days were longer, yes, and I did miss out on quality time in the evening with my kids, that three-day weekend was just so perfect. It’s so wonderful. Negotiating for your benefits can just make a huge lifestyle difference. And I know for me personally, when I had that, it made me significantly happier about what I was doing at my day job. And then lastly, the main reason why you want to do this is that this job that you take, whatever it is, it will probably not be your last and final job. All trends right now point to people changing jobs more frequently than ever before.

Tim Ulbrich: That’s right.

Alex Barker: And whatever salary you end up taking at this next job likely will influence the next job salary that you take because you want to use that, whatever your previous salary was, as evidence for your value, the contributions you make at your company, and you can use that as fodder for your next salary negotiation.

Tim Ulbrich: And Alex, so good. So you talked about four different things there: your salary determines your future, your salary determines when you retire, your benefits can depend on it, and then it affects salary negotiations at future jobs. And you know, I’m not going to get out the nerdy investment calculator, but I’ve talked about on the show before just one really tangible example beyond what this means for the income that’s coming into your bank account after taxes and all that. You know, take a simple employer match on a retirement account, right? If you’re making $110,000 because you’ve gone through a negotiation or $120,000 instead of $100,000 or $105,000, whatever that difference would be, it may not seem large. But that additional match on that benefit, you know, is going to have a compound — significant compound effect over time. And that doesn’t even account for your point, which is a really good one, you know, if you’re going to be changing jobs, which likely you’re going to be doing many times throughout your career, often your current position is the jumping point for that next position. And you’ve got typically pretty good leverage there if that organization really wants you in that role. And I’ve got a really tangible example of this when I made the transition from Northeast Ohio Medical University to my faculty role to The Ohio State University College of Pharmacy and overseeing the Master’s program in health systems pharmacy administration. At that time, I really was enjoying my role at NEOMed. I loved what I was doing. Interesting opportunity came up at Ohio State, love that institution, the people that work there. The opportunity was there, but there wasn’t really that pressing need to make that move. And you know, that’s probably one of the better strategies of negotiation is if there’s a recruitment that’s happening and you don’t necessarily have that need, obviously you’ve got some leverage. But using current position and salary obviously becomes — for me, it was and it becomes for many people — that jumping point to that new role. So it’s not just the first offer that you take that has the implications. For those that are listening, maybe they started a position five, six, seven years ago and have seen marginal increases in their salary that probably haven’t kept up with inflation, if they’re thinking ahead to that next jump, like it’s not just at the job offer. You can also negotiate while you’re along the way. And you should be having those conversations, right?

Alex Barker: Absolutely. You know, just on a quick point there, one of the reasons why I feel like a lot of people can’t negotiate or feel like they can’t is something you said previously. When they offer you the job, they want you. It means that they don’t want other people. They’ve made decisions collectively as an organization to give you the job, not someone else. This may not be true for every organization. You know, there may be some devious nature to some offers, which I know there are those kind of practices. But in general, major organizations in particular, when they give you that offer, when they say, “We want to offer you the position doing this and it’s for this much,” that means this is an offer to you, and this is where a lot of your practice negotiation strategy will come into play where you’re able to wrestle with that, hopefully it’s an offer that you love so there’s not a lot of conflict. But if you’re negotiating and what you’re asking for is reasonable, they’re going to work with you because they’ve already made the decision to commit to you. I have not heard horror stories nor actually does any research indicate that negotiation for the offer more often than not ends in the person’s offer being terminated. What happens actually more often is that offers are made to pharmacists and for whatever reason, budgetary restraints most commonly happen where the job is let through. It is not because of negotiations.

Tim Ulbrich: Yeah, I agree. And I’ve been on the other side of these conversations, Alex, in several instances. And even if, even if there’s not a huge gap in preference between candidate 1 and 2, what often happens is when that offer goes out, that organization starts to envision that person in that role and what they bring to the table, right? So they’re starting to affirm the strengths that person is bringing, the opportunities that they’re bringing, and they’re starting to see that person in that role. And there’s a risk to the organization — so if I’m offering you a position, Alex, I’m waiting for you to hear back and let’s say you try to negotiate. And if I’m the employer and I’m like, “No, no, no, we’re going to make an offer to the second person. Just we can’t budget-wise do it,” like unless that number is way out in left field, like there’s a risk I now lose both of my candidates as the employer end. So flip the script. I think this is sometimes where we’ve got a lot of self-confidence challenge and issues and obviously this is a very individualized, you know, assessment and hopefully where some good mentorship can provide value, what do you bring to the table, why are you unique for that position, how are you different from other candidates, but really great advice there. Alex, in the guide, I think it’s in Chapter 3, you start off by talking about mindset and the connection between mindset and negotiating. And you write that your strategy doesn’t just start at the negotiation table. It starts with your mindset right now. What do you mean by that?

Alex Barker: Well I think the quote that I put at the beginning of the chapter fits it perfectly. If you fail to plan, you are planning to fail. You know, a lot of people think the biggest struggle in the process of getting a new job is the application, the interview. And most people put the majority of their effort when looking for a new career in those things. And the idea of success, the idea of getting an offer and negotiations often doesn’t even come into play when making this consideration. And so in most cases from what we’ve learned from talking with thousands of pharmacists is they don’t even plan for this. There’s a lot of pessimism about our job market, there’s a lot of pretty negative analysis and posts about it, and so why would you plan for success? In their mind, I think. And if that’s the case, you know, whether you think you’re right or wrong, you’re probably right. I was thinking as you were talking about this guide, when I first made it, I did a ton of research. Not only did I help people increase their offers by thousands of dollars, but I spoke with negotiation experts. I interviewed them. I talked with hiring managers, executives, I talked to them about this issue, and I talked with them about what the best practices were, and I gathered up all this research and information. And I thought, this is really valuable, this guide. And I remember thinking, OK, well, I’m looking to see what other businesspeople are doing out there about negotiation courses, books. And I thought, I could sell this. I could legitimately sell it. And it did make a few sales but nothing near where what I had hoped. And I just learned that after talking with people and presenting this, people were like, why would I pay for this? I’m not going to be able to negotiate anything. So I was like, what? Like, there’s such a low level of mindset around this issue that people aren’t even believing that this is possible.

Tim Ulbrich: Yep.

Alex Barker: So now we just, hey, we just give it away for free because we have multiple reports of people using this guide, following the steps, and getting thousands of dollars more from the initial offer, which of course compounds over time. But this is why I feel like mindset is so important, it’s why I’m hoping that people kind of see the stories that we’ve posted online to social media and say, “OK, other people are doing it. Maybe it’s possible for me.”

Tim Ulbrich: Absolutely. And I think you do a nice job, Alex, in the resource, which is really valuable and I hope people will take a look at it, where you give some tangible strategies, eight steps to negotiate your salary and benefits. And we’re not going to talk through all eight of those. I want to hit just a few of them that I think folks can walk away with some very specific ideas and perhaps skills that they can take to those conversations that they’re going to have with their supervisors. So let’s walk through a few of these. First, Alex, is document your salary and benefit research. Tell us more about this one.

Alex Barker: Absolutely. So if you don’t know what’s going on in the salary world in pharmacy, you’ve got to get up. We’ve got a guide on our website, it’s very thorough. I recommend you check it out. But you should be doing your research in really three main areas. Internal research, meaning looking at what your company is paying people, what published information they have. External research, seeing what other companies are paying. Specific skill research, so if you have something specific to your career, residency, certification. Those are easy examples. You should understand what value that trans — how that translates into into the market. The reason why you want to document these things is because when negotiating, you want hard evidence, proof of the value of what you’re going to do for that company. Because you can’t just say in the negotiation, “We want to give you” — let’s say the hiring manager says, “We want to hire you as a clinical pharmacy specialist managing this HIV clinic. And we want to pay you $115,000.” You could just say, “Absolutely. Yes. I’ll take anything. Just give me the job.” Or what you could do is do your research. So look in the city and state and look to see what is the average pharmacist pay for that kind of job? There are of course information on our website, TheHappyPharmD.com, but there’s plenty of other resources as well like GlassDoor, Indeed, Mercer Job Salary Report.

Tim Ulbrich: Some state associations do some of this too. Not all.

Alex Barker: Absolutely.

Tim Ulbrich: Yep.

Alex Barker: Yeah. And with that, you’ll be able to tell easily like what is an average. What’s the median? What could you expect even before you are offered the position because it’s becoming less and less common now for job postings to say — particularly for professionals — what is the salary reach. You want to have that evidence so that when the offer comes, you’re able to gauge whether or not this is something that you would want. Also, if salary isn’t the thing for you, like let’s say $115,000 a year is an acceptable salary for what your life expectations are and let’s say that you know that on average, this position gets paid $120,000, well that’s $5,000 difference. You could negotiate for that. But you could also negotiate for other benefits. “Well, because I’m not getting what the average is, and the average is this, here’s what I would like to ask for in return.” This research is so critical because it can lay a solid foundation on what is true because the company cannot dispute these external resources.

Tim Ulbrich: That’s right.

Alex Barker: I mean, they can certainly say no. But they can’t dispute what evidence is collected.

Tim Ulbrich: Yeah, it’s not Alex’s made-up numbers, right? This is data. Yeah. I think too, Alex, the other thing I think about here is if I’m in a position let’s say I’m getting an offer for say $110,000 and I really think because of my research and because of x, y, and z, I really think that should be let’s say $118,000, right? And the answer is no. Now there’s some strategies for how you navigate that conversation and there’s very specific techniques that you talk about in the guide. “Never Split the Difference” is another great book that talks about some of those techniques where you’re really trying to get to that yes and it’s not just that initial no and how do you approach that. But let’s just say for the sake of this example the answer is no but you’re really interested in that position, you think it’s a good fit. I think one of the thoughts I have here is if I’m that candidate, my next follow-up is remember, we’re laying the foundation. You talked about that earlier. What can I do? Like what can I do over the next 6-12 months to get to $118,000, right? What are some of the goals that I can work towards? What are some of the opportunities? Because if I’m a hiring manager and I really like a candidate and they say, “What can I do to get to whatever that number is?” like that starts to really become the road map of the objectives for that individual and perhaps some even opportunities, depends on the organization of course, the company you work for, of what are some things that they might be able to do that either is or is not in their job description to be able to earn up to that income.

Alex Barker: Absolutely. Hopefully by that point, when the offer is given to you, you’ve asked the right questions in the interview to have a really good understanding of what the position is and where the company or the department, pharmacy department is going in particular. This is a great place for you to provide even more value during the negotiation process. One example that comes to mind was a client we worked with who was wanting to get into academia — no prior experience, no residency — and wanted to run a clinic, something that this person hadn’t done before. The offer came, and what was offered was a lot lower. And they based this on the idea that ‘Hey, you don’t have a residency, you’ve never done a position before.’ It was quite a pay cut for this person. So what this client did was brilliant. They knew that what this college was struggling with was getting new sites. This was a relatively newer school, and they were struggling with that aspect. And obviously, if you don’t have the number of rotations, you can’t get always accredited. It’s a huge problem. You can’t market your school as well, which is becoming increasingly important for colleges. So what this person was able to do was twofold. Because the offer came in, they were actually able to renegotiate their position to where they were doing more of the kind of work that this person enjoyed, which was doing more experiential education management and getting more involved in that department, talking with more people, getting more sites on board, with certain guarantees that they were able to negotiate for. And in turn, this meant less clinic time, which this person still loved. But she was a kind of pharmacist who enjoyed a large variety of tasks. So being able to negotiate in the moment, knowing the company’s priorities, being able to get more of what you want — and ultimately, she was able to negotiate a salary change as well — is a brilliant strategy. Don’t think that no means no.

Tim Ulbrich: Yep.

Alex Barker: In this case. In this case alone.

Tim Ulbrich: Alex, that too is a good example of like understand your environment. You know, I believe negotiation can apply to everyone, but understand your environment and where you may have more flexibility and leverage. So that example, an experiential education individual, there is not seven of those at a college, right? There’s typically a director of experiential education. So if I’m the department chair, I’m the dean, and I working with that person, I have some more flexibility of which is true just in that environment overall. But through things like administrative stipends, through how we split time, through other things that I’m not as concerned with like I’ve got 10 people that are in the same role and I have to have them all within this range, right? Because obviously that’s something that an employer might be thinking about. So I think understanding your environment — and I would even point to that position, that’s a really hard position to both recruit and retain. It’s one of the hardest positions to retain in a college of pharmacy is an experiential director because of the challenges and the stress that can come with it. So an experiential director is listening out there, like you’ve got leverage, right? Understand the leverage that you have. So good stuff. Alex, I want to fast forward to the offer. And again, there’s lots more in the guide. You go through eight specific strategies, but one you talk about is the offer moment, right? So this is what we’ve been waiting for, the offer is on the table, we can react to something. Talk to us about some negotiation tips after receiving an offer that folks can consider employing in their own situation.

Alex Barker: Practice, practice, practice. Practice with your spouse if you’ve got one, practice with your parents, practice with a friend. Role play the event. This is by far the best advice I can give you. It isn’t hard because most people have had a job. Most people have gone through this experience. While probably the majority of your friends and even parents are not managers and have actually done this, you can put yourself in that situation and script your response. You do not need to accept right away would be my first encouragement. You don’t need to say absolutely yes, no, or even negotiate in this moment. For me, I’m a very emotional person and so having — making decision in an emotional state often leads to not the greatest results. Hence, both probably your and my first job offer. Right? “Oh yeah, I’ll take it 3x my salary! Of course! That’s a great thing!” That was a great moment, but making that decision in that moment may not reflect really where you want to take your career. So be willing to say, “Thank you for the offer. I’m so happy to be able to have the opportunity to work with you. But I want to think about this, I want to talk with my spouse, I want to review my research and make an informed decision.” Having another call is not unexpected for people because everything they share with you about the offer — and by the way, get more than just the salary. Make sure that you understand the benefits package, make sure you understand the demands, make sure that you understand what their goals are for you in this role.

Tim Ulbrich: What you’re saying yes to, understand that.

Alex Barker: Absolutely. I think everyone has had an experience where they took on a job and didn’t realize everything that they were going to be asked to do. In fact, every time I talk about the offer with people, I often kind of get that response of, what happens when the unexpected happens? Like they tell me that I’m managing this now and I’m doing this and I’m doing this when that wasn’t a part of the offer. Well, that’s a whole other discussion. And my final recommendation to you is even when the offer is better than what you expected, still hold back your yes and ask yourself, what do I really want? Take that time before and during the offer to really consider is this everything that I want? Or is there something more can I get? Heck, even if it’s just $500 for an education fund. Something as simple as that can just make that much better and it also can create a better relationship with the team that you’re working with.

Tim Ulbrich: Yeah, and I think sometimes, Alex, you know, it’s monetary. Sometimes it’s things that are maybe not in the form of salary but could be professional development-related. It could be carved out time to work on certain initiatives or projects, for some folks it could be an administrative role that are pretty easy to create from the employer side. So you know, those are often, again, you’re setting up future opportunities and leverage and then there’s other areas you can get into like maybe they can’t — because of how that position is classified, maybe there’s limitations on salary for that position, but if you have something else like an administrative position, you’ve opened up like stipends and other things that can be different ways that they classify income. So there’s certainly some strategy here to be thinking about. But great wisdom in that recommendation of take some time to think about it, right? And express the gratitude of the offer. Express, you know, some of the interests that you have in the position. But I think that pause is incredibly important, not only to give yourself space to think about it but again, flip the script, right Alex? So if I’m hiring and I’ve got Alex applying and I’m like, ‘I’m really excited about what Alex can do for this organization,’ I’ve got the offer out there, I’m starting to envision Alex in that role. When Alex says, “Hey, Tim, really excited about the position, the company, the direction what you guys are going. I’m grateful for the offer. I really need 48 hours to think this through and really evaluate how this fits in with my goals and talk this over with my wife, think about it for our family, like now I want you more, right? Now I want you more because you’ve created that space and you’re opening up the door for me to expect a follow-up conversation. And I would encourage folks, like in that follow-up conversation, if there are things that you are genuinely excited about as well as maybe some reservations, concerns, or questions, articulating some of that, giving the space for them to talk, is going to even further open up that door for some of the negotiation. And you talk in the guide, Alex, about some strategies that folks can read up to learn more about the use of silence and mirroring and active listening and again, this is something that you can read and I think apply in practice certainly so that you’re ready for that situation. And Tim Baker and I also talked about this on Episode 166, about why negotiation is an important part of the financial plan. And we talked through some of those strategies as well. So again, folks, check out the guide. We just hit a couple of the high points. You can get a copy of that guide by sending an email to [email protected]. Again, “A Pharmacist’s Guide to Salary and Benefit Negotiation.” Alex, I want to wrap up our time with a couple of comments that we had from the Facebook group, in the YFP Facebook group. And I said, “Hey, I’m going to be recording with Alex, upcoming episode on salary negotiation, give me your thoughts.” And two really that stood out to me, one that I want to get your reaction on based on everything we just talked through, what are you hearing as why that might have been a successful negotiation and then the second one is someone who’s got some questions around some difficulties that they’re having with the negotiation process. So you up for that?

Alex Barker: Hopefully my responses are adequate. Let’s go for it.

Tim Ulbrich: Alright, here’s the first one. And this comes from someone that put in the YFP Facebook group says, “I”m a recent graduate who is hesitant to negotiate, but I’ve been with the same company for 5+ years and knew I owed it to myself to at least counter once I got the job offer to move to full-time staff pharmacist. I was able to get $250 more per hour on top of the initial offer and build a great relationship with my boss to help reach my future goals as a pharmacist. Biggest things I learned throughout this process: No. 1, it’s not offensive to ask for more. Know your worth. No. 2, the company already likes you, so don’t freak out about taking back that offer. You’re now trying to reach an agreement that works for both parties. And No. 3, my biggest selling point was that I would be saving the company time on training for the day-to-day things since I was a pharmacy tech and intern, so not having to reorient, re-onboard somebody in that role.” What are your thoughts to that, Alex?

Alex Barker: Super smart kid. I shouldn’t say kid. But just that simple having that belief that they’re worth that value and demonstrating that through evidence earned this person $5,000 more a year. You know, I don’t know how much prep this person did, and I’m sure it was stressful, as most people think negotiations are. But that little bit of effort earned him $5,000 more dollars that he would not have made had he not made the effort. I love the angle of him deepening that relationship with his manager.

Tim Ulbrich: Yes.

Alex Barker: That’s the thing. As you were talking before this example, I was actually just thinking that this kind of feels like dating all over again or like the phase before dating where you’re like, ‘Ooh, does she like me?’ You know, and your hands touch for the first time. You’re like, oh my gosh, electric jolts go up yourself and you’re like, oh my gosh, this is so, so awesome. But you don’t know if they like you. There’s definitely a misconception of yeah, they like you. They want you. And if you’re able to demonstrate with evidence, with proof, and with a strong agreement commitment to what you’re going to do for them, then they’re more than willing to likely give you what your value is.

Tim Ulbrich: Yeah.

Alex Barker: And it would be great to teach that in pharmacy school. It would be great to say, “Here’s the value of what you bring. Here’s what — for example, one pharmacist, here’s what they’re able to produce economically for a business, hospital, community pharmacy, whatever,” so that you have an understanding of it isn’t like the company is just throwing money at you and not getting anything back, right?

Tim Ulbrich: Otherwise that wouldn’t make sense. The position wouldn’t be there.

Alex Barker: Right. And salaries wouldn’t be at where they’re at if a company wasn’t making money.

Tim Ulbrich: Yep.

Alex Barker: So $5,000 in the grand scheme of things to the company is not a lot of money to keep someone happy and retained because the cost of retention is higher than probably what you think.

Tim Ulbrich: I was just going to say that, Alex. For anyone who’s listening and has worked with an organization for a period of time and know that you’re an awesome employee and ambassador of the organization, go do some research on the cost of retention and I think that will give you a lot of confidence and feeling comfortable of why and employer wants to keep a valued and key employee. It is significant, not only in the cost of time of retraining but what that means for the culture of the organization, the time that’s spent, all of those things. And it can be underestimated, as you mentioned. Alright, next one I have here is a little bit of a hey, help me out here, what should I do? So this comes, again, from the YFP Facebook group. It says, “I don’t negotiate for salary and benefits because my employer doesn’t really discuss compensation at all.”

Alex Barker: Yikes.

Tim Ulbrich: “There have been two times that I have asked for a raise because I had taken on more responsibilities, so someone else who had left, grew metsync, implement of vaccinations, other clinical services, started diabetes prevention program, etc., etc. Both times, the boss essentially said, ‘I’ll look into it.’” And goes on to share another example where boss was paying a company to do something that she had been working on and so asked, “Hey, what can I do to earn that money instead of us using that money to hire somebody externally?” That ended up of her getting some raise, not the full amount, and so the question here is how can one more effectively negotiate with someone who really doesn’t seem interested in wanting to have that conversation?

Alex Barker: Yuck. It sounds like this kind of manager is the person who sweeps problems under the rug and doesn’t want to handle conflict themselves. So that is definitely an uphill battle. I do — I sympathize with you. But here, I would say at the core of all of this, is actually a word that Tim, you used earlier: agreement. Employee is an at-will agreement between yourself and the company. You are not forced to work that job. You have the right, the choice, to make that decision. And agreements change over time. They have to because the market changes, demands change, and clearly, you — I’m assuming everything you’re saying here is true and obviously we only have one side of this story — but I’m assuming that you’ve been providing consistent value over time and you’ve had two attempts without success. So my old ID mentor used to tell me, “Two points don’t make a trend, but three do.” I think a third conversation is warranted. And I think you need to say with great certainty what your value is, what you’ve produced for the company, and what your expectations are moving forward, letting them know what you’re willing to decide if a decision isn’t made. You know, the whole ‘Let me think about it,’ or ‘Let me work on it,’ response kind of — it reminds me of my children asking me to play with them throughout the day as I work from home, you know? Like, “Dad, we want to play! Let’s play! Let’s play!” “Yeah, yeah, yeah. We’ll do it later. We’ll do it later.”

Tim Ulbrich: “We will. We will.” Yeah.

Alex Barker: And it pacifies them knowing that I’ll eventually get to it. And I do. At the end of the day, I do. I fulfill on my promise. I play with them. This person hasn’t fulfilled. And they’ve done that now twice. That’s evidence for you. Now, you need to be willing to come to a decision about what it is that you’re going to be doing should they not give you a raise. And this is hard because, you know, one of those decisions obviously is ‘I’m not going to work for you,’ or ‘I’m going to work less,’ or ‘I’m going to look for a new position.’ And you’re well within your rights to negotiate for that. There is nothing forcing you to continue working for this company. And you can point out very clearly that they have not fulfilled the request that you made previously for negotiating your salary. Hold yourself to that high standard and elevate them along with you. You know, this shouldn’t be a us v. them, right, kind of battle. It should be about hey, you’re on my side. And this is what’s happened. Here’s the value of what I think I’m worth. And how can we move forward? Before you start suggesting or demanding what your actions are, try to understand what the limitations are. Maybe they did look into it and they ran into a roadblock and they’re too afraid to tell you of what that roadblock is.

Tim Ulbrich: Yep. Yeah, and I think the lack of communication here probably — you know, we don’t know the full story — but probably can lead to resentment, just like it does in any relationship.

Alex Barker: Oh, sure.

Tim Ulbrich: Right? So I think, you know, even if the outcome isn’t desired, I think the conversation can be really valuable. This also feels — and Alex, I might be wrong — but as I look at this question again, this feels like maybe an independent environment when somebody talks about what they’ve done to grow programs, some MedSync, diabetes prevention, stepping in for another pharmacist. So back to my comment earlier about leverage, if I’m an independent owner and I have a key employee of which probably not only developed these programs but probably of which these programs depend upon to run and maybe the owner doesn’t even necessarily know how to continue them and they’ve had a good impact on the pharmacy for both patient care and bottom line, like understand the leverage, you know, that you have in this situation, not to abuse that but to understand what you have as you’re coming into the conversation to really show and communicate the value. Alex, great stuff, as always. Appreciate having you on the show again. I look forward to these episodes that we do every so often. And this one certainly didn’t disappoint for me. So thank you so much for taking the time. And again, to the listeners, make sure you get a free copy of “A Pharmacist’s Guide to Salary and Benefit Negotiation.” And you can get that by sending an email to [email protected]. Alex, thanks again.

Alex Barker: Thanks for having me.

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YFP 218: How Marina Created a Business in Clinical Herbalism


How Marina Created a Business in Clinical Herbalism

Dr. Marina Buksov discusses her entrepreneurial journey in natural remedies and clinical herbalism.

About Today’s Guest

Dr. Marina Buksov is a registered Doctor of Pharmacy, Health Coach, Clinical Herbalist, and lifelong learner of the Healing Arts. She is the creator of Build Your Holistic Herbal Practice course mentoring other healthcare professionals in clinical herbal as well as business skills. She is also a functional medicine pharmacist as part of PharmToTable telehealth platform.

Marina also offers educational webinars with Radicle Herbs and is a wellness writer for Jejune Magazine. Marina uses her multidisciplinary background to educate patients about the least invasive and most natural methods for healing the spirit-body-mind. Her truly holistic approach helps women embody the best versions of themselves and lovingly celebrate the skin they’re in.

When she is not studying, Marina likes to dance, paint, and tinker with various concoctions (tea blends, meals, DIY projects). She lives with her husband, toddler, and two mischievous kitties in NYC.

Summary

Dr. Marina Buksov, a registered pharmacist, Health Coach, Clinical Herbalist, and lifelong learner of the Healing Arts, joins Tim Ulbrich to discuss her entrepreneurial journey. Marina reveals why she launched her brand and business, some lessons she learned along the way, and how her financial journey has intersected with her business goals.

Upon graduation from pharmacy school, Marina quickly realized that she didn’t feel truly passionate about any one particular area of pharmacy or traditional pharmacy career paths. After connecting with her mentor, she decided to explore alternative medicine. During this time, Marina started working in a Russian-style apothecary that specialized in herbs and supplements. Shortly after, Marina found her way into health coaching, incorporating her alternative medicine training and education from her retail pharmacy experience.

Marina advises other pharmacists who may experience that same sense of not belonging in the profession to explore a variety of areas of pharmacy, connect with mentors, and look for (or create) opportunities to find what and how you resonate with the pharmacy profession even as a practicing pharmacist. Along the way, mentors and coaches have played an integral part in Marina’s business, with financial planning and coaching guiding her ability to take risks with her business while also providing for her future.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Marina, welcome to the show.

Marina Buksov: Hi. Thanks so much, Tim.

Tim Ulbrich: I am really excited to dig into your entrepreneurial journey and start us off by telling us about your journey into becoming a pharmacist.

Marina Buksov: Sure. So my parents are actually both dual majors, you could say, in biology and chemistry. And so they kind of inspired me to go down this road. I always loved chemistry as well. It kind of came naturally to me, I guess because my dad was also a chemistry teacher, even though I was learning chemistry in English and he had learned it in Russian. So we kind of didn’t speak the same language, even though it’s a science. I never really needed the help, but I guess the interest was there, much like it was for him. And so when I was choosing colleges, they kind of just brought up pharmacy and they said, “Hey, this seems like a really lucrative field of study right now that you can look into since you like chemistry and math.” So I kind of decided to try it out with the thinking that if I don’t like it, I could always get out of it. But if I don’t get in now, then I won’t have a Master’s degree in six years and the opportunity was really good. So I ended up applying to a couple of schools, and there weren’t that many pharmacy schools in my area. There were only two, so that narrowed down my choices. And I actually loved it in school. I loved learning about the body, and I learned about the biochemistry and about all the medications but also about the non-pharmacological areas, which is what I specialize in now. So I loved the whole process. So being in pharmacy school but again, when it came time to graduate, I found myself at a loss for where in pharmacy exactly I see myself fitting in. My focus was, again, kind of widespread and I liked a lot of different areas, but I couldn’t see myself doing any one thing. And I chose a variety of diverse rotation settings just to put myself in different experiences, but I still couldn’t see myself doing a fellowship or any other kind of advanced training program or in retail or in hospital. So I was kind of like thinking, what am I going to do after I graduate?

Tim Ulbrich: So you had a lot of interests heading into pharmacy, ultimately went that pathway for the reasons that you mentioned. And I’m not surprised you graduate, I can tell that you’re inherently a learner, you’re interested in lots of different things. You go through your rotations, you’ve got this doctorate degree, but you’re not necessarily feeling like you fit into any “traditional” mold, right, that we often think of of pharmacy graduates, which as I think we’re doing a better job of now in 2021, you know, realizing that there certainly are lots of opportunities. The PharmD is a pathway, in my opinion, to many different opportunities. And we’re going to get to yours here in a moment. But tell us then about the path after pharmacy school. What did you do? And did you find out and ultimately get into something that you found out you love? Or did it just affirm that, you know what, I’m not sure where I’m going to go with this path?

Marina Buksov: Yes, so I guess it’s just taking things step-by-step and one day at a time and seeing what opportunities arise and present themselves. So I did end up going to Midyear to interview for fellowships, but that’s when I realized that I don’t see myself doing neither a residency or a fellowship, even though it’s such a lucrative and competitive field that I feel like, you know, people go into it for maybe the merit of it or the prestige of it, maybe some people are really into it, but I was only seeing like the prestige side of it and I wasn’t really seeing how it was really something I’m personally passionate about, so I decided that wasn’t a good reason to apply. So I turned down the one offer that I had and I instead took another offer from a local pharmacy that was just a plain independent retail pharmacy that I had been working part-time as I was in pharmacy school and like learning the ropes there. So I accepted their position as a pharmacist. I figured this was like a safe step for me, a stepping stone, and from here, I could also do some learning on the side and figure out what I want to do next. And as it turns out, that pharmacy went out of business. Well, not really. But they were selling the pharmacy, so they said, ‘Oh, you know, there’s probably no point in us hiring you because we’re going to be selling the business so then we don’t know what the new owners are going to do.’ So basically, that offer fell through. And I found myself having no idea what to do. But I ended up just spending the summer after graduation and taking the test seeing on social media what opportunities are out there, and I ended up going to another pharmacy to kind of learn the system there and cover for someone. And it turned out a pharmacy next door was looking for a full-time pharmacist. So I happened to just go in there and drop off my resume, and they called me back and they said, “OK, we have a position for you.” And the interesting thing is it wasn’t a full-time in one position. It was kind of split between two stores. And one of the stores was in an area that I had said to myself that I would like to work in before, which is this area of Brooklyn that’s kind of a Russian population area called Brighton Beach next to the beach. And they do a lot of herbal medicine there because Russian medicine, much like Chinese, is very integrative in their approach. So their pharmacies are trained in both herbal medicine and pharmacological medicine and pharmaceutical medicine. So it kind of embodied both of those worlds, and I started my journey there.

Tim Ulbrich: So you’re working in a pharmacy that has more “traditional,” you know, what we think of of the pharmacy and dispensing medications, and then they have this more nontraditional — at least nontraditional in the sense of how we think of pharmacy practice in the U.S. So tell us more about that experience as you’re getting into more of the herbal experience and, you know, what did you learn through that? And how did this position and experience affect your path forward?

Marina Buksov: So it was pretty amazing to see how we have — we’re considered to be masters in our field, right, doctors, actually doctor of pharmacy in our six years of intense schooling, but we really know next to nothing on other types of medicine, anything “alternative” or holistic or complementary. All of that is kind of like if you’re lucky, you get an elective like I did. But otherwise, we don’t know too much. And even the over-the-counter medicines, we don’t go in depth about — again, unless you’re taking a self-care elective. It’s amazing that yes, we pack so much schooling and we come out with so much knowledge but also there’s so much more out there that we don’t know because we don’t know what we don’t know, right? If you just simply don’t know that it’s out there, you won’t even know that you can look for something else, right? So you’ll just rely on the “traditional” things that are conventional and available. So this was kind of like scratching the surface and exposing me to how other countries actually still utilize plant medicine and herbals and many more diverse over-the-counter products than we do. Basically, they’re very, very creative in how people are taking care of themselves from the home and they can go to a pharmacy and get a lot — a bunch of herbs or a bunch of herbal products or a mix between an herbal and a pharmaceutical that’s available without a prescription. And so there’s just so much more to know. And the pharmacists that are trained by, for example, Russian schools or any other kind of country that has this integrative approach, they know maybe not as in-depth as what we know pharmacologically, but they know a lot more about general self-care things that are, again, available to people without going to the doctor and without going to get a prescription. So that was really impressive, and I realized that I also want to know more.

Tim Ulbrich: So Marina, one of the things that I think of and I’ve seen this and heard it from entrepreneurs that have been on this show is that often, some experience that someone has leads to an interest or sparks an idea and then that ultimately will set them off on the path to start something, could be a business, could be a nonproft, could be a side hustle, whatever you want to call it. And before we get into your business, what you’re doing, what you’re working on, I don’t want to gloss over that there is a big jump from experience to idea to actually starting a business. So talk us through that a little bit more in terms of you’re working in this pharmacy, you’re getting this experience, it’s affirming the interests that you have, you’re a learner and you’re absorbing more information. What is the idea or the opportunity that you see that ultimately leads to you starting your business?

Marina Buksov: I mean, I think there were several big factors that were going on, one of which was my personal health journey that has been going on too during this time. And the interesting thing is that now, I — looking back at it — attribute it to psychosomatic things that were happening in my body and my mind and spirit, perhaps, because as I was graduating pharmacy school, I remember described my confusion and not feeling like I fit in anywhere, not knowing if this is actually the path that I should be on, kind of questioning all of that. And I called this my quarter-life crisis that happened because as I chose, you know, the retail position and the retail, as you know, you’re kind of behind the counter and, you know, the most pleasurable activity there was coming out and counseling the patients. But because of the fast pace, even in independent settings, often unless they had questions, counseling wouldn’t really happen.

Tim Ulbrich: Yep.

Marina Buksov: So that was my biggest joy, but unfortunately, I found myself mostly just filling prescriptions and checking things and billing insurances and calling doctors and calling insurances and being behind the counter and not really having the patient-to-patient interaction, which is what my favorite part was. And I started having different kinds of health issues arise from finishing pharmacy school and all through my first years of practice where I had like a worsening in my digestive tract issues that I had growing up, IBS type of things. I was also diagnosed with H. pylori. I had to take a lot of antibiotics. Then I had this obscure dacryostenosis happen in my eyes, which is when your tear ducts basically become more narrow. And so my eyes starting getting chronically inflamed. And at that point, I didn’t even want to come out and see anyone from behind the counter because I felt that I looked horrible with my inflamed eyes. And to top everything off, I also started having PCOS type of symptoms and was diagnosed with it and had lots of acne, which I never had growing up. So it was adult-onset acne and weight gain. And so all of these issues started cropping up when I, again, now, looking back at it, see it tied more to my life purpose and my mission wasn’t really being carried out. And so my health was suffering because of that.

Tim Ulbrich: OK, so Marina, you identify an opportunity to help train others, make other folks aware of some of these practices that, again, could supplement more what we think of traditional medicine. So what does that lead to in terms of your business, your services, what you’re offering, who that’s intended for, and really, what does that look like to solve the problem of which you just described, which is to really help fill what is potentially a gap out there and unawareness and lack of education?

Marina Buksov: Yeah, well, it took some time to distill that exact thought in my entrepreneurial journey. And as I like to say, the entrepreneurial journey is kind of like a forever commitment because you’re always growing. And it’s very much tied to professional growth, the business growth, and your personal growth where your business is a reflection of you and what you’re going through internally. And if you can master your own self, you can master having a business. As I was going along and working in mostly the retail setting, I realized this gap existed, right? So the first step was realizing that there is something I don’t know. So the first thing I need to do is educate myself on that. And then I could kind of draw some other conclusions or learn how to run a business with that perhaps or how to incorporate that into my practice that I already have. So first thing I did was I spoke to my complementary and alternative elective professor, and I asked her what she thinks I should do, and I shared with her how I feel like I don’t fit in and I really did have an interest in that elective. So she suggested I reach out to another person who was a graduate right before me. So when I spoke to her, she suggested that I go into health coaching. So my first program out of college was immediately enrolling in a health coaching program. So after that, I underwent a series of other programs where I learned everything from functional nutrition to eventually clinical herbalism. So how to work with plants and phytochemicals in a way to support the human body. Both nutritionally and medicinally, plants have a huge role in this. And they’re really the basis of both traditional pharmacy and naturopathy and even functional medicine or any supplement that you take out there, they have a basis of some kind of plant behind that. So the minerals and vitamins we extract or the active constituents probably have a root in a plant somewhere.

Tim Ulbrich: Yeah, and I think, you know, you’re taking me back, Marina, to sometime in pharmacy school. And you’re right. There’s just a lot of connection back to the herbal aspect. And you’re spot-on that traditional PharmD curricula doesn’t necessarily provide much information — really, if at all sometimes, depending on the curriculum — that would allow folks to think about some of the application of this clinically or how some patients might be interested in approaching this. So again, you’ve identified a need, right? We’ve just talked about that. You mentioned about this very much being a journey, which I would agree with. And you’ve sought out additional training, so you provided some additional education to help increase your skills, which then takes us to the point where OK, you’ve got — you’ve obviously got your PharmD background, you’ve got some additional training, you’ve identified an opportunity to serve a group that perhaps isn’t being served to the full potential. So if I come to you, Marina, and I’m interested in this area of practice, whether I’m a pharmacist or not, like what are you offering? What is the product? What is the service?

Marina Buksov: There were a couple of iterations in my offerings. But it has evolved to me seeing clients in a functional medicine capacity as part of a team on a telehealth platform. So I realized that that would probably be the best use of my time in working with private clients whereas the majority of my business focus is really around educating and that knowledge gap to other providers and healthcare practitioners, especially pharmacists, that are wanting to learn about employing herbal medicine, whether they’re a pharmacy owner that wants to specialize and offer this to their patients or if there’s any other way that they would like to incorporate it as a private consultant like I did for many years or working with supplement companies as a consultant. I mean, there’s a myriad of ways. And that’s actually part of what we do in the program besides the didactic knowledge and homework that I give and accountability that I provide, I also train on the kind of business end side of things and how to actually implement some of these things into your work or business so that you have a successful vocation at the end of it.

Tim Ulbrich: Gotcha. So there’s both the patient side of it; you mentioned seeing clients one-on-one, and then more of the focus of what you’re doing on the business is training and educating others both on their clinical understanding but also some of the business aspects involved with this. So if we continue on the journey, I mentioned before often we have an experience that can spark an idea or lead to an interest that then takes us on our own entrepreneur journey to start something. Once you start something, obviously there’s then the task of OK, do folks know about what I’m doing? And how am I marketing this? And how am I making people aware of this? So tell us about your current strategies. I looked at your website; you’ve got a lot of great educational information, you’ve got a podcast. Like what is your strategy in terms of standing out so that other folks can become aware of who you are, your brand, the services that you offer, and ultimately engage in those and benefit from them.

Marina Buksov: This is definitely something that after I got the clinical knowledge side of things down — and again, I’m a person like many of us, especially pharmacists, we feel like we never know enough, so we always want more and more and more courses and all of this stuff, which I’m definitely guilty of. But eventually, I said, OK, I know enough to start helping people. So now I have to, again, focus on how am I presenting myself? How are people finding me? How can I serve? You know, because I am now capable of serving in the way that I want to serve. But how can I do that without any clients? So I had to also teach myself that and I have to say that it was a very hard and rocky journey to teach myself, so I really recommend investing in a coach that will show you the ropes, which is what I eventually had to do. I actually worked with several business coaches and was part of like Business Masterminds and again, those are great for accountability and support. And I’m trying to really cut that learning curve for people where they can just go to one program that will teach them a really, really good foundation and basis for everything that they would need in terms of botanical medicine, which is again, the backbone of every alternative, holistic practice in some way or form. And so people can get the clinical side of things, get a really good foundation and backbone, and start to dip their feet into the marketing and the business side of things immediately and finding themselves a niche and whatever else will help them on their particular implementation plan because for me, it took me a really long time. You know, I’ve been working slowly, slowly to build my business for about seven years now. And this year was the first year that I really pivoted and decided who am I going to serve and was really clear on that and came out with my program, which I mentioned, that I’m now running. So this all kind of solidified earlier this year.

Tim Ulbrich: And I hope our listeners, especially those that have an idea or maybe they’re at the beginning of their journey or maybe even feeling frustrated with, man, this is just not taking off as quickly as I can, just hearing that timeframe, right? Seven years. You know, I think back to the journey of YFP, coming up on seven years. And there is always something new that is to be learned. And I would encourage folks to check out your website, Marina. We’ll link to that in the show notes, DrMarinaBuksov.com, because I think you’ve done a really nice job of what I think is an important recipe to taking people along the journey from interest to actually being able to engage with those folks and then offer them a product or a service that is of value and hopefully is mutually beneficial between you and that individual. And you know, when you look on your website, you’ve got obviously valuable educational content in terms of interview that you do on the podcast and other resources, but you also have done a nice job with building lead generation techniques and guides and some other things that help you to capture those leads and then you have the ability to follow up with them and convert traffic into conversations that you can have and engage with that community. And so lead with value and then find a way to be able to capture that audience and then you can have that two-way conversation to see whether or not your services may be a good fit. Marina, I want to go back to something you mentioned a little bit earlier. And you mentioned it quickly, but it’s a really important point. And that is that folks that are going on this entrepreneurial journey, no matter where they are in that journey, I do think that certainly includes not only the professional side but a fair amount of personal development. And I believe from my experiences that often, engaging and leaning into the business can really bring out some of the best strengths that someone may have that maybe they weren’t even fully aware of what those strengths were, but it also can expose some weaknesses, opportunities for development, whatever you want to call it, that maybe otherwise weren’t exposed because of all the different hats that you have to wear as you’re trying to get a business off and running. So Marina, for your journey, what are an area or two that you think of by going through this journey and the work that you’ve done in starting this business, it’s really brought out or firmed some of the strengths that you have and then other side of the equation, maybe has exposed some opportunities where you even need to surround yourself with others’ support or even develop yourself a little bit further.

Marina Buksov: That’s a great question. I think really, this journey does expose you with the opportunities for growth, like you said, by exposing you to some of your not-so-favorite qualities or maybe even your worst qualities will come to life when you start to run a business because like I said, often we see the business as a reflection of us because it’s so personal to us. It’s related to our vocation and our personal mission, what we’re trying to be in the world. So sometimes, when we’re faced with not seeing success right away or as soon as we like or the level of success that we like, however you would like to measure that but most people measure it with fame or money or visibility or some kind of feedback, right, from the real world, maybe really good testimonials is another one. So whatever success is for you, it’s important to define it and to also be able to separate you from your business but also learn when it is a mirror and what you can learn from it. So you know, just because your business may not take off as soon as you’d like, like we said, seven years for us, or something is just not going your way or you’re experiencing some sort of setback, just know that it could be a “temporary failure” or think of it only as a lesson because you really can only either win or learn. That’s how I approach things nowadays. And so if something doesn’t take off immediately or doesn’t give you a reward on your investment right away, it doesn’t mean that it wasn’t valuable. It’s a step that was vital for you to not repeat that in the future or to learn a different strategy that will work better or some other important lesson for you to, again, learn from. And especially if you don’t have a business background, you should expect some sort of challenges or setbacks in business your first rodeo because you know, you could be a great pharmacist and know everything there is about pharmacy, but that doesn’t mean that you’ll know immediately how to run a business and how to have that proper mindset to run a business. So for me, it was a lot of coaching that helped me and also seeing that other people on the same journey as entrepreneurs are also experiencing similar challenges and setbacks. So viewing that as a normal part of the growth process instead of seeing it as a failure is my best advice. And ultimately, I realized that even if I do experience setbacks in my business, it’s still worth it for me to eventually have the opportunity to succeed by showing my mission and getting more recognition about my mission. And inspiring others to pursue their missions with my story is worth it to me, despite all of the setbacks that it has potentially.

Tim Ulbrich: Absolutely. And that’s what I encourage folks: Share your story. You don’t know who’s listening, who may be affirmed by that, who might have an idea that it helps stimulate that forward, a student who’s feeling frustrated and unsure of where to go with their career path and just hearing about alternative ideas. I think so much value in that. And Marina, loved what you shared to connect that with the value for you of a coach. And I think that sometimes on this journey, like not only — especially for folks that are working full-time and they’re starting a business or an idea, you know, there’s that excitement, there’s that energy, but it also can be a lonely place and you’re putting in a lot of time. And having a coach, having a community, having a mastermind, having folks around you that you can bounce ideas off of and get support from, is just really important for the accountability but also be able to talk out loud as I think so much of this, we can live in our own thoughts as we’re trying to build the business. And shoutout here as I think about for YFP, my partner at YFP, Tim Baker, you know, I have the opportunity to sit down on a regular basis and we can share wins, we can share frustrations, but just having those conversations I think is so, so valuable. Marina, I’m going to ask you about the connection between the personal financial plan and what you’re doing on the business side and vice versa. And where I’m going with this is that I am a firm believer that a good, healthy business is often built and built confidently when you can build that upon having a strong personal financial foundation because you’re not necessarily worried about, ‘What about this? What about that?’ It doesn’t necessarily mean you have all of your financial goals achieved, but you’ve got a good foundation of which you can work from so you’re not constantly worried about that as you approach the business with confidence. And vice versa, often our business activities are able to help support our personal financial goals, whatever that may be for individuals that are listening. So tell us a little bit about for you, how the business and your personal plan have really worked alongside and have ultimately fed into one another.

Marina Buksov: I have to admit that I was a little bit floundering in this area before with actually tracking things. Like you were saying, it’s really important to bounce ideas and to talk about what’s happening, what are the wins, what are the challenges, and to actually put that into numbers and see in that way how your business is actually doing because numbers don’t lie, as they say. So that part of it, actually tracking and putting things down as data and analyzing it, you know, you can just remove some of the stigma that’s attached to OK, is this number a win or a fail? And actually, just view it as a statistic that is showing you OK, what can you improve on based on these numbers? You know, which area needs improvement? Which area is doing well? So that way, you can focus your resources and your time and energy on improving the things that aren’t doing well and doubling down on the things that are. But unless you track it and use numbers, you really won’t know. And so same thing with my business. You know, for a long time, I was reluctant to even put down numbers that are coming in from clients and balancing the checkbook and all of those kind of business tasks because it’s like a hassle because it’s another thing for you to do, but I realized that it’s very important and it actually gives you the clarity and the confidence with what needs to be done next because another thing that was a challenge for me is to learn how to prioritize. And so when you see the numbers in front of you, you see what needs to be done first. You know, what is an area that really needs your help and attention right now? And what scenario that can wait? And often, you know, I spread myself thin. I’m sure many other people do, trying to do all the things. But really, we need a structured guide so that you mentioned before, not to burn yourself out by all the business activities and to really have this focused plan of intention and a plan of action, which can really be informed by the numbers. So when earlier this year, you know, I was investing in coaching programs all these past years and really wanted to take my business to the next level and wanting to leave my job full-time, that’s when we started to — actually last year at this time, so about a year ago, my husband and I decided to look into a financial planner because we wanted to know, you know, where do we stand financially personally? And where can we be confident in making a certain buffer for ourselves so that we can take certain risks with our business? I think that’s really important to have a plan and to expect some setbacks. Nothing is going to be smooth sailing. You know, the past few years taught me that. But I decided it was really important to look at the numbers and to create a buffer, which we were comfortable for a certain period of time so that we give ourselves that safety zone from which the business could grow. And again, that’s always a risk. Is the business is going to take off exactly per our plan, our projections, or not? So shameless plug to YFP: I was working with YFP, and I found that I really didn’t know much because this is not my area of interest, right? Accounting and counting numbers, I am more into health and wellness and getting results for my clients. I would like to dedicate my time for those kind of things. But living in the real world, you do have to think about personal finances and business finances and retirement and putting away money for more expenses than you even are expecting because —

Tim Ulbrich: Boring, right?

Marina Buksov: Yeah, a lot of us live paycheck-to-paycheck, and we don’t realize, you know, we need to set aside money for this or we need to plan an estate or we need to maybe save for education for our kids or if you are a homeowner, there’s many hidden expenses that pop up that you don’t expect. So we decided it was time for us to kind of get a realistic perspective and reality check so that we can be more confident in the business side of things. And so I highly recommend working with a financial advisor that has your best interests at heart and doesn’t just want to sell you things with commission attached.

Tim Ulbrich: Yeah, and I think for Marina, you mentioned some of the value that can come from the technical side, right, of the financial plan. I know for Jess and I and our journey, which I think is something that others may find value in, is sometimes when you’re in the weeds of your own financial plan, it’s really hard to see outward, right? And having somebody as a third party, you know, thinking of spouses or couples that might be working with a planner specifically, where you can have somebody ask really good questions that get you thinking, that get you talking, that get you really evaluating like, what is the true risk on this scale, right? And I think that while I don’t want to categorize all pharmacists as being risk-averse, I think sometimes we view financial decisions on that end — and I’m certainly not promoting that we go out and make crazy financial decisions, right. We’ve got to take care of our future self. But we’ve also got to live a rich life today. And part of what I’m hearing through this interview, Marina, for you is living a rich life was pursuing this passion that not only was only important to your physical and emotional health but also what you saw as an opportunity to bring this information to other healthcare practitioners and ultimately the patients that they serve to be able to have an impact. And that’s an investment worth making, right, in being able to see that through, whether it’s a coach, whether it’s a financial planner, and certainly all the other investments you’ve made in getting the business up. Marina, I’m thinking back to your journey where you mentioned, ‘Hey, I’m graduating pharmacy school. Yeah, it’s been an interesting ride, but I don’t really feel like I fit, right? I don’t fit in a traditional mode of fellowship or of residencies or, you know, community pharmacy or inpatient practice. And so I suspect we have a lot of other people that might be feeling that, whether it’s students that are maybe questioning was this the right decision or I’m not sure where I’m going to go or practicing pharmacists that might feel the pull to explore another area of pharmacy and how their pharmacy degree could be used but they just don’t know where to go, who to talk to, where to start. What advice would you have for folks that are out there that are listening and feeling like, I’m just not sure I really fit in this whole pharmacy thing. Like where do I go? What do I do?

Marina Buksov: Yeah, so I think the best thing to do is really dip your toes, just like I was talking about how I selected a diverse variety of rotation sites for myself in APs and FPs. As much as possible, I tried to diversify. I worked in insurances, worked in different settings, pharmaceutical industry, basically everything was super different. And that taught me, actually, what I liked and what I didn’t like because just getting a glimpse into a setting and how it would be like to work there and the day-to-day, how to assess what they’re doing on their back end and how you feel about that and then giving you a sense of if you can climb the ladder in that space, if it’s more corporate or not. So you can kind of picture yourself in those spaces and see do you feel good there? And does this agree with your inner wiring or your ethics? Because for me, I found that I really wanted to make an impact. That was important to me to use my skills in a way that was impactful and that I felt I was creating good in the world. And I saw that as targeting the low-hanging fruit, you know, how we can improve on a large scale our public health and self-care by education and by self-care. That’s really my mission, what it really boils down to. And the other settings for me didn’t provide that level of impact. You know, there was some personal gratification or again that prestige aspect in some settings, but I was not on the same mission as those settings and what they were doing. So I didn’t feel like I fit in there. On the other hand of the spectrum, even if you don’t get to go on a variety of rotation sites, you can find your own opportunities. So actually, I had a bunch of students reach out to me. And I might be a preceptor someday soon.

Tim Ulbrich: Oh, fun.

Marina Buksov: And then besides — nowadays, yeah, the opportunities are crazy because we’re in a virtual world. But you can also just reach out locally. So when I was considering going to herb school — actually, before I even knew there was a thing because that’s another missing knowledge gap because I didn’t even know there was such a thing — so before I even knew somebody had recommended that I check out an herb shop as a place where I could practice alternative pharmacy. So I went to a local herb shop and asked the owner to give me an internship, which he did. So there is plenty of ways you can create your own opportunity and learn from the experience and empirically applying yourself there. It’s going to teach you so much more than what you can read in a blog or a book. So that’s really what I recommend. And when I was in the shop, that’s when I decided to go to this school and get a more formal education because I did see myself aligning with that and being interested to learn more. So I think exposing yourself to experiencing is the best teacher. So whatever way you can do that locally or virtually nowadays and get somebody to mentor you or again, if you’re able to invest in a coach if let’s say you’re not a student but you’re a pharmacist, it is worth it to have some level of guidance or mentorship.

Tim Ulbrich: Yeah, great advice and wisdom, Marina. And back to a comment that you made earlier. You either win or you learned along the way, correct? And I think of maybe students who have some of those opportunities to choose rotations and get out there and network. But for pharmacists that are out there, you know, don’t let that be a hindrance. You know, reach out to folks like Marina. Reach out to folks in other nontraditional areas. You know, have several conversations. People are very willing typically to meet. And I think not only will that networking be really valuable, but I think it will also stimulate hopefully some ideas and conversations and lead to other connections that will affirm areas of interest and hopefully generate some ideas as well. Marina, I really appreciate you taking the time to share your story. I’m looking forward to following your journey in the years ahead. And I have a feeling you have inspired folks that are listening and perhaps in their own journey, whether they may be on moving forward with some of the ideas that they have of their own. So Marina, as we wrap up, where can listeners go to learn more about you and the work that you’re doing and to connect with you?

Marina Buksov: Yes, so the website you mentioned, it’s DrMarinaBuksov.com. And it has all the links to my social media. But I am on Facebook and Instagram and even TikTok nowadays. So you could reach me everywhere at @DrMarinaBuksov. And you can also search by my business name, which is Raw Fork.

Tim Ulbrich: Great. We’ll link to those in the show notes. And again, Marina, thank you so much for your time.

Marina Buksov: Thank you so much, Tim.

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YFP 217: How Kelley Used Her Clinical Expertise to Build a Business


How Kelley Used Her Clinical Expertise to Build a Business

On this episode, sponsored by GoodRx, Kelley Carlstrom shares how she has leveraged her clinical expertise to make oncology specialty training more accessible.

About Today’s Guest

Kelley D. Carlstrom received her Doctor of Pharmacy from The University of Colorado and completed post-graduate residency training at Beth Israel Deaconess Medical Center and Dana-Farber Cancer Institute in Boston, MA. She is a board-certified oncology pharmacist that has worked in a variety of traditional and non-traditional settings including at a large academic medical center where she specialized in blood and marrow transplantation, at a small community hospital, as a consultant for a large electronic medical record implementation, and most recently at a healthcare technology startup company committed to building software products for oncology clinicians. Kelley is passionate about oncology and sees a growing need for more pharmacists to be trained in this specialty. She has launched KelleyCPharmD, LLC which offers unique oncology training opportunities because she believes every pharmacist deserves access to specialty training that can transform their career.

Summary

Kelley Carlstrom, a board-certified oncology pharmacist, joins Tim Ulbrich on this episode to discuss her side hustle, which arguably is more of a full-time business. She talks about her career journey as a clinical oncology specialist, what motivated her to develop oncology training opportunities through KelleyCPharmD, and how her business has accelerated her financial plan.

Through her career experiences, Kelley learned there are gaps in oncology specialty training availability and a lack of support for pharmacists managing complex cancer treatments without additional resources. This shortage of resources and training, partnered with a need for oncology-trained pharmacists across the country, created an opportunity to build technology and education to fill that gap. Kelley saw this problem and began working on a solution, and KelleyCPharmD was born.

Without a background in business or being a prior business owner, Kelley had to learn how to take on various tasks outside of her comfort zone, including building her website. Initially, she explains, she wanted to make low-risk financial decisions about the business while testing its necessity and benefit to the pharmacy community. For Kelley, this hustle is not just a temporary solution. She is in it for the long haul. Kelley has built a business that she enjoys, sharing that experience with other pharmacists who she employs. She sees KelleyCPharmD and the flexibility that it will bring to her life as an integral part of her long-term financial plan.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Kelley, thank you for coming on the show.

Kelley Carlstrom: Thanks so much for having me.

Tim Ulbrich: Really excited to dig into your pharmacy journey as well as your business, Kelley C, PharmD, LLC and your upcoming launch of a really incredible course. And I was sharing with you before we hit record, our paths crossed several years ago when you were up at Northeast Ohio and I was up at Northeast Ohio. And as we will share throughout this episode, your career has really taken some interesting turns and I love the mission and the work that you’re doing as a trained oncology pharmacist to really help impact and provide those services to other pharmacists and ultimately to have a positive impact on patient care. So excited for this interview and getting it out to our community. I think they’re going to find it really inspirational. So we have, as those that are listening know, we have featured several pharmacy entrepreneurs on this show as they have shared their business stories, their side hustle stories, and to be clear, the work that we’re going to talk about today that Kelley is doing at Kelley C, PharmD, is more than what I think of when I hear “side hustle.” This really feels more like a main hustle. But our goal nonetheless is the same, and that is to share inspiring stories of pharmacists such as Kelley that have really taken their clinical experience and training and because of their passion, developed an incredible business and offering that is helping other pharmacists while helping also accelerate their personal financial goals. So Kelley, start us off by telling us about how you got into pharmacy, where you went to school, and your training and some of the first work that you did after school and in residency.

Kelley Carlstrom: Sure. So I went to pharmacy school, I worked as a technician, actually, for a long time before pharmacy school. So I’ve been in pharmacy for awhile. But I graduated pharmacy school in 2010 from the University of Colorado. And I moved to Boston for postgraduate residency training. So I did my first year at Beth Israel Deaconess and my second year literally a stone’s throw across the street at Dana-Farber Cancer Institute. After I did residency, I moved to Cleveland, of which I had never been before. I’d spent about 24 hours in an interview there and moved for a really incredible job. And my — I was tasked with starting a new pharmacy-led ambulatory service in the bone marrow transplant department. They had really a not — they had very few pharmacists that touched patients in the ambulatory setting. But they were having some issues in bone marrow transplant when the patients were admitted. They were on interacting drugs, their med rec was terrible. So they really wanted to try to capture those patients up front. And I loved it. I loved the ambulatory setting, I got to chat with patients all day long. And I did that for several years and ended up deciding to broaden my scope a little bit because bone marrow transplant, although I love it, is super niche. Rare treatment of rare cancers. So I ended up moving to a small community hospital within the same health system. So I went from working with 10 physicians in my niche in bone marrow transplant down to two physicians that covered all cancers. So really different environment, large academic center down to community center. And I learned a lot there. I learned that this is where the majority of cancer patients are treated in this country are these small community centers. Most of them don’t go to these large academic places. And I learned what it was like to be the only pharmacist in this type of setting. So I did everything. I did the clinical work, I did the order verification, the product verification, and I am so thankful still to this day I had a rockstar technician that kept me on task. So it was a great learning experience.

Tim Ulbrich: So Kelley, you talked about, you know, your time at school in Colorado, made the move cross-country to Boston, from Boston to northeast Ohio where you’re at a large academic medical center, regarded as one of the best healthcare institutions really in the world. And then you decide to make a pivot to a smaller community hospital within that same system. You know, I think the question that comes to mind is why make that pivot from the large academic medical center where we tend to think about the specialty experiences, the high intensity care types of cases, you know, that’s where we’re really going to get the most bang for our buck as a specialist and what we’ve been trained to do. Why make that move? And tell me more about when you say that you realized many patients are getting their care in the — more of the local, community setting, not necessarily going to those larger academic health centers, what did that really help you do in terms of form your thoughts around what support pharmacists do or do not get in those roles where they’re not at those large institutions?

Kelley Carlstrom: Well, I did realize that just a couple years out of residency, I had hit the top rung of my career ladder. And I was a little surprised about that. And I guess I shouldn’t have been when I kind of understood what the career trajectory was after residency. But I was, you know, doing all of the things that we do in clinical specialist roles. I was seeing patients, I was involved in the residency program, I was a director of the PGY2 program, I spoke at conferences, you know, I gave CEs, I did all the things, but I was at that top rung and wanted to expand and see what else was out there, how else I could develop my skills. So that’s what moved me to the community practice. And when I got there, I think what it showed to me, I was very — I felt very fortunate because I had — like I mentioned, I was the only pharmacist in the whole hospital, let alone the cancer center that had any oncology experience. So I felt fortunate that I could rely on my residency training, I could rely on my colleagues that I had connected with, that I had worked with over many years, and I could reach out for help. But as I interacted with other pharmacists at other smaller community centers like me, I realized not everybody has those resources. And I thought it would be pretty terrifying. I mean, I was busy throughout the day, there was a lot of questions I didn’t know, I don’t know why every 5FU pump shows up at 10 a.m. on a Tuesday, you know? It’s really busy, it’s a fast-paced type of environment. And I just, I was so fortunate that I had resources to tap. And I was just wondering, how do these other pharmacists manage this? Because like I said, there’s so many of these cancer centers. And yeah, I just wanted to determine how other pharmacists kind of make that successful.

Tim Ulbrich: And I think we’re going to come back in a little bit and dig into more of what I perceive to be the solution that you’ve developed to the problem that you observed in terms of pharmacists that are at these smaller institutions or even perhaps institutions that may not have access to those pharmacists and how can we be able to provide those services in a way that might seem a little bit more nontraditional. Kelley, it reminds me — you know, one of the thoughts I had often in my academic roles where it’s very common where there’s a shared faculty member that spending time at the college and time at the practice site and often, the funding of those positions may be split between those institutions, and those practice sites tend to be very robust, they tend to be very innovative, they’re training students. But I always left feeling a little bit unsettled of like, how does this scale? Or how does this translate when we think about the pharmacist impact nationally and ultimately, what a pharmacist can do to improve patient care? And I think those types of pilot sites, I guess you could call them, are great. Or if I think about here, what we’re discussing in terms of sites that have access to really robust, advanced residency training programs and clinical specialists, that’s great. But that’s a really small percentage overall of the institutions that are out there across the country. And so I think the vision that you have here — and we’ll talk more about some of the services that you’re deploying to help solve this problem, is really an interesting one. And when I first learned more about that, it was kind of a lightbulb moment for me of wow, like this is a really incredible opportunity for here, we’re talking about oncology practice, but I could see how this could also translate beyond oncology practice of how do we be able to really extend the expertise of a pharmacist outside of what we might think are the institutions that are able to offer these services or have the resources to do so. Now, before we get into that and talking more about what you’ve developed with Kelley C, PharmD, and to really help solve this problem, bring us up to speed with your current positions and the transition you made after that experience at the small community hospital and the work that you’ve been doing since then.

Kelley Carlstrom: I was pretty happy in my small community role, and I had a recruiter reach out to me through LinkedIn, which is one reason I’m so passionate about advocating for pharmacists to be on LinkedIn because this is where a lot of job opportunities come from. So I got recruited into a consulting role where I helped a large center get off of their paper chemotherapy orders and into their EMR, which there still are cancer centers and other centers that are on paper orders. And what surprised me is that I found this love for oncology and technology that I didn’t realize I had. You know, it’s not the typical path of a clinical specialist to end up on the tech side or the informatics side of things. But what I realized is that we have a lot of bad tech in healthcare. And the reason why we do is because there’s not enough clinicians helping inform those products. So I did that for awhile, almost three years. And when that contract ended, I was looking to stay in the technology space. So I ended up at a healthcare technology startup. So an interesting role for a pharmacist, and it’s really great because we’re making software products for oncology physicians and patients. And I get to bring my clinical practice experience to help inform those products.

Tim Ulbrich: And that led you out to San Francisco, correct?

Kelley Carlstrom: It did.

Tim Ulbrich: Yeah. So adding to the list, as we talked about, you know, Colorado to Boston to Cleveland and so forth. So really cool. So on top of that role and that position that you’re working in in that startup where you’re able to really blend your passion and love for oncology with some more of the informatics technology side, I want to shift gears and talk about the business that you have developed because I think it’s a really interesting example and one that I’m excited to share with our community about how you’ve been able to leverage your clinical expertise and ultimately monetize that expertise while being able to provide value and a service to other pharmacists and ultimately, the patients they serve. So Kelley C, PharmD, LLC, tell us about when it started, how it started, and ultimately what was some of the why behind getting this effort off the ground?

Kelley Carlstrom: Well technically, it started two years ago. That’s when I made my LLC. But I had some ideas floating around in my head before that from what we spoke about when I was at the community cancer center and really just trying to understand who were the pharmacists that work in these settings and what kind of support do they need? And in addition to my experience there, I had a lot of pharmacists reaching out to me on LinkedIn, getting messages every day about ‘Hey, I’m new to oncology,’ or, ‘Hey, I’m covering for a maternity leave and I’ve been thrown in here and I don’t know what I’m doing.’ You know, ‘Where can I learn the basics of oncology?’ And so I sought out — I started to research like, OK, what hyperlinks can I give these people, what are articles can they read, and there was nothing cohesive out there. You know, I had to send people to a slew of different websites. And it’s just — there’s nothing that was at the baseline level of what these pharmacists needed. So that’s when I got an initial idea, but what really sparked it was I went to the MediPreneur conference, which is a conference for pharmacist entrepreneurs or other medical professional entrepreneurs. And it was great to be in a room with a lot of like-minded people that had big ideas and really just started chatting through what could this actually look like? What does being a business owner look like? Because of course, in pharmacy, we don’t get a lot of exposure to that. I think my school had a business elective that I didn’t take because I didn’t think I needed it. So you know, I don’t know anything about business. So that’s really when the process started. And from there, I just took a lot of really small steps of reaching out to pharmacists and saying, “Hey, what kind of information do you need?” and kind of gleaning more information. And it’s been growing since then.

Tim Ulbrich: Yeah, and as I mentioned on the call before we hit record, this really feels disruptive to me in a good way. And I think one of the things you shared is that there’s this idea in the profession that you can only work in oncology if you’re residency-trained, perhaps two years of training, board certification, and so forth. And that’s just not true in terms of the number of people that are out there that are working in oncology practice without training that might not be getting support. And that could be situations like you mentioned of, hey, somebody’s on leave and I’ve been thrown into this role and I want to make sure I’m doing my job well as a pharmacist and so how do I get up to speed? Or it could be maybe somebody who has been in a staff pharmacist role or maybe a general pharmacist role and they have this interest in oncology that’s flourishing. And maybe they’re out five, seven, 10 years and the idea of going back and doing some additional residency doesn’t necessarily make a whole lot of sense. And so how do we make this more accessible and to get the support that they need? And one of the things I love, Kelley, from your website is that you say, “My goal is to bring hope and optimism back to the pharmacy profession because everyone deserves access to specialty training that can transform their career.” And that mission, I know our listeners know that I talk often about any good business is ultimately finding a solution to a problem that is out there and is one that people care about. And I think you really have, you know, nailed this with a strong why and motivation behind what you’re trying to do. So kudos on the vision and for taking some of that risk to get this off the ground, even if that means not necessarily following what would be a traditional path as we think about pharmacists in these roles.

Kelley Carlstrom: Yeah, let me throw a couple numbers at you, Tim, that kind of explain this. So yeah, I completely agree with what you said about not everybody can do residency training. And we can’t restrict people working in oncology just to those that are residency-trained. And the reason for that is we don’t have enough pharmacists. So there are 71 NCI-designated cancer centers, so National Cancer Institute. And these are, they’re only in 36 states, so there’s not even one NCI center in every state. And these are the big, urban centers where residents are trained and where clinical specialists typically work. So 71. But there are more than 1,500 cancer centers in the country accredited by the Commission on Cancer. And that — they all dispense chemotherapy. There’s probably other centers, infusion centers, that dispense chemotherapy, that aren’t accredited. So we need more pharmacists to work in all of these various settings. And there are constantly oncology jobs posted. I talk with recruiters that can’t fill oncology jobs. So I know you’ve talked previously on episodes about where the profession is going and the shrinking job market, but oncology is not experiencing that. We have a lot of opportunity.

Tim Ulbrich: Yeah, and I’m glad you said that, Kelley, because I think this is a great example where we often talk about the job market and trends from a global standpoint. And we really need to get down in the weeds a little bit in that there are certainly sectors of the profession, you’re talking about one here, where there’s arguably considerable opportunity for growth. And I think that’s one of the challenges when we look at general trends, Bureau of Labor Statistics, indices, etc., we’re looking at the whole pie. And really, it can be different stories if we look at different parts of the profession. And as I put on my employer hat for a moment, Kelley, like if I’m a director of pharmacy or a Chief Pharmacy Officer, and I have this open position in oncology that I can’t fill, you know, I could sit around and perhaps wait for the right time and the right person that has clinical specialist training, residency training, board certification, etc., or I might have someone in my department who has been a high performer, is a known entity, has an interest in oncology, and if there was more readily available access to resources and training, I could develop that person internally and be able to promote them up into that role. And that’s where when I say I think you’re onto something disruptive, I think that’s a great example where, you know, there’s an opportunity through more readily available training and resources to be able to train up folks within a workforce or to be able to make these positions more readily available.

Kelley Carlstrom: Exactly.

Tim Ulbrich: So talk to us more about the products and services. We’ve talked about the problem, right, that we’ve identified. You’ve talked a little bit about the why there’s a need for this. So what does the solution look like? When we talk about readily accessible resources and training, talk to us a little bit more about the products and services that you currently offer, the focus of what you do on your website, and more specifically, about the Enjoy Learning Oncology program, the ELO program for short, which is a new course that you’re going to be launching soon.

Kelley Carlstrom: So I see three main paths to learning oncology. There’s the do-it-yourself, the DIY path, where you can learn oncology on your own. All the information you need is free on the internet. But that’s the problem, right? The internet is a vast place, and you can fall down into a lot of rabbit holes, and it’s not really — it takes a lot of time investment up front to kind of do your own curation of the information. The second piece is the curated content, so what’s already been packaged out there? You know, some of the CE programs I’d put in this bucket. You’re kind of given some information. You still have to do it on your own, but it’s kind of already been collated for you. And then the third piece is the facilitated training path, which is what I’m going down. And I like to think of this as an Orange Theory analogy.

Tim Ulbrich: Yes. Yes, give us an Orange Theory analogy. Yes.

Kelley Carlstrom: So I love Orange Theory. I went a lot pre-pandemic. And what I love about it is you just show up. You don’t have to bring water, you don’t have to bring a towel, you just get dressed and you walk in the door. And they tell you what to do. “Go get on this treadmill, run at this pace, do this on the rower.” And you still have to show up and do the work, you have to burn the calories, put in the effort. But you don’t have to spend time and effort thinking, you know, what’s my workout program going to be today or tracking in your app how many reps I did. And I’ve modeled my program off of that because you also have access to those experts in the class. You can say, “Hey, is my form good?” or ask a question about the rowing machine or how fast should I be going, what’s my speed? So my program, my ELO program, has three main components. And the component that I’m most passionate about is what I call the ELO collaborative. So what this includes is a basics training program, so foundation of things like how to verify a chemotherapy order. It includes my blueprint online course, which is a really robust program that has 20+ weekly modules. And it goes through all the major diseases and a couple non-clinical topics. But what the collaborative does is it houses all of those in a bubble of access to experts. This is the biggest challenge I see and what I’ve heard from pharmacists is I can read all this material, but I have questions, I don’t understand how these things link together, I don’t know if this actually happens in real life. Just because it’s in the guidelines doesn’t mean it happens in practice. And so we need resources to be able to help direct people when they have questions. So how I do that is I hire other expert oncology pharmacists to support clients in my program. And that is through — you can ask questions weekly as you go through the content in my Slack channel. And then we have live office hours virtually where you can pick the brain of an oncology pharmacist.

Tim Ulbrich: That’s awesome. That’s really cool. And that feels like, Kelley, to me as you talked through the three types of training pathways, the DIY, more of a traditional CE type approach, and then obviously what you’re doing here, those things where you’ve got more of the support, the community aspect, the live office hours, and so forth, access to various experts, more up-to-date, relevant information, that really feels like the differentiator from that more of a traditional model. Is that accurate?

Kelley Carlstrom: Yes.

Tim Ulbrich: OK.

Kelley Carlstrom: I think that’s the big piece that people have told me. They have questions and they have nowhere to go to ask them.

Tim Ulbrich: You know, I love your Orange Theory analysis here. And I want to take it a step further because I participated in Orange Theory for awhile pre-pandemic, and for all the reasons that you mentioned, I thought it was incredibly impactful. A couple other things that I think resonate here as well as we’re talking about the ELO program and what you’ve developed and would be of interest to other pharmacists that might think about developing something on their own, if you want the Orange Theory type of model, you book an appointment, you’re accountable, and if you don’t show up, even though you’re paying a monthly fee, if you don’t show up, you’re going to get charged, right? And you know, one of the things I love about folks that are monetizing their clinical expertise is that for the user, for the person that’s purchasing, there is value and power in someone having skin in the game. You know, maybe you offer something for free and you get more folks involved. I can tell you from our experiences at YFP and a lot of what we’ve done, I heard from other pharmacy entrepreneurs, is that there is value in folks that make an investment to pay for something that they then perceive there is a personal return on that investment and therefore, there’s a commitment of time and energy to be able to participate in that. So I would encourage folks that are thinking about monetizing clinical expertise and services, No. 1, don’t be scared to charge for your expertise and your time, and No. 2, make sure you’re not underestimating what your service is worth. Because I think we tend to maybe have that approach for some pharmacists that are out there. The other thing I would say to that is, you know, I remember going to some of those workouts and like, you’re right, I mean, you don’t have to have all the equipment, you show up, the workout is ready for you, but you better walk in the door with a mindset of being ready to personally grow or else your butt is going to get kicked, right, for that day. And I think that’s true here. Like when you’re going to invest a lot of time and some money in a course that you’re making a commitment to develop individually and professionally, like you’ve got to be ready. You’ve got to be ready to engage. And I think the accountability you have with other learners and the accountability you have with live office hours and things like that really helps to facilitate that as well. But I think the mindset going in to a program like this is really important to be able to get everything out of it that you want to.

Kelley Carlstrom: I completely agree. Accountability is really difficult with a long program. Oncology is hard. Like it’s — we have a steep learning curve. But our profession is a profession of self-learners. So if anyone can learn oncology, it’s any pharmacist. And you just need to show up and put in the time because at the end of the day, nobody can make you learn or develop new skills. It’s really on you.

Tim Ulbrich: That’s right.

Kelley Carlstrom: And you know, my program is about eight months long. So this is not a short, do it one time course and learn all about oncology. I need you to stay committed.

Tim Ulbrich: So at the time of this episode launching, your course is maybe live or about to be live here really soon, so where can folks go to learn more about not only Kelley C, PharmD, but also more specifically about this course, the ELO program.

Kelley Carlstrom: Yeah, you can visit my website at kelleycpharmd.com. And that’s Kelley with an -ey here.

Tim Ulbrich: Awesome, awesome. Let’s transition, Kelley. One of the questions I like to ask folks that are especially working full-time, they’ve started their own business whether we want to call it a side hustle — I would argue this is not. You know, it seems more than that, as I mentioned at the beginning — but whatever we want to call it, at the end of the day, you know, I think some of this is about really having a strong vision for what you want to do, the impact that you want to have, and obviously I can tell this is fulfilling work to you. But I think part of this is also about like you have financial goals, you have a financial plan, and you want to be able to accelerate some of those as well. So how has this business accelerated and impacted your financial plan?

Kelley Carlstrom: So this is — I’m in it for the long game here. So it has not had an impact on my financial plan in the short term. But what — my focus when I initially started this was, you know, not being a business owner not having any experience with business before. I wanted to kind of tiptoe my way in and do a lot of bootstrapping initially. So for example, I built my own website. Not a skill pharmacists typically have. And I definitely wasn’t great at it. But I didn’t want to make huge investments up front until I kind of got some feedback and determined if I was on the right path. So over the past two years, I’ve been getting that incremental information and investing more and more in my business. So what I — definitely what I am interested in is having this be an integral part of my plan, my financial plan, and what that gives me is flexibility. And at the end of the day, flexibility in my view is the end-all, be-all that gives you opportunity to go whatever path you want to go. If you want to take a different job, if you want to take a different job that maybe pays less, like you don’t have that pressure of needing a full-time income or benefits from a particular job. It gives you a lot more options.

Tim Ulbrich: Absolutely. We’ve talked about the power of flexibility on this show so many times as I think that others share your belief on the value and the power that that has. Kelley, let me ask you, you mentioned — paraphrasing here — that you know, you weren’t a business owner, you didn’t see yourself necessarily as a business owner and entrepreneur. You’re a clinically-trained specialist. And so here you’ve got this really cool idea, you think that you have a solution to a problem. But I always say, there’s a big chasm between like idea and actually having something that’s out there, right? And I think this chasm is where a lot of people get overwhelmed, get lost, or perhaps give up? And Seth Godin, one of my favorite authors, talks about this as the concept of being the dip. You know, when we’ve got a really cool idea, whether it’s a project at work, whether it’s a business idea, whatever, we get really excited about it. And then we quickly find ourselves in this dip of like, oh crap, like what do I do next? And what is this really going to take? And like am I ready to kind of go through this? And what he argues in that book of which I agree with is oftentimes, we never get on the other side of the chasm or the other side of the dip because we get lost in that period. So for you, you know, you mentioned building your own website and that’s awesome. I noticed that when I was looking at the site the other day. Like as someone who doesn’t necessarily view themselves as an entrepreneur or a business person — although I would challenge you a little bit on that — what were some of the big barriers to bridging that gap between idea and actually having something to go?

Kelley Carlstrom: The biggest barrier I think is your understanding or my understanding of what you’re capable of because I think, like you said, you look into this chasm of I don’t know a lot of this information, and it can easily get in your way. So for example, initially, I was sending out an email newsletter with some interesting jobs I found that didn’t require residency. And I was manually sending these emails, Tim. I didn’t realize what an email provider was. And so I really started at the baseline of understanding all of these skills. But one thing that in my traditional or in my career path that really helped me, when I got into my consulting role, I moved from being a full-time employee to being a consultant contractor, which is a much riskier position, you can be let go at any time. And what I learned from that was I was much more project-based. So I had to show up and understand what value I was bringing and what I was delivering at the end of this project. And that’s a different mindset than when you’re an employee.

Tim Ulbrich: That’s right.

Kelley Carlstrom: So that really shifted me to think OK, I see a problem, these pharmacists reaching out to me and telling me they have a problem — shouting at me, actually. When I finally recognized OK, somebody’s giving me an opportunity here, there’s a problem, then I start thinking about how can I fix this? What’s the deliverable at the end of it? And I just started walking down that path of asking questions, the resources at the MediPreneur Summit kind of got me kicked off. They gave me a couple other references, and I just started learning on my own. I invested in some coaching and some other programs that really kind of taught me a lot of the nuances. But it’s a journey for sure. Like there is not a destination here. I am learning something every single day. There’s lots of great new technology out there to help us, depending on what you’re offering. So I’ve really enjoyed flexing those skills that I didn’t get to flex before.

Tim Ulbrich: And I think if folks that are listening that have an idea, you know, really let sink in what you said about it is a journey. I don’t view this as there’s an end point per se because there’s always the learning that’s happening of new tools, new resources, how can this be improved. But one thing you said that really resonates with me, and I’ve shared on the show before, you said, I just started, right? And there are several ways that you just started, whether it was eventually you built that website, you mentioned engaging in coaching, you attended the summit, MediPreneur Summit, which sounds like had a big impact on kind of accelerating the idea forward. And one of my favorite books I’ve referenced on the show before is “Start” by John Acoff. And that was really instrumental for me as well of OK, how do I get over some of these internal objections and fears and all these questions, and what’s one thing I can do to get started, even though you know, like you will look back, Kelley, I know you will, in five years — and even though I think you’ve done an awesome job building your site and what you have — you’ll look back and say, “Wow. This has come a long way.” Right? “It’s grown, and I can’t believe that I did this or that,” or “I can’t believe I didn’t use an email provider.” And that’s OK. Like not letting those things paralyze you but really just trying to move forward because at the end of the day, you’ve got a good vision, and you’ve got a problem that needs to be solved, and I think you’ve certainly got a solution to that. What about time? You know, I sense that many people listening are thinking, Kelley, like where and how are you finding time to build a website, you’re working a full-time position, I’m sure in a startup environment, that doesn’t mean you’re not working a decent amount of hours. So how are you balancing this with your pharmacy job? How many hours are you spending of the week in the business? Tell us a little bit more about that.

Kelley Carlstrom: Yeah, time balancing is definitely tricky. So this is my night — every night and every weekend is pretty much what I work on this. I think the — when I was first developing kind of what program I would want to create or what product I wanted to create, I had some great advice about not making a product you don’t — or not building a business that you don’t want to work in. And it sounds kind of intuitive, but when you’re initially thinking of what is the problem and what’s the solution, it can easily fall in the trap of making something that fits the solution but doesn’t fit your particular lifestyle or goals. And so when I was initially making my bigger, robust program with these 20+ modules, I was thinking, OK, I can make all this — I can do this all myself. I have this knowledge. But then I had the epiphany one day where I was thinking, why would I do this all on my own? Like I have a full-time job. I don’t need to do this on my own. So that’s when I got into the track of my business where I hire other pharmacists because what I’m realizing now is that there’s kind of a mass exodus in oncology pharmacy. A lot of experienced clinicians are leaving patient care and going into nontraditional roles, particularly pharma. And I think one reason — it’s multifaceted, but I think burnout is definitely one part of it — but one reason is that there’s not a lot of other opportunities within their role to monetize their knowledge or kind of move above that career ladder. And you can be on an advisory board or speaker panel for pharma and make a little extra money, but not — those have conflicts of interest so not everybody can do that. You can give a presentation at a conference that they usually pay you for, but then you have to slave over a slide deck. And at the end of the day, your hourly wage is pretty meager. So you know, not only am I helping pharmacists learn this material, but I wanted to bring in these expert pharmacists and pay them for their knowledge to help support me so I don’t have to do everything myself. Staff your liabilities is one of my most important phrases lately. Hire out help.

Tim Ulbrich: Absolutely. And I think those hires, Kelley, like it sounds like for you — I know we’ve noticed the same thing — like in the moment, they feel really weighty, right? Not only from a financial standpoint but also you’re giving up some of that control of whatever piece or part but so instrumental to getting comfortable with that and really, at the end of the day, again, you’ve got a great vision and a big vision, and at the end of the day, like Kelley can only do so much to accomplish this vision, right? And so how does the business not necessarily become just Kelley but it’s about this accessibility of oncology specialist training to as many pharmacists that need it and that can get it out there and that you might be the limiting step to that to be able to accomplish that. And so how do you be able to build the business in a way that supports other people helping? I said this before we hit record, I mean it genuinely, so I’m going to say it again: I was really excited about this interview. You’ve delivered on inspiring me, and I sense that’s going to be true for many of our listeners as well that may have some ideas that are floating out there and maybe have not taken action on some of those and are ready to move those forward. Where can folks go or what is the best place for folks to go to connect with you and to learn more about the work that you’re doing?

Kelley Carlstrom: So you can learn more on my website, KelleyCPharmD.com. But I would love if you would connect with me on LinkedIn. LinkedIn is my favorite place to hang out, and I think most pharmacists do not maximize LinkedIn to the fullest potential. And there’s a lot of opportunity on there. So definitely reach out and send me a message.

Tim Ulbrich: Great stuff, Kelley. And again, that’s KelleyCPharmD.com. That’s Kelley with -ey, and you can connect with her on LinkedIn. We will put her information into the show notes. If you have a story and you’re listening, you have a story that you think would make for a good episode on the podcast that either you’re monetizing your clinical expertise or have knowledge of someone else that is, please reach out to us and as always, do us a favor and leave us a rating and review on Apple Podcasts so more pharmacists can find this show as well. Thank you so much for joining, and hope to have you back here again next week. Take care.

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YFP 216: Common Credit Blunders to Avoid When Buying a Home


Common Credit Blunders to Avoid When Buying a Home

On this episode, sponsored by IBERIABANK/First Horizon, Tony Umholtz discusses common credit blunders when buying a home.

About Today’s Guest

Tony graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants, and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay, and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine, and Mortgage Originator magazine.

Summary

Tony Umholtz, a mortgage manager for IBERIABANK/First Horizon, discusses the impact of credit on purchasing a home and common credit blunders that he has encountered when working with pharmacists during the lending process for the pharmacists home loan product.

Tony explains how credit and your credit score can impact your home buying process. Your credit score can affect your interest rate for a home loan. He details how credit information is collected and how the three main credit bureaus, Experian, TransUnion, and Equifax, aggregate your FICO score. Tony lays out how the scores are calculated, with payment history making up 35% of the score, credit utilization making up 30%, length of history with 15%, and credit mix with 10%.

Some common blunders that Tony has seen when working with pharmacists include having no credit or limited credit history, maxing out a 0% interest rate credit card, and relying on third-party credit tools for an accurate FICO score. Tony further shares that clients may not be checking credit reports and correcting errors that may appear on those reports. During the home loan process, borrowers have also made the credit blunders of co-signing for a loan without fully knowing how it would impact their credit and applying for credit for large purchases like a car or furniture for the whole before the sale is final. The lender knows and can see those last-minute credit applications and changes, and those changes can impact your loan approval.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tony, welcome back to the show.

Tony Umholtz: Hey, Tim. It’s good to be here.

Tim Ulbrich: Excited to have you back on. And last time we had you on was Episode 204, where we talked about the current state of buying, selling, and refinancing a home. And we’re going to link to that episode in the show notes. But Tony, before we jump into the meat of today’s episode, give us the update from your perspective on what’s happening out there in the home buying market. Anything cooling off?

Tony Umholtz: Well, you know, it depends on what you mean by cooling off. It’s still — we’re still kind of dealing with a lot of the same challenges we’ve had this past year with inventory levels are still very, very low. But there’s still a lot of demand from home buyers. And you know, hopefully we’ll see some of that additional inventory come online soon. But with interest rates continuing to decline throughout the summer, there’s still a lot of demand for both new purchases and refinances.

Tim Ulbrich: I suspected as much as interest rates came back down. I know we saw a little bit of a jump up and have come back down since. So appreciate the perspective that you share on that. And so today’s episode, the idea for this episode came from a conversation Tony and I had back on Episode 191 where we talked about 10 common mortgage mistakes to avoid. And on that episode, one of those mistakes we talked about was credit. But we wanted to dig deeper, knowing that there’s a lot more to discuss and also to hear from Tony as he can share more about some of the experiences and what he sees folks making often in terms of credit mistakes that might have an impact on their lending situation and through the process. And so you know, these mistakes could lead to surprises, which surprises during the home process, home buying process, are certainly not good things. We want to avoid that. And that could be surprises in the form of a higher interest rate or surprise credit score. And again, we want to do everything that we can to avoid that and making sure that we’re ready and prepared going into the home buying and into the lending process. Tony, before we get into the common mistakes that you see folks making around credit when purchasing a home, let’s start with the mechanics. How does credit information get into one’s lending application? When does this happen? And how does a borrower get rated?

Tony Umholtz: Great question. And you know, there’s really three large repositories that aggregate all of our information as consumers. And that’s Equifax, Experian, and Transunion. So those are the three main bureaus that are out there that are gathering all the data on our credit histories. So for example, you know, any credit cards that we may have, even starting as young as 18 years old, you know, installment loans, car loans, anything — mortgage loans, student loans, all these types of creditors are evaluated by the three bureaus. So they aggregate all the data, our payment history, our performance, how long we’ve had credit, so those are essentially the three bureaus that are kind of watching us, so to speak.

Tim Ulbrich: And I want to dig in a little bit further about the impact one’s credit score can have on their application, ultimately the interest rate in terms of they’re able to access. So before we look at the numbers, remind us the components of one’s credit score, Tony. I’m specifically thinking here about the FICO score.

Tony Umholtz: Yes. So you know, typically when we look at the FICO score — and we’re starting to see a re-emergence of other scoring models, but the primary driver of our credit scores is going to be our payment history. So payment history is by far the biggest driver of our credit score. So meaning on time payments, not having a 30-day delinquency. And I want to just touch on this for a minute because it’s something that’s come up a lot over my career, my nearly 20 years in the business is let’s just say — we just had this incident with one of my borrowers this past week where they did not get a credit card statement. They were selling their house prior to buying the new home they were buying. And he missed a credit card statement that came to the home. And if it’s over 30 days late, you’re reported to the bureaus. So if it’s 15 days late, you’re not reported to the bureaus as a delinquency. But if it’s over 30 days, then it becomes late. So it’s — that’s a question that comes up a lot. And unfortunately, it’s something we had to navigate here at the last minute.

Tim Ulbrich: Oh man.

Tony Umholtz: But payment history is the biggest driver. The next would be credit utilization. And that primarily is going to be driven on revolving credit accounts. And what I mean by revolving credit accounts is going to be your credit cards that you might have or lines of credit. And those are essentially going to be evaluated based upon how much you have borrowed on that card. For example, I always advise people to try to stay at 50-70% of their credit limits. And what that means — so let’s say you had a $10,000 credit limit on your credit card and you ran it up to $9,000 balance. Well, that’s going to report adversely to the creditors, credit bureaus. And remember, credit utilization is 30% weighting of your score. It’s a big weighting. But that’s the other really big driver of your credit history. Those two alone are like 65% of the weighting of what determines your credit. And then the next couple I would say, just to add in here, is length of credit history, you know, the longer you’ve had credit, good credit, the better that’s going to weigh on your score. That’s usually about a 15% driver. And then your credit mix is about a 10% driver. So the types of credit you have is very important too. You know, do you have experience with — you know, a lot of times, people will come in before they buy their first home and they have maybe a car loan, student loans, credit cards, but they haven’t had a mortgage yet. And a lot of times the mortgage will add more — a stronger credit mix. It would be viewed stronger because it’s a bigger installment loan. It’s a little tougher to get. And then the last driver of your score is inquiries. A lot of people will call me and say, “Tony, the inquiries really hurt my score, and I don’t want this to damage my score.” But they really have the least amount of impact on your score. If you go and have a tremendous amount of them at one time, that can hit your credit a little bit. But normally, a couple of inquiries isn’t going to have much of an impact.

Tim Ulbrich: Yeah, and it sounds like, Tony, you mentioned several components here, but low hanging fruit, you mentioned payment history, so on-time payments, and then credit utilization, how much of that balance is used each month in terms of the revolving amount. Those two alone making up more than 60%. So you know, I think being in tune of if you’re looking to really optimize credit, I think of some tips here that folks may want to consider, specifically with payment history and on-time payments, something like automatic payments, right? Obviously we want to make sure we’ve got the funds to pay that money, you know, in the account that that’s coming from, but the example you gave of someone not getting a mailed statement, hopefully folks can get electronic statements, you know, as a backup to help prevent that. But something like automatic payments can really help make sure that we don’t have something like that happen, especially if you’re in the midst of purchasing a property where the timing of that is less than ideal. I would also point folks here to an episode, 162. Tim Baker and I talked about Credit 101, and what Tony just mentioned there of the makeup of a FICO score was one part of that discussion. But we also talked about credit security, the importance of understanding your credit, how credit really is a thread across the financial plan, and so credit being a very important topic as it relates to the financial planning process. Tony, I’m someone listening today, and I feel like I’ve got a good idea of my credit score. And the question that comes to mind here is how significant of an impact can this have on securing the best rates and terms? And so you know, what I’m thinking of here is 30-year mortgage, maybe because of a higher or lower credit score, we’re looking at maybe a quarter of a percent. And maybe that doesn’t look as much of a big deal on paper as it actually can be mathematically, so tell me about what the impact of this might be.

Tony Umholtz: Well, the longer term the loan is, the more impactful your credit history — your credit scores are going to be. So it’s a good point, Tim, because you know, for example, if you have a 710 score versus a 740, you’re going to get probably about an eighth to a quarter better rate on a 30-year loan having over a 740. Typically on most of our mortgages, over 740 does not get much more benefit.

Tim Ulbrich: OK.

Tony Umholtz: So a 740 score versus an 800 score isn’t going to see a huge benefit. Some of the jumbo loans that get over $550,000 may see a little bit more of a benefit because they have some pricing matrices — the matrix will go up to 780 or higher. But where you really see the impact is like if you’re under 700, right, and you’re at 660 versus even a 700, talking about a large margin risk profile added to the loan, especially on a 30-year fixed. One thing I do want to mention that I think it’s important is the shorter the term, especially on a 15-year fixed, the more flexibility you have with the credit score. So I’ve even had some customers that have been under 700 and it really impacted their 30-year rate, but the 15-year rate stayed the same because the hits don’t really adjust to that until you get even lower because a lower term, you’re paying back the loan faster.

Tim Ulbrich: Yeah, that makes sense. And I would encourage folks, even though that may not seem significant, eighth of a percent, quarter of a percent, when you’re talking about Tony’s comment, a 30-year mortgage, $400,000 or $500,000 home, you know, that can start to add up in terms of obviously difference in monthly payment because of that interest as well as the difference in what you’re going to pay over the life of the loan. And here, we start to think about opportunity costs, right? Where else might that be used in other parts of the financial plan, whether it be investing, other debt repayment, and so forth. So now that we’ve talked about the makeup of the FICO and really understanding that score components and the impact that that might have, let’s talk about some of the common mistakes that you see, Tony, folks that make when they’re applying for really any loan but here, we’re going to talk about the pharmacist home loan a little bit more specifically. And the first one I have here is no or limited credit history. So we’ve been talking for the last five minutes or so about the importance that, you know, a higher credit score can have in getting more favorable rates and terms. So if someone’s listening and they have limited credit history or no credit history, what are the problems that can present themselves there? And what are some of the solutions that they can pursue?

Tony Umholtz: Well, it’s one of those things where especially if you’re young, it’s hard to come right in with very established credit. But I would suggest, I mean, just a couple points here. You know, one thing that — and I didn’t realize, and I’ll just take my own example. But I remember my first day, first month let’s just say, of my freshman year of college, there was a credit card company on campus where you could get a credit card, right? And being the finance major that I am, I was one of those guys that didn’t charge much but used it here and there. And it helped me with my credit history. And I’ve seen that. If you can get even a small credit card even in college, even if it’s got a couple hundred dollar limit, and you use it as a wise steward, right, you’re not out there running it up, I think that’s a great way to start building your credit. That really helped me because I had a solid credit score coming out of college. And I see that with other people too. Now, student loans being paid on time, that all helps as well because student loans will show up quickly too. I do have a situation now with a client that we’ve had to like rebuild their — they had no credit. They had zero credit history, right? So there’s no score. And that becomes a real challenge, especially — I mean, for example, the pharmacist home loan, we do — you don’t have to have a real in-depth credit history. You really can have a fairly young credit history, but you have to have a score. You know, we have to know what that score is. The only other option we have if you have no credit score that we have available is FHA where we essentially kind of have to build your credit history to some degree. But that’s kind of a rare thing these days. But that’s — every now and then, we run into that. I would just say to start building it early. Having some credit is not a bad thing. Just be responsible with it.

Tim Ulbrich: Tony, I’ve heard you say that before about for those that have no or limited credit history, the FHA is an option and building credit. Tell me more about what you mean by that.

Tony Umholtz: So when we say building credit, we essentially are using other types of forms — like for example, you might have paid auto insurance, right, or utility bills, or rent. We’re able to pull some of these other types of elements of payment history together to show responsibility and the ability to repay. So those are some of the things that we’ll actually use to build the credit history as well as we suggest to get a credit card or something to that effect to — depending on their timing and when they want to buy to start developing that so they can at least get a score. But having a score is pretty critical to get the best loans, you know. Really the only one that we have out there is FHA that will allow us to work without a credit score.

Tim Ulbrich: Got you. Another common mistake I’ve heard you mention is, you know, folks that might have purchased an appliance, piece of furniture, there’s several examples of this, on a 0% interest card and not realized the impact that that might have when they’re going through the lending process and purchasing a home. Tell us more about that.

Tony Umholtz: You know, this is another one, Tim, that I learned firsthand personally when I was young and lots of my — I’ve seen it many times over the years with my clients, but you know, I’ll give the example of buying furniture. Fortunately, I did this after I bought my home. I was 25 I think at the time. It was a long time ago. But essentially, I went into a furniture store, was able to buy all this furniture, and they said, “Hey, by the way, that $4,800 in furniture, we’ll give you a credit card where you don’t have to pay interest for over a year.” I said, “Well, that sounds great. Let’s do it.” And you won’t have to make payments for over a year. Well, unfortunately, how those credit cards work — and they’re in all sorts of retail goods. It’s not just furniture. There’s a lot of different promotions out there. It reports to the bureaus as a maxed-out credit card. So you know, a lot of electronics companies are the same way. They’ll offer this to you. And you’ve just got to beware because it’ll report to the bureaus as a maxed-out credit card. And as we discussed, 30% of our weighting of our credit score is based upon credit utilization. If we show a maxed-out credit card, that’s going to be a big hit to our score. And I see that a lot. It’s unfortunate. But it comes up a lot.

Tim Ulbrich: And you taught me that, Tony. I did not know that that was often viewed as a maxed-out credit card. So obviously what we just learned about FICO and utilization, that makes a whole lot of sense of the impact that that could have. So we talked about no or limited credit history, we talked about buying an appliance or piece of furniture or something like that on a 0% card. The other thing I’ve heard you mention several times — and I think we’re seeing more and more as folks are using more of these tools — would be relying on a third-party credit app or tool, whether it be something like CreditKarma, CreditSesame, when we’re relying on that for credit score information that may not match up necessarily with what you’re seeing on the lending side. Is that correct?

Tony Umholtz: That’s right, Tim. Yeah. That’s right. And I think this is an important topic because there’s a lot of variables out there. And I don’t want to say that these like a CreditKarma and some of the other apps and trackers aren’t legitimate and helpful. They certainly are. And they give you a good idea of the trend of your credit score and how you’re performing. The one thing I would caution everyone on, though, is it’s not typically indicative of what your score is to a creditor. Now, mortgage companies in particular, we run what’s called a tri-merge report, which is all three bureaus. So we’re going to see Equifax, Experian, and Transunion’s, each of them give us a score, provide us a score. And we take the median score. So mortgage lenders take the media score where — and the same thing would apply for like a commercial loan if you’re getting commercial loan for a building or something of substance. An auto company, if you’re buying a car, will often just pull one. So they may just pull Experian, right? Or Equifax. So you know, a lot of times there is a little bit of variability in our scores. And they can be different. Our Equifax score could be potentially be 750, our Experian could be 739, and our Transunion might be 730. Well in that case, you’re at 739, not over 740. And that’s where I see the mistake come up because a lot of these trackers will show you a score that’s a little higher than what we would see. And a lot of my customers send me — my clients will say, “Hey, here’s my report, here’s my credit score.” And it’s oftentimes a lot different than what we pull. But I think there’s a lot coming on scores over the next couple years. I think you’ll see different ways of risk assessment. It hasn’t hit us yet, but I think rental performance will come into play more too. It’s important to always pay our rents on time. You know, traditionally that didn’t always come up on reports. But I think there’s going to be some other elements that are going to potentially help us. And I think you’ll see that the medical collections take less weight on the reports. We’re already seeing that too, which is really a blessing for a lot of people that have had things happen.

Tim Ulbrich: Tony, I can see this playing out. You know, you gave a good example where somebody might be on that line, let’s say a 740, and they think because of what they see on CreditKarma or CreditSesame that they’re going to be above that and then come to find out that they’re not, and that obviously can have a surprise and be an impact on rates. And you know, I’m sure — it reminds me of the patient that might walk through the doors of the pharmacy and be upset with the pharmacist because of what they get through claims adjudication on the insurance side. And the pharmacist is often not deciding that price, but the reality is they’re the person that’s in front of the patient. And I suspect here, that can be much of the same where they may be surprised and take it out on you guys sometimes.

Tony Umholtz: It happens.

Tim Ulbrich: It happens, right?

Tony Umholtz: We’re the messenger.

Tim Ulbrich: Yeah. It’s an emotional process.

Tony Umholtz: It is. One thing that we find that’s been helping too is we have a tool as part of our platform here that can actually tell — we can see what credit — what the scoring potential for a client based upon activities they could do to their report such as paying down debt, consolidating a card or whatever it might be. So it actually — we are able to a lot of times add some value to help people get their scores a little higher. We’ve had a lot of success with that.

Tim Ulbrich: The next one I have here, Tony, is borrowers that may not be checking their credit reports and therefore identifying and correcting any errors that could lead to higher rates. And this one is really something that I find interesting. You know, I do an activity in a personal finance course that I teach where I have folks actually go out, pull their credit reports, analyze them, and then they write a reflection on kind of what they learned. And the trends I have found is that about 50% of the students No. 1, have never checked credit before, have never run a credit report. And then the number of folks that are surprised by what they find on that credit report. So any insights here, even any examples that come to mind of where this can be problematic, especially when you’re in the midst of trying to secure a loan and secure a loan at the best rate?

Tony Umholtz: I think it’s really important for everyone to take advantage of the free credit reports that are out there. You know, the annualcreditreport.com. You’re allowed to have one copy from each bureau per year. And I think that’s something that we all need to do. And the surprises I think are hey, I thought I canceled that credit card years ago, right? And sometimes having open credit — it doesn’t hurt you. But you may not want to have a whole bunch of things out there just from a fraud risk potential. But — and making sure that you’re not attached to things you don’t want to be attached to. You just — in this day and age, you never know, and especially if you get into partnerships and cosigning and things like that, you’ve got to be really careful about what you’re attached to and knowing what entities your credit, you’re attached to. That’s one thing I would just caution because I’ve seen some problems come up with cosigning and people not being aware that they did or applications from everything from student loans to auto loans to business loans. And then just there is a lot of fraud out there, you know? And I think that I’m on LifeLock. I’m not trying to promote anything, I just, I’ve put that on me and my wife’s accounts just so we know what’s going on, right, in case anything ever were to happen we’d be made aware. But certainly would encourage everyone to do that. And you know, I think just knowing what’s out there. I know when I did it one time, I had a credit card that I hadn’t used in like 6-7 years and it was still open, right? If you don’t use it, might want to close it.

Tim Ulbrich: And I’m glad you mentioned the cosigner because I do think that’s something that we hear and see often from the community, whether that’s student loans, whether that’s auto loans, whatever be the situation, obviously there’s a potential risk there of late payments, somebody may or may not be aware of that and the impact that that could have during the credit and obviously impact that could have on your credit and then the surprise that could present during the lending process. Tony, last one I want to talk about here before we wrap up by talking about the pharmacist home loan product is applying for credit before sale is final. And I think many of us who have gone through this process, we’ve gotten the advice of, do as little as you can in terms of new credit or inquiries or anything during this process. But give us some more details, not only why is this important but what is the time period that we should be thinking about this because I sense that there are listeners out there that might be buying a home and also be thinking about refinancing their loans, for example.

Tony Umholtz: Right. And this one is really important, guys, if you’re in process for a home loan because us lenders, we know what you’ve applied for during the process. We’re notified if you secure a new loan. So for example, one that comes up a lot is a new auto loan, a — furniture for the home. I’ve seen that quite a bit. And a lot of our clients are proactive and ask the question first. And we will look and see. If it’s something like hey, my car absolutely won’t work anymore, I need to get a new one, we’ll look and see, will that impact you. We’ll include that new payment into your numbers so it doesn’t affect your home closing. But normally, you want to try to postpone any activity, new credit, when you’re in the mortgage process until after you close just because there’s a lot of risk there, right? It’s a big transaction. You do not want to jeopardize it with new credit because we do know about it. We will know. We are notified if you open anything up. And that’s a really important point if you’re in the process. So I would just caution everyone to be very careful with that. And I will give the classic example. Before they tracked, this is going back probably 2005, I remember I went to this closing for a client of mine, and it was a fairly nice home. And he goes, “Hey, Tony, look at my new car I bought last week!” And the guy had bought a new Porsche, right? This is before we had the trackers. I’m like, don’t tell me this. Oh, don’t tell me that. But anyway, nowadays, we do know what activity has happened. And be very careful. And if you have to do something, just speak to your lender first before you officially apply for any other types of credit during the process.

Tim Ulbrich: Yeah, and that’s where my mind was going, Tony, just knowing the examples that might come here, right? It could be credit, we talked about some of these already, furniture, appliances, student loans, auto loans. Like there’s a lot of things that could come up here, and I think just open communication with the lender if you have questions to make sure that you’re not doing anything that’s going to jeopardize obviously, again, the goal here being that we get the best loan at the best term, you know, and ultimately the best rate so that we can keep the cost of interest low throughout the life of the loan. So Tony, we’ve talked about the makeup of the FICO score, understanding what feeds into that score. We talked about the impact that that could have on someone’s rate and their ability to secure that competitive rate. We talked about some of the common mistakes that you see folks making around credit in the home buying. And I think this is a good connection to the pharmacist home loan product. And I know many of our community members are familiar with this from previous episodes, information we have on the website, but for folks that are hearing this for the first time, give us some more information about the pharmacist home loan, what is it, how it’s different from other options that are out there in terms of down payment, PMI, minimum credit scores, and so forth.

Tony Umholtz: Sure. I mean, again, just a great tool for pharmacists to purchase a home. And the main points of it is you’re able to buy a home — if you’re a first-time home buyer, you could put down as little as 3% and have no PMI. And if you’ve owned a home before, it’s 5% down with no PMI. And that’s significant savings not having the MI but also the interest rates tend to be better than I can offer with a 20% down normal conventional loan for someone else, which is quite a nice opportunity for people. And the minimum credit score is 700. So it doesn’t have like a super high credit threshold. And it’s flexible on reserves and things like that. You know, some programs have very strict reserve requirements, and this one has some flexibility there, has some flexibility on how we value student loans, and you don’t have to be — you know, one of the other things that a lot of doctor loan programs have out there is some of them have restrictions if you’ve been out of residency for 10 years, you can’t use the product. This one does not have those limitations. So it’s — it’s been a great tool for a lot of people. And we’re very pleased that we can offer it.

Tim Ulbrich: And we’ll put Tony’s contact information in the show notes for folks that want to reach out to Tony directly. Also, if you haven’t already done so, make sure to check out — we’ve got a great comprehensive post, very informational, that I think you’ll find helpful, “Five Steps to Getting a Home Loan.” And you can — in that blog post, which we’ll link to in the show notes — learn more about the pharmacist home loan product. We’ve got some calculators there as well. And that’s available at YourFinancialPharmacist.com/home-loan. Again, that’s “Five Steps to Getting a Home Loan” at YourFinancialPharmacist.com/home-loan. Tony, as always, appreciate your insights, your expertise in this area, and thank you for the time coming on the show.

Tony Umholtz: Hey, Tim, thanks for having me. It was great to be here.

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YFP 215: Know Yourself, Know Your Money with New York Times Bestseller Rachel Cruze


Know Yourself, Know Your Money with New York Times Bestseller Rachel Cruze

Rachel Cruze discusses her new book, Know Yourself, Know Your Money.

About Today’s Guest

Rachel Cruze is a two-time #1 national best-selling author, financial expert, and host of The Rachel Cruze Show. Since 2010, Rachel has served at Ramsey Solutions, where she teaches people to avoid debt, save money, budget, and how to win with money at any stage in life. She’s authored three best-selling books, including her latest, Know Yourself, Know Your Money: Discover WHY You Handle Money the Way You Do and WHAT to Do About It. Follow Rachel on Twitter, Instagram, Facebook, and YouTube or online at rachelcruze.com.

Summary

National best-selling author and financial expert, Rachel Cruze, joins Tim Ulbrich to discuss her newest book, Know Yourself, Know Your Money: Discover WHY You Handle Money the Way You Do and WHAT to Do About It. Tim and Rachel delve into various portions of the book, highlighting specific lessons and concepts relatable to pharmacists, parents, and anyone interested in learning more about themselves and their relationship to their finances.

Rachel walks listeners through “Discovering Your Personal Money Mindset,” including how we form our ideas about money and how we learn to handle money as we do through “Your Childhood Money Classroom.” Rachel goes through the four money classrooms. She reminds us that regardless of the quadrant that you grew up in, you can choose your quadrant from this point forward. Rachel outlines seven money tendencies, how they not only impact your financial picture, and how these tendencies affect interpersonal relationships with significant others. Tim and Rachel share an earnest discussion about money fears, detailed in Chapters 5 and 6 of the book. They close with an eye-opening discussion on part 2 of the book, focusing on the “Power of Contentment.” Rachel shares how contentment changes your motivation for spending. She explains a practical exercise for determining what brings you joy and demonstrates how learning where and how you find happiness allows you to focus your spending on what is truly important to you.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Rachel, welcome to the show.

Rachel Cruze: Yeah, thank you so much for having me. I appreciate it.

Tim Ulbrich: It’s really an honor to have you on, and I’m excited to talk about your latest book, “Know Yourself, Know Your Money.” And for those listening in the YFP community that are already familiar with the Ramsey baby steps, I think this book does an excellent job covering much of the mindset, the behaviors, the beliefs that are the foundation to ensuring your goals and dreams become a reality. So Rachel, in Part 1 of the book, which is “Discovering Your Personal Money Mindset,” you talk in Chapter 1 about your childhood money classroom. And you make a strong argument that this is the first step in understanding why we handle money the way that we do and that “there are really two ways we learned about money: what our parents communicated emotionally and what they communicated verbally.” Tell us more about these two modes of communication and why it is so important to dig into our past for some honest reflection before we chart our path forward.

Rachel Cruze: Yes, well whenever you talk to any great psychologist or counselor or therapist, they will tell you that so much of who you are today is from how you grew up, whether that’s coping mechanisms, defense strategies, all of that. Learning to kind of survive really in your childhood is something that’s engrained in all of us. And so when I was writing the book, I wanted to go in and say, “OK, I want to understand why we handle money the way we do.” Like you said, it’s not just the what — you know, we talk about the how a lot around Ramsey Solutions, how to get out of debt, how to invest, how to refinance, how to give, but I wanted to answer that question, why? Why do we do the things we do? And it always stems back to that classroom that you lived in, which is your home growing up. And there’s a lot of lessons in those classrooms that we grew up in that you want to unlearn. As an adult, you’re like, I don’t want to take that with me. And there’s a lot of lessons that you do want to take with you. And so being able to just pinpoint, hey, my money habits, the way I view money, part of that is because of my environment growing up. And so those two modes of communication, like you said, the verbal, what is said out loud, and then that emotional state, is really important. So as I was writing the manuscript for this book, you know, kind of coming across these two things, and I remember thinking, oh, OK, it’s like a quadrant. God gave me a graph to explain this, and I’m so happy because it ends up being this four quadrant where that verbal communication and emotional communication intersect. And it ends up really showing these four different money classrooms. And so for you to be able to identify OK, I grew up in Classroom No. 1 or Classroom No. 2 there, and to understand that really will show you why you handle money the way you do today.

Tim Ulbrich: Yeah, and this was really a gut check for me, Rachel, as a father of four young boys, you know, I feel like I do a decent job in communicating verbally about money. It’s something I talk about daily, but it was a gut check on like the emotional part and what are some of the messages that we’re sending to our kids? And so part of this as I read it is unlearning in part or reflecting upon your past but also for those that are out there that are parents, thinking about some of the money scripts and messages that we’re sending in our own homes as well.

Rachel Cruze: That’s right. Yeah. And even that nonverbal, you know, in the classroom, Classroom 1 is the anxious money classroom. And that’s where it’s verbally closed but emotionally stressed. Classroom 2 is the unstable money classroom where it’s emotionally stressed but verbally open, so it’s lots of conflict, lots of fighting. That Classroom 3 is the unaware money classroom, which is emotionally calm but it’s verbally closed. So it’s not talked about, but it’s also not felt. Like it’s a stress point, so you don’t really even — your head is kind of in the sand, if you will, about money until you leave home and realize, oh wow, there’s a lot to do with this subject. And then Classroom 4 is that secure money classroom. And that’s where it’s verbally open but emotionally calm. So that fourth classroom, kind of like what you’re saying, I really wanted the readers to think about their current nuclear family to say, OK, if I do have kids or if I want kids in the future, how am I going to do this on the verbal and emotional scale? And so moving to that Classroom 4 is really important for people because the thing about that is you don’t have to be a perfect parents by any means to be in that classroom. You also don’t have to have a ton of money, right? You don’t have to be like a millionaire to be in that. It’s these habits that you create. And what’s funny is when you’re emotionally calm about money, usually there’s a plan around it, usually there’s a level of healthy control. There’s some safety nets in place like an emergency fund, you know, there’s these habits that you do in the how-to of money that set you up to create that emotionally stable home around this subject where for so many people it’s not safe, it’s not emotionally calm, it is very stressed. And when you look at the statistics of the average American today, I’m like, yeah, I would be stressed too, right? Living paycheck-to-paycheck, having $16,000 of credit card debt, all of it. So I understand why that is, but getting yourself in a place financially where you’re more under control, you’re naturally going to bring in that emotional side in your household, which is amazing. And then the verbal side you pointed out too is talking about it. And I think it’s less taboo today than it was even 20 years ago. I think parents engage their kids in more conversations maybe than the Boomers did for their kids, you know, like when you look at the different generational differences. But again, engaging it and showing the mechanics but also the other side of it of hey, here’s what contentment looks like. Here’s what generosity does to your heart and your viewpoint in life. I mean, you know, bringing in those hard and soft subjects of money are important to talk to about with kids.

Tim Ulbrich: Yeah, and I love, Rachel, how you take folks through this journey of understanding these four different classrooms you mentioned in the quadrant. And it can be heavy to kind of walk through and reflect on some of this. But you end Chapter 3 where you talk about calm money classrooms, you end Chapter 3 by reassuring us that our childhood does not define us. You say, “Your childhood may have given you a rocky start, but it doesn’t make or break you, regardless of the household you grew up in. You get to choose your quadrant from this point forward.” What an awesome view, right? We learn from the past, but we’ve got an opportunity to chart a new path going forward.

Rachel Cruze: That’s right, yeah. I mean, there’s so much hope and I think even in the money piece of my messages that I communicate with people is like no matter what mistakes you’ve made, yeah, maybe you do have a ton of debt. So on a more logistical side, yeah, maybe you have a deeper hole to dig out of than the person next to you, but no matter what, you get to make the decisions to say, no, I actually want to change how I view something or the habits around money. And the same is true with your classroom. Some people, a lot of people I would say, grew up in a hard environment when it came to money with their parents. But yet you don’t have to just mirror that story, right? You can take charge of your life to say, you know what, I’m not going to sit here and bash my parents, but I’m also not going to defend them. I’m going to just tell the truth of what happened, and here’s the truth. OK, there’s some good stuff, and there’s some bad stuff. And the bad stuff I can forgive, and I’m going to move forward though to choose something different for my life and my family. And I think it’s powerful. And I think we have to do that in all of parenting. I’m not a parenting expert by any means, but I’m like, you know, my husband and I have said, OK, this is our family. What are we going to choose to do in this? And so the money pieces is part of that.

Tim Ulbrich: Absolutely. And give yourself some grace along the way, right?

Rachel Cruze: That’s right. Oh, absolutely. There’s hope in grace. Absolutely.

Tim Ulbrich: Absolutely. Rachel, in Chapter 4, which is “Your Unique Money Tendencies,” you introduce seven major money tendencies. And we’re not going to go through all of these, but I’ll read them off quickly. And those seven are save or spender, nerd or free spirit, experiences or things, quality or quantity, safety or status, abundance or scarcity, and planned giving or spontaneous giving. And I want to break down one of these further that I suspect our audience has heard of before, and that is the concept of being a nerd or being a free spirit. And so this as one example of these different tendencies, tell us more about the difference between these two and why each really has its own benefits and challenges and we want to think about these on a scale.

Rachel Cruze: Yes. Well, when I did these seven tendencies, I didn’t want one to be right or wrong because I feel like that can happen a lot. You know, it’s just no, these are naturally where you’re bent, and if you go to the extremes of any of these tendencies, that can get unhealthy. Kind of that middle ground is to say, ‘OK, I’m naturally bent towards this, but I can actually have a little bit of both,’ which makes you I think more well-rounded, honestly. But yeah, the nerd and free spirit, that was kind of a phrase that was coined, two terms that were coined by my dad, honestly, about probably 20 years ago talking about the budget specifically and how I make it a little bit more broad in just the idea of how you view money, but one of you — or if you’re married, usually opposites attract. But you either lean toward a nerd, which is the one that yeah, you’re just organized, you probably have Excel spreadsheets all over the place, you love to budget, you love to feel in control, you know what’s going on, you keep up with everything, numbers are your friends, it feels great to know what’s going on. And so that nerd is naturally going to be bent one way towards money, which obviously is more the control factor. Sometimes more the scarcity mindset, they want to just know what’s going on. And then the free spirit is on the opposite end, and that’s the person that is more hey, everything is going to work out. It’s fine, it’s fine. A budget to them, it feels restrictive. It feels like there’s no fun in life if I have to live on a budget, that means I have to say no a lot, and I don’t want to say no. I want to say yes because you only live once, you know? It’s a little bit more of that mentality. And what’s funny is I actually lean more free spirit in who I am, so this money stuff and budgeting, some of it was hard for me to say, OK, I have to learn this because I don’t have to become a nerd to be good at money. That’s not the reason behind this. But it is to say, “Hey, there are qualities that I need to pick up,” because if I’m a free spirit on the extreme of the free spirit side, I’m probably going to be broke. I’m probably going to have lots of debt because I’m not keeping up with anything, I’m just doing what I want in the moment, what feels good. And that’s not wise. But I also don’t have to absolutely love numbers like my husband. He is more of the nerd. Like I mean, he has spreadsheets. He’s like all about the five-year goal and what’s going in each month, looking at the mutual funds. I mean, he just loves it. And I’m like, I’m the money person that talks about this every day, and I don’t love it that much. Like I’ll do the budget and track transactions, but that’s about it. So again, it’s just pinpointing hey, here’s where I lean, here’s places I can learn, and here’s some really great things about that side of the nerd or great things about the free spirit. And then if you’re married, again, it’s good to call that too because I think in marriage, money can be such a difficult subject. But to be able to say, “OK, you’re not my enemy in this. You’re just more of a nerd in that or you’re more of a free spirit, so how can we come together and work as a team?”

Tim Ulbrich: Yeah, you do a great job in the book going through each one of these sets that I mentioned and not only what they are and some of the differences and where that balance might but also some great exercises at the end of the chapter where folks can reflect upon those, and I think it would be great conversation starters as well for couples that are going through this together. Rachel, Chapters 5 and 6, it gets real, right? You start to talk about your money fears, six of them in total. And I want to pick apart the fear that you say is the most common one you see, which is not having enough. And essentially, this is if something bad happens, the fear that I won’t survive financially. And as you talk about in the book, this could be job loss, this could be a huge health bill, this could be a major house issue. And really, the list can go on and on of all of the things that might go wrong. And it could be a today thing, a today fear, or it could be a future fear. For example, will I have enough when it comes time to retirement? And I think this quickly becomes overwhelming and for many can become paralyzing. And as you say in the book, the “what if” question, it’s a scary question. And so tell us more here, how can we face this fear head-on without it ultimately paralyzing us to take action with our financial plan?

Rachel Cruze: Yeah, when we talk about fear — for this book, I did a lot of research around it because usually fear is just seen as a 100% bad thing, right? Face your fears, don’t let your fear hold you back, all that. Well, some of that, yes, is very true. I remember talking to Dr. Chip Dodd about this, and I loved what he said because he said, fear can actually be a gift. Fear is your body’s response that you are in need of something. Now, again, when that fear becomes paralyzing or turns into anxiety, like any of that, we don’t want that. But just that initial fear, OK, what is that telling you? Because it actually could be telling you something that you need to listen to to diminish that fear. So for a lot of people — and gosh, we just walked through 2020, right, which was just the craziest year I think of all of our lives, around this. And so you could say, OK, my fear is that if something happens, am I going to be OK? If we lose a job, am I going to be OK? Well, you look at your situation and again, just pulling in just stats that I know that 78% of Americans live paycheck-to-paycheck, the average car payment is around $548, the average family owes $16,000 just on their credit cards. So you put all that together and if something happens, are you going to be OK? Well yeah, you’re going to be able to literally survive. But financially, you’re going to be in a mess. You’re going to be in a mess if you don’t have another paycheck to pay these bills. So let’s look at the reality of what’s going on. Again, it’s not to paralyze you, but it’s to say, OK, what can I do now to get in better control of my money? Am I budgeting? Am I living on less than I make? Do I have an emergency fund? And do I have a goal that I’m working towards that actually puts my money towards something, right? Am I giving? Like am I doing these things? And for a lot of people, if they say, “No, I’m not,” hopefully it’s a little bit of a motivator. I don’t think fear has to be the only motivator, but I think it’s a good jumpstart to it of OK, let’s get some things in place so that we can say, OK, maybe you look up in 24, 36 months, three years down the road, and you’re completely debt-free, you have a fully-funded emergency fund of 3-6 months worth of expenses. You now have retirement planned out, you know how much you’re putting in each month, like you actually have a plan in place. And what caused that may have been that fear of wow, if I lose one paycheck, this entire thing just implodes is what it feels like. So again, let that fear drive you. And again, it’s a big one, that fear of am I going to be OK? And what’s interesting is prior to 2020, it was women’s top financial fear. So for some men, it was oh, there’s a dream that I have that I can’t get to because of my life or you fill in the lank. But women day-in and day-out, consistently when surveyed, it was am I going to be OK? And then I think you fast forward to 2021, I don’t have hard data for this, but I would say a lot of people now are in that bucket.

Tim Ulbrich: Absolutely.

Rachel Cruze: Because of what we walked through. So again, I want this fear to not turn into something that’s super unhealthy, but I want it to be a little bit of that jumpstart to say OK, is this rational? OK, maybe it is. So maybe I need to change some things. But then also I’ll tell you this too: It could be irrational. I mean, my husband and I have been doing this plan for 11 years of marriage, so we are, we’re debt-free — I mean, we’ve done it to the t. And it works, No. 1, I can say that. I’m the proof. But No. 2, even during the pandemic, I had a few nights where I went to bed thinking, oh my gosh, are we going to be OK? But what allowed me a little bit to have that safety is realizing No. 1, black-and-white on paper, the numbers, yes, we’re going to be fine because we’ve been doing this, we’ve been diligent. But also No. 2, Rachel, it’s a little bit of a wakeup call for me emotionally to say why am I so fearful that this foundation that I’ve set, this financial foundation, that if it was shook, who am I? Right? And it made me do a gut check, honestly, to say OK, where is my identity? Where have I been putting value? Because money, while we need to be responsible with it and we want to be able to do things like get out of debt and build wealth and change our family tree and be generous to others, all of these wonderful things, money is not our God. And if it’s the thing day-in and day-out that you’re looking toward, it’s not going to fulfill you. And I kind of got to a place where I had to do a gut check on myself last year to think, OK, who am I emotionally on that side, right, if that foundation is shaken? So again, this fear conversation I think is a really important one to have. And I think it’s a really good one to have.

Tim Ulbrich: I do too. And I think it can be motivating for the reasons that you mentioned. Our listeners have heard me say many times about really building a strong financial foundation and think about what the building blocks of that are. But there are challenges that can be had in the security of that foundation and what you’re ultimately putting that security in. So I think a great reminder. And this section of the book, as I mentioned, really powerful. You talked through several other fears. We’re just scratching the surface here. You talk about the fears of not realizing your dreams, of not being capable, external fears, past mistakes, repeating the past, you know, all types of things that we want to be considering. So I hope folks will pick up a copy of the book and check that out. Rachel, Part 2 of the book, “Discovering What You Do With Money and Why,” you connect the information the reader learns in Part 1 so that it can then be applied to their personal situation. And one thing that stood out to me in this section was the concept that you talk about, the power of contentment. And you say that “contentment is a process that changes your motivation for spending money.” Tell us more about that.

Rachel Cruze: Yeah, contentment I think is a huge piece of this financial conversation that has to be in place because money is like a magnifying glass. It makes you more of what you already are. And so if you are a discontent person and you think — and it’s all of us, you know, at different times in life for sure and maybe different parts of the day too, so I’m not speaking out of that I have found the answer to it all — but realizing though if we live in a discontentment state, which usually results in OK, if I can just make x amount of money, if I can just buy this kind of car, if I can go on that kind of vacation, if I live in this kind of house, then everything is going to be fixed. And we think that in our culture in our country that our problems are fixed by stuff. And that discontentment is just magnified, and the problem is that if you build wealth and you actually have the money to go and get these things, you get the things, and it doesn’t fulfill you and you’re discontent again with just more stuff around you. And so there’s that heart piece that I think is important to keep in check. And for me, it’s calling out to people, OK, what are the things in your life that money — there’s not a price tag towards. And this was kind of my journey even just last year, I thought, Rachel, what are the things in my life that I can’t pay for. Well, that’s a great marriage, having children that I am trying to raise in the best way possible, my health, my spiritual walk, my family, you know, my friendships, like relationships. So kind of mapping those things out and realizing OK, if I can invest my time and my energy in those things, life is so much richer, right? And again, not that it doesn’t mean you can’t have a great house or go on a great vacation. My husband and I just got back on Saturday from a fun trip that him and I just took, you know, for a few nights. It was fantastic. It was wonderful. But those things don’t fulfill you, right? It’s the fact that I was with my husband. And we got to have that time together. That is what was fulfilling. And so all of that I think stems to that contentment, and that contentment piece, again, I think is — we tried to find it in stuff, and I really push people to find it in things that money can’t buy.

Tim Ulbrich: My favorite part of the book, Rachel, is that you make a really good case for the importance of connecting saving and dreaming. Saving and dreaming. And we talk a lot on this show about having a strong financial why. And this chapter reminded me of that concept. You say that, “Not having any savings is a worrying sign for two big problems. The first problem is that your house isn’t in order. You’re not prepared. But not having savings is also a worrying sign of a second problem: that you’re not tuned into your dreams.” What do you mean by this?

Rachel Cruze: Well, when I did this part of the book, you know, I wanted to kind of walk through OK, why do we spend the way we spend? Why do we save the way we save? Why do we give the way we give? And so when I was in that saving section, I was like, OK, why do we save the way we save? And I’m like, well, what are the things we save for? What are the — I’m like, well, it’s because we have these dreams. Is it to build a house one day? Is it to be debt-free? You know, whatever it is, and that gives purpose behind our dollars. It gives us purpose to say OK, when the money comes in, I actually know where it’s going. It’s going to something that I value in life. And that’s what makes things rich, right? That’s what brings joy. And people that just live life and they’re not intentional, it’s just kind of that paycheck-to-paycheck, I go to work, I get paid, I just keep doing the same thing. And you look up in five years and not much has changed about your life, I bet your savings hasn’t changed either because you don’t have a goal, you don’t have something you’re saving towards. And so that dreaming portion, it is, it’s so, so critical. I mean, any great book motivator that shows you how to be better in certain parts of your life, goals are always in there. Those dreams are always in there. And so there’s the short-term dreams, have something that you’re working towards five years and less so that you can get to it quickly. And then have those dreams that are five years or more that you say, OK, out there in the future, what do I want? And then also have shared dreams. If those two dreams don’t coincide with your spouse, then have something you guys are working at together. I mean, all of this is going to be a partnership if you’re married. But I think having those dreams together is so crucial where yes, we are individuals, so my husband may have a dream to go on a hunting trip, you know, to South Dakota. That’s not my dream. That’s great if that’s his dream. It’s not my dream. So what are the dreams that we have together? And so all of that, it gives you such motivation. And it was funny, that trip we just went on last week, we had an agenda. We had like four things we wanted to talk about. But one of them was we literally set our financial dreams. One of ours was to build a house, and we moved in November of ‘19. And honestly, since then, I mean, we went through 2020, which was crazy. Now, we’re kind of on the other side saying, OK, what do we want? Besides just a number, what are the things that we’re shooting for? And just having those conversations, it’s so fun. I mean, it just brings life to you or again, if you’re married, to your marriage, just to have things that you’re working towards together. Again, it gives you purpose. It gives you purpose to save. And if there’s not purpose to save, you’re more than likely not going to do it.

Tim Ulbrich: Yeah, I think shared dreams, it’s so important. Great wisdom. I think especially for folks that are in the weeds and maybe frustrated with the budget or feeling like a goal is taking forever, I think some of those dreams can lift folks together and get excited behind the vision, you know, especially while there’s other things that are happening along the way. Rachel, I want to wrap up our time by talking about giving. And you make the case that giving is ultimately the antidote to fear. Why is that the case?

Rachel Cruze: There’s something about living life with an open hand where you say, “You know what, I’m actually going to give things,” because I think the opposite of that is that closed fist mentality where you’re going to just control everything and it’s all yours and it’s just all right here, and there’s a level of that that just, it gets exhausting. And there’s not joy in that. And so when you actually open your hand and give, which sounds counterintuitive, right, if I’m trying to put money towards a dream or I’m trying to put money towards getting out of debt or building an emergency fund, but I’m giving some of it away, like that just seems so backwards where in fact what it does is it fuels you. Because when you live a life that you move on the spectrum from being selfish where it is all about you to selfless where you actually see other people and you see OK, the needs that are out there, things that your money can do, even if it’s not a lot of money, but using it as a tool to help people, it changes you. I mean, it really, really changes you. And there’s nothing like it. It’s cliche to say, but it’s true. The joy that you get from giving is unlike any other joy that you can have in life. Like it gives something to you, to your soul. Because I think we were created to be givers. And when you’re living in that, it changes your perspective. And I also think selfless people have a better quality of life. I think they’re better spouses, better parents, better coworkers, better friends. You know, people that actually care about other people, it’s an amazing thing, but I think it does, it gives you a quality of life that’s so deep. And I think that it can be — obviously you can give all different kinds of ways, but your money is one of those. And when you live that life with an open hand, it does something to your soul that I think is so, so healthy in a world that is so self-centered.

Tim Ulbrich: Rachel, great, great stuff. Where is the best place that our community can go to connect with you and learn more about your work?

Rachel Cruze: Yeah, you can go to RachelCruze.com. The book “Know Yourself, Know Your Money” is anywhere books are sold. And I’m also — I have a podcast, “The Rachel Cruze Show” you can check out as well.

Tim Ulbrich: Awesome. So to the YFP community, make sure to pick up your copy of “Know Yourself, Know Your Money,” available really anywhere, also available at RamseySolutions.com. We’ve just scratched the surface during this interview. I’m confident you’ll gain so much more from digging into the book and completing the activities at the end of each chapter. In the book, you’ll discover what’s at the root of your money tendencies, including how to overcome your biggest money fears, how your childhood impacts your money decisions today, and what really motivates your spending, saving, giving, and more. Rachel, thank you again for taking time to come on the show. Really appreciate it.

Rachel Cruze: No, thanks for having me. Really, really thankful. Thanks.

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YFP 214: How Anna Got $127k Forgiven Through PSLF


How Anna Got $127k Forgiven Through PSLF

Anna Santoro shares her journey of pursuing and receiving Public Service Loan Forgiveness.

About Today’s Guest

CDR Santoro received her Doctor of Pharmacy degree from MCPHS University and earned her Masters of Arts in counseling, specializing in emergency response and trauma from Liberty University. She is an officer in the US Public Health Service, assigned to the Federal Bureau of Prisons (BOP). In the BOP, CDR Santoro is a Mental Health Clinical Specialist at Federal Medical Center (FMC) Devens in Ayer, MA, and also serves as a Federal Bureau of Prisons’ (BOP) Regional Mental Health Clinical Pharmacy Consultant. CDR Santoro developed and implemented the BOP’s first Mental Health Clinical Pharmacy Program, and assisted with the expansion of pharmacy mental health services to >8 facilities with both inpatient and outpatient psychiatric pharmacist services as well as a national Mental Health Consultant program serving 122 institutions. Additionally, CDR Santoro is the Lead Consultant for pain management and for the Memory Disorder Unit at FMC Devens, the BOP’s only dedicated service for the treatment of inmates with dementia.

Summary

Finally, a real-life pharmacist who has received Public Service Loan Forgiveness! Anna Santoro, a pharmacist and officer in the U.S. Public Health Service, joins Tim Ulbrich to talk about her journey to PSLF. She talks about what it felt like ultimately receiving PSLF, her experience along the way, and lessons she learned that ultimately may help other pharmacists pursuing the same path to loan forgiveness.

In 2009, Anna had about $225 in loans, with approximately $145,000 of those loans classified as federal loans. She prepared to live on a shoestring budget and make huge payments, loan payments more costly than her rent payment at the time, to keep up with those loans. Luckily a colleague provided some information on PSLF and Anna was on her 10-year journey to having $127,000 of those loans forgiven. She explains that the feeling of having the balance on the loans as zero was surreal, but something that she had worked for diligently, and it was fun to see the outcome.

Anna shared two of her challenges along the way that may help other pharmacists. While making her payments toward PSLF, she enrolled in a Master’s degree program, which triggered her loan payments to go into deferment while in school. Because PSLF required consecutive, on-time payments, Anna had to request her loans be taken out of deferment and never go into deferment for the reason of attending educational programs in the future. After making this request in writing, she was able to automate her payments once again. The second challenge that Anna shared was regarding her tax filings and how filing “Married – Filing Jointly” affected her income-driven repayments, which had to be adjusted after she updated her filing information to “Married – Filing Separately.”

For those pharmacists pursuing PSLF, Anna says, don’t get discouraged. Ten years is a very long time but seeing the final results makes it worth it.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Anna, welcome to the show.

Anna Santoro: Hi. Thank you so much for having me.

Tim Ulbrich: I’m so excited to have you on to talk about your journey of reaching Public Service Loan Forgiveness, PSLF, something we talk often about on this show, but a real, live pharmacist who has actually gotten forgiveness and excited about being able to feature your story, your journey, as others I suspect may be interested in learning about that journey, what worked, what went as planned, what didn’t go as planned, and we’re going to dig into all of that here in a moment. And for those that are listening, you know that we have talked about student loans in depth on this show. And we have covered loan forgiveness before as well. So if you want to go back and revisit some of that material, Episode 018, we talked about maximizing the benefits of PSLF; Episode 078, we talked about is pursuing Public Service Loan Forgiveness a waste and we’re going to dig into some more of where that background came for that episode on this show today; and then on Episode 187, we talked about how another pharmacist, Stephanie, got $72,000 forgiven through TEPSLF program. And so the PSLF program has definitely had its share of bad press, but I think it’s exciting and hopeful to see someone in our community reach the finish line. So Anna, tell us about your journey into pharmacy, what ultimately drew you into the profession, where you went to school, and some of the work that you’re doing now.

Anna Santoro: Yeah, absolutely. So I actually kind of fell into pharmacy. I originally went to undergraduate to become a Spanish teacher and worked in pharmacy to pay my way through school and realized that I absolutely loved it. Transitioned into pre-pharmacy my junior year of undergrad, and then I went to Massachusetts College of Pharmacy in Massachusetts for my pharmacy school. I did their three-year accelerated program. And I had all intentions of working retail pharmacy, kind of translating within the Hispanic community and using my language background. And through their program, one of the things that they did was kind of really try to expose you to different types of pharmacy. And I met a pharmacist who worked for the U.S. Public Health Service with the Bureau of Prisons. And she really just kind of found a new passion for myself and for my ability to kind of help serve others after meeting with her and kind of learning about her work. And she introduced me to a program within the U.S. Public Health Service where you can sign on as a scholarship student called Senior Costep, and you’re able to receive an income your last year of pharmacy school and then you repay that back for two years after you get out of school. So I ended up doing that and just decided, you know, serving and being able to serve in uniform, helping those who need and helping our country in times of emergency was just something that I really liked, and I liked the fact that it was always changing. Plus, working within the federal pharmacy field, you know, you’re working at the top of your license. You can do a lot more than I had initially realized that a pharmacist could do when I went in with the hope to be a retail pharmacist.

Tim Ulbrich: And another benefit, which we’ll get to through the rest of this interview, is obviously working for a qualified employer that opened up some of the PSLF opportunities. So before we go down that path, Anna, tell us about your debt position, what that was like after graduating, how much you ended up paying for school, and how much of that did you borrow with student loans?

Anna Santoro: Yeah, so I ended up doing five years of undergrad because I changed my major so late and then three years of graduate school. So I was really lucky, I had a scholarship as well as some parent help for my first four years of undergrad. For my last year, I ended up taking about $8,000 in loans and then I paid $10,000 for my tuition there. I ended up financing 100% of my graduate pharmacy school loans. So I came out of school with about $225,000 or so in loans altogether. It was a mix of federal and private. I had about $145,000 within the federal system.

Tim Ulbrich: OK. And that was 2009, just to give our listeners a timeline, 2009 when you came out of pharmacy school.

Anna Santoro: Yeah.

Tim Ulbrich: OK. So before we talk about your PSLF journey, I want to take a step back and give some quick background and information about PSLF to our listeners that might be hearing some of this for the first time or for folks that also want a refresher. And we talk about this in much more detail in our book “The Ultimate Guide to Pay Back Pharmacy School Loans,” and so I’d encourage folks to check that out, available at PharmDLoans.com. And as I mentioned a little bit earlier, PSLF has certainly gotten some negative press along the way. And we’re going to talk about whether or not that may be fair. And I believe, we believe, that despite its rocky past and in some regards, some questions around what the future means for PSLF, I believe that it’s one of the best payoff strategies available for pharmacists and without question is often the most beneficial to the borrower in terms of the monthly payment. Obviously the goal with forgiveness is try to maximize forgiveness, minimize the monthly payment, and then what that means for paying amount over the life of the loan and then what you’re able to do in terms of moving other financial goals forward as well. And so there are really several key requirements that folks need to be thinking about that are pursuing Public Service Loan Forgiveness. And for those that have read some of that negative press and perhaps are intimidated by PSLF, I think it’s often one of these rules and these requirements that folks may feel like there’s a burdensome process. And some of the horror stories you hear around PSLF ultimately come from folks that may not have followed one of these important steps along the way. So quickly, No. 1 is you have to work for the right kind of employer. That’s a government agency, a 501(c)3 not-for-profit, as well as some other not-for-profit organizations. No. 2 is you have to have the right kind of loans, and those are direct loans. So in some cases, you have to go through an important step of consolidation if you don’t have qualifying loans. No. 3 is you have to be in the right repayment plan, and that’s an income-driven repayment plan. Also counts would be the standard 10-year repayment plan, although that wouldn’t make a whole lot of sense since you’d pay them off. No. 4 is you have to make the right amount of payments, that’s 120 monthly payments that do not have to be consecutive but 10 years worth of payments. And then finally, you prove it and you apply for and receive tax-free forgiveness. And so now that we have some of that background information or reminder on PSLF, Anna, tell us about ultimately how much was forgiven for you and forgiven tax-free through PSLF.

Anna Santoro: Yeah, so I ended up — like I said, I started out with about $145,000 in loans, and when all in all was said and done, I think I had a little over $127,000 forgiven, all of it tax-free.

Tim Ulbrich: Yeah, and that — so just thinking of the math right there, $145,000 in federal loans, $127,000 forgiven tax-free, a little over a 10-year period, that just shows the impact of the interest on these types of loans, right? Because you obviously were making some of those income-driven payments along the way but still had a big chunk of that that was to be forgiven because of what that interest accrues. And I think a lot of pharmacists are feeling that they’re at a crossroads upon graduation with trying to figure out if they should work with a qualifying employer and pursue PSLF or if they should pay off their loans in the federal system sooner or perhaps even refinance them with a private lender. And of course, some folks inadvertently end up pursuing PSLF because of the work that they’re doing with a qualifying employer. And so my question here for you is how and why did you make the decision to pursue PSLF instead of some of the other options that are out there for loan repayment?

Anna Santoro: Yeah, so I originally went into the standard repayment. I was making the extremely large payments when I first got out of school. And I had a coworker who was like, “What are you doing? No. Here’s this program,” and basically gave me the phone number to call, helped me consolidate my federal loans so that I would be into a qualifying program, helped me enroll. And as we kind of got farther down the road when I first graduated, the National Health Service loan repayment option and a couple of the other loan repayments weren’t available for pharmacists. And as those changed, I really kind of had to make that decision of like, do I stay with this? Do I move over to this program? And I think I just kind of said, “Well, you know, it’s going well. I’m getting closer, I’m getting closer. Let’s just keep my fingers crossed.” But I was really lucky. I had no intentions of doing anything other than just paying off my loans and living on a shoestring budget while I did so at the beginning. But luckily, I had some really good colleagues who were looking out for me.

Tim Ulbrich: Yeah, I too am glad you had the colleagues looking out for you because one of the things I share is that in 2021, the information I think available is a lot better for the borrower.

Anna Santoro: Yes.

Tim Ulbrich: You know, we have to remember this program was enacted legislatively in 2007, 10-year timeline at a minimum, so the first borrowers that were really starting to experience forgiveness, it’s not that long ago, right? And the information has gotten a lot better, and so I think sometimes some of the stories and so forth that we hear, it’s important that we have that context of what information available, folks had available. And when you graduated in ‘09, when I graduated in ‘08, I didn’t even know what Public Service Loan Forgiveness was, let alone the rules of what needed to be involved. And I think today’s graduate is certainly much better informed, of which I’m grateful for that. So $127,000 that was forgiven and forgiven tax-free. What was your journey like paying off these loans? Did you have any reservations or concerns about PSLF before you started or even during the forgiveness pathway?

Anna Santoro: So I think for me, it felt really similarly to like graduating from pharmacy school and taking the NAPLEX. Like I was working, and I was kind of doing all of the steps, but you just worry that until that — I mean, even up after I made my 120 payments — that the program’s going to shut down or I will have filled out a paperwork wrong or maybe even though U.S. Public Health Service has the words “public health” in it, they’re not going to accept it. So until I actually got the like, “Congratulations, your loans are forgiven,” and I saw that $0 balance, I think I kind of just always had a little bit of concern in the background. But you know, at the same time, I kind of said, “Well, it is the government and it is in writing, and so usually they have to uphold what they put in writing.” So I kind of said, “Well, let’s just do some blind trust and hope.” But luckily it worked out.

Tim Ulbrich: A little bit of trust there. And that’s one of the reasons I’m excited to share your story is I think it’s really helpful for folks to hear from another pharmacist, someone they can relate to, that has gone down this path that maybe had similar reservations and we’ll talk in a moment here about hiccups along the way. But some trust that’s involved as well in the process if you feel good about following those rules along the way. You know, one of the things, Anna, that I like to think about here is that it feels like everybody has their own PSLF story. And what I mean by that is we know the rules. I just listed them off one by one. But inevitably, everyone’s got some variation that happens, whether it’s with paperwork or dealing with the loan servicer or something unique to the employment situation or non-consecutive payments — I mean, there’s just a whole lot of different scenarios and situations that can come. So for you and your individual journey, were there any issues or hiccups along the way that yes, you got to that $0 balance but it also had some bumps along the road?

Anna Santoro: Yeah, actually two. So throughout my career, I work in clinical pharmacy and I decided to go back and get a Master’s degree to kind of further my education beyond just my PharmD. And when I enrolled in school, PSLF and the loan repayment program just automatically moved my loans into deferment because they said, “Well, you’re in school, so you don’t need to pay.” And I actually had to fight with them to say, “No, like I want to keep making my payments.” And with PSLF, one of the requirements is that it has to be an on-time payment. So even when they defer, I would have to call and say, “Please take my loans out of deferment, please take a payment today. I do not want this marked late.” And there was some question as to whether or not those payments that I even did make were going to count or not since I was having to do them manually. So I was a little concerned about that. But after my third semester of grad school, I actually reached — you know, sometimes you just get the right person on the phone. And they said, “Well, if you fill out a memo or send us an email saying you never want your loans to be moved into deferment because of in-school status, then this won’t happen again.” And so that was really helpful because then I didn’t have to worry OK, it’s August, or, it’s the beginning of a semester, double check that my loan — that my payment was taken out. So that was really helpful in being able to kind of finish my Master’s degree and not have to worry that those loans were being taken out. The other thing was when I graduated from pharmacy school, I wasn’t married, it was just my income. And then in 2013, I got married and didn’t even think about it, and I just started filing my taxes as married filing jointly. And my husband was in graduate school at the time. He actually went back to school to go to physical therapy. So the first three years that we were married, we had zero income on his income, so I just noticed that our total monthly payment went down because he was earning nothing, but now I had an extra person in our family size. But the year that he graduated and his loans came in and we sent our taxes in — or his income became factored in, I said, “Whoa, whoa, why is my payment three times what it used to be?” And I just kind of thought, OK, well this is how it is. Alright. It’s still better than if I was making the standard payment. And then I was actually listening to I think one of your podcasts, I think it might have been podcast No. 18 that you mentioned, and it said, don’t forget, file married filing separately. And I was just like, ohhhh. So luckily with PSLF, you can go in and adjust your income or say that you have an adjustment to a family size or adjustment to personal income really kind of at any time. So I went, I was able to refill out my income-based repayment and then did my taxes married filing separately from then on. And that made a huge difference in my payments. But I had about 18 months to two years where I paid probably double or triple what I should have.

Tim Ulbrich: I can tell you from sharing those, you’re going to have a positive impact on others. And thank you for sharing those because those are two common things I think pharmacists that might pursue additional degrees or training, right, that could be residencies that are combined with Master’s degree, I’m thinking of like Health System Admin, MBA, or even just Master’s, PhD programs that are independent of residency. So that probably is fairly common. And then certainly we know firsthand the tax situation is a common one and changes in tax situation. And I think this is a great example about why the tax part of the financial plan needs to be wedded and married to other parts of the financial plan and considerations that we make. You know, student loans and taxes in this case can very much go hand-in-hand, and we want to make sure we’re considering the implications here. So two great lessons that are learned along the way. Not glad that you had to pay a little bit extra along the way, but I am glad that we can help share some of that with other folks. What about the best moment or two that you had during this journey? I think so often we talk about the hassle and the hiccups and the bumps along the road, but some of the best moments on this journey in ultimating getting these loans forgiven.

Anna Santoro: So I had my loans forgiven earlier this year, so I was still paying through COVID, I knew exactly where I was on the payments. But I did not realize that the legislation because of COVID was going to — I know they said that we don’t have to make student payments, student loan payments. And I said, “Well, I’m just going to keep paying because I want to get my PSLF.” And I had no clue that it would change your payments to $0 payments and still qualify for PSLF. And I was actually having my check-in with Tim with Your Financial Pharmacist, and he was — I can still see his face on the computer — and he said, “Actually,” he’s like, “No,” he’s like, “This should be done.” He’s like, “So you have made your last loan payment.”

Tim Ulbrich: Wow.

Anna Santoro: And I remember thinking like, OK, no, like that didn’t just happen. How did I not get to enjoy my last loan payment? But then I said, that’s fine. And then once I hit my number of payments, I submitted all my paperwork, and I actually had three or four colleagues that were all — we all graduated together, we’re all within U.S. Public Health Service, we were all submitting and emailing. And we knew whose stuff had gotten submitted, like what day their applications were in. And one of my colleagues sent me an email — I knew her application was about two weeks ahead of mine — and she said, “My payments just went to $0. I’m good.” And so I started checking every day. And it was about 10:30 at night, I had logged on. I had logged on that morning and nothing, my normal student loan balance, and I remember checking in that night and all of a sudden it said $0.

Tim Ulbrich: That’s awesome.

Anna Santoro: And I looked at it, and I looked at it again, and then I hit refresh, and then I logged out, and I looked at it again. And it was just so like surreal to see nope, that balance is gone and it’s $0. So that was really fun, just finally seeing it go to the $0 balance. It’s what you work for. So it’s fun.

Tim Ulbrich: Yeah, absolutely. And I would have done the same — I would have logged back in, logged back out, logged back in. I probably would have hit “Print,” you know, make sure it’s real and I have record of it.

Anna Santoro: I took a couple of photos with my phone.

Tim Ulbrich: Yeah.

Anna Santoro: Yeah. It was funny.

Tim Ulbrich: That’s cool. Obviously there’s that emotional joy of hey, we’ve had these steps, we’ve been following this journey for over 10 years, we finally see the $0 balance and there’s been some hiccups along the way. What a cool way to end too. So because of, you know, the COVID provision that you mentioned that there were $0 payments. But those were counting as qualifying payments. So you got to the finish line through those COVID provisions out of the CARES Act. What was the timeline or estimated timeline between when the last qualifying payment — even though it was a $0 payment — was made, what was the timeline from that to actually when the $0 balance showed up in your account?

Anna Santoro: OK, so COVID delayed some of that. But there were a couple of steps along the way. So I should have met, based on my calculations, had my final payment in August. I was able to submit my application in the beginning of October because once you meet your final payments, you then have to send in another annual certification because they have to certify that yes, the payments that you made for that last few months, even though you had — like I had my annual certification in March. They wanted another certification in August before I could send in my application. So after I did that, then I sent in an application and got that done in October. The big thing is you also have to show within the application that you are also still employed, even in the months in between and while they’re processing your paperwork. Then in October, because of COVID and government budgetary changes and all of that, they had kind of a delay of processing within their system. So my loan I think finally got approved in February. So it took a long time. But part of that is I think they tell you 60-90 days to process your application. Once they process your application, they then go in and re-audit every payment you’ve made. And I got really lucky in that they determined that even though they said I had made 120 payments, I had really made 124. And that was counting some $0 payments. It must have been more than that. I ended up getting refunded.

Tim Ulbrich: OK.

Anna Santoro: For four overpayments that I had made. So instead of being done — I guess my last payment was in March. So I should have been done in December of the year before.

Tim Ulbrich: OK.

Anna Santoro: But they don’t tell you, “Hey, we approved these overpayments.” They just say, “Hey, your filing approved,” and then refund you random money into your account.

Tim Ulbrich: Happy day.

Anna Santoro: Right? So I had to call them and say, “OK, what’s going on?” And they’re like, “Oh, those were overpayments that you had made. You had actually made 124 payments, so you will get these refunded back.”

Tim Ulbrich: OK. And that makes sense. It takes a little bit for the reconciliation of that to catch up, but another good reminder to try to keep your own records as well if there ends up being a discrepancy for whatever reason. One of the things, Anna, that we often say is that if you’re going to be in the forgiveness boat, like be in the boat, right? Don’t be half in and half out. What I mean by that is I think there’s a strategy in terms of maximizing forgiveness, which ultimately means minimizing what you’re paying out of pocket, which then naturally leads to the conversation of might I be able to pursue and move other financial goals forward if I’m pursuing loan forgiveness because I can then use some of those dollars that might be going towards student loan payments and allocate those towards other goals? And so for your situation, did pursuing PSLF allow you to focus on other financial goals beyond debt repayment that might not have otherwise been either possible or as likely if you were down more of that traditional standard repayment path?

Anna Santoro: Oh, absolutely. So I kind of set up my payments — I had automatic payments, so it just automatically came out on the 2nd of every month, and I knew I didn’t really have to worry about it. So I set up a budget based on what my loan repayment was and I was able to kind of move towards other goals within my life and my career. I was able to buy a house 2.5 years out of school, which now looking back on it, I’m like, wow, that was really fast. But at the time, I just said, “You know, I don’t want to pay rent. I want my money to be worth something and kind of get that equity.” So I was able to buy a house, put a good amount down on the house because I wasn’t having to put extra money into the loans. And then like I mentioned, when my husband and I got married, he ended up going back to school. So his first year of school, we weren’t sure what the budget was going to be like so we did end up taking out about $60,000 in loans for his first year of his physical therapy program. But after that, we said, “You know, we have this cash. Our budget is set. We know what these loan payments are going to be,” so we were able to pay the next two years of his doctorate degree in cash at the time. You know, we didn’t have to take out any loans. We paid $120,000 on his. And then we were used to his $0 income on our budget, so when he did start working, we were able to take his income and pay off that $60,000 that we borrowed for him within like 9 or 10 months of him being out of school, which was really nice. So by the time he was out of school and earning money maybe six years into the program, that extra income he earned really was just like extra for us, which was nice. Now we have kids, so we’re paying for child care and that type of stuff. But it was really nice to just be able to say, “OK, this is my payment,” and just kind of put it on the back burner, automatically taken out of my account, and it wasn’t this huge, crazy amount of money that we had to try to — you know, it wasn’t a second mortgage.

Tim Ulbrich: Yeah.

Anna Santoro: When I was making those first payments the first few months, it was more than my rent at the apartment that I was in at the time. So I can’t imagine having done that for 10 years and still be able to do the other financial things I was able to do.

Tim Ulbrich: Yeah, and that makes a whole lot of sense. Going back to the beginning of your story, a little over $225,000 in debt, $145,000 or so of that was federal, so just rough numbers, we know that if you’re paying that over a standard 10-year period, those are big monthly payments. And so the PSLF pathway and maximizing forgiveness, minimizing payments, sometimes it opens up the door, as it sounds like it did here, to be able to pursue other financial goals and here, one being obviously being able to pay most of a degree for your husband in cash and then pay off the rest of that balance quickly. So two doctorate degrees with $0 in the balance of either, no debt anymore, that’s great.

Anna Santoro: Plus my Master’s degree.

Tim Ulbrich: Oh yeah, that’s right! Plus your Master’s degree.

Anna Santoro: Yeah.

Tim Ulbrich: Very cool. Now that your loans are out of the way — and the reason I want to ask this question is I talk with many folks that are graduating, within the first few years, and you know, I think sometimes the student loan mountain can seem so big that it’s hard to see what may be on the other side of it, right?

Anna Santoro: Yeah.

Tim Ulbrich: And now that your loans are out of the way, what other financial goals are you focusing on and are able to do so because you don’t have to worry about these monthly payments anymore related to the student loan?

Anna Santoro: So we had Murphy’s Law at our house. We got my student loans forgiven in February, and in April, we got a roof leak. So we have used all of the money that we would — well, not all — but we had to buy a new roof. So that has been kind of our big financial hit this year. But we have — the way we have our budget set up, we had a home repair budget, so we’re just working on kind of redoing that. Our goal over the next couple of years, we want to take a family vacation. But then I think we are going to be working towards kind of setting up a nest egg to possibly buy a vacation home or do a renovation on our house here, something like that. But we’re trying to kind of say, “OK, we’re used to making that payment, so let’s use that money in a thoughtful and meaningful way as we move forward,” versus just buying extra coffee or something small.

Tim Ulbrich: Yeah, that’s great. I think the intentionality of that and the planning process of hey, we were putting these dollars towards student loans, and now what are some other goals that we can shift it and put these in other buckets that we want to see forward with other parts of the financial plan? That’s great. Last but certainly not least, Anna, what advice would you have for other pharmacists that are out there that are either actively pursuing PSLF, maybe considering it, and might even be a little bit skeptical about whether or not that path makes sense for them?

Anna Santoro: So I think the two things are — so I take a lot of students, and I’m always big with my students on this is — if you at all end up in a residency, in any type of employment with a qualified employer, enroll. If you’re enrolled now and the program closes, you get to stay in it. If you are a resident and you have no income, your payment will be $0, and that still qualifies, which is less money that you’re going to be paying 10 years down the road when you’re on payment 120 and you have an income. So that I think is huge is getting enrolled as soon as you can. And if you are a qualified employer for 2-3 years, and then you leave and you come back, you’re still enrolled and those payments still qualify. So I think that’s huge. The other thing is, you know, not to get discouraged. Ten years is a very long time and the six months it took for that application process after that seemed like eternity. But you know, watching it change and seeing the final results makes it worth it.

Tim Ulbrich: Yeah, absolutely. And I think your comment about the timeline and being patient, if you will, is another reminder of the value of colleagues and community and other people that are going through this as well so you don’t necessarily feel like you’re on an island and hopefully being able to share stories or we’ve heard many frustrations from folks that are calling in asking questions and often don’t feel like those questions are getting fully answered. We’re getting ready to turn the page — I’m sure you saw the news over the past couple weeks where the loan servicing company for PSLF is about to change, and I’m sure that’s going to mean maybe some good things in the long term but probably a whole lot of frustration in the short term. And so having that accountability, having that coach, having somebody alongside of you I think could be very powerful on this journey and really keeping that end goal in mind. So really exciting stuff, and great wisdom that you have to share there. I really appreciate you taking the time to come on the show, for sharing your story about getting $127,000 in federal loans forgiven through PSLF and certainly wishing you the best of luck in the future. So thank you again, Anna.

Anna Santoro: Yeah, thank you so much. I appreciate you having me.

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YFP 213: 5 Investing Considerations for a Volatile Market


5 Investing Considerations for a Volatile Market

Tim Baker shares five considerations for investing in a volatile market.

Summary

Recent media attention brings to mind the current state of the investing market. In this episode, Tim Ulbrich and Tim Baker discuss five considerations for investors in this volatile market.

Investors should consider and work to understand common biases, including but not limited to overconfidence bias, loss aversion, and others. Investors should also consider their personal goals and personal philosophies relative to building wealth and living a wealthy life. In gaining a better understanding of the personal philosophy, investors should consider their risk tolerance, long-term goals, and asset allocation. As investors approach their goals through investing, targets and strategies should be revisited and revised.

Given the volatile nature of the market and how easily it can be influenced by the news cycle in the short term, investors should be mindful of groupthink, herd mentality, and investing in a silo. While it may be fun to make high-risk investment choices, those boring choices of index funds and long-term strategies are often the best financially. Generally speaking, the market shows growth over the long term despite short-term dips and drops. Being aware of your asset allocation, making safe choices, and not over-extending yourself to the detriment of your financial plan benefits new investors. Tim Baker shares that even professionals in finance benefit from guidance from a coach to help prevent those missteps with exciting but risky investment choices.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, welcome back to the show.

Tim Baker: Hey, Tim. How’s it going? Good to be back again.

Tim Ulbrich: Excited for this episode. Now, call me old school, Tim, but I get the Wall Street Journal delivered to my house every morning. I’ve shared with you before, I hear the car coming in the driveway, it’s a feel-good. But one of the things that I couldn’t help but notice and therefore led to today’s episode is in reading the Journal, the volume of attention that has been given to investing lately, whether that be the stock market, the bond market, inflation, the housing market, crypto, meme stocks such as AMC, GameStop, Wendy’s, and so forth, you know, could be that the market is going to come crashing down or folks that think there’s going to be sustained growth, what will the Fed do or not do? All this really goes on and on. And I think if you read that news any given day and make a decision, the next day you might be kicking yourself. And so I wanted to talk in this episode about how one can have that long-term investing mindset that we have talked about often on this show in the midst of a lot of noise and attention that is out there just in the time period and the volatility that we are in right now. And so we’re going to talk through five considerations for the investor that’s going through this time period. And Tim, this really reminded me of an important philosophy that you and I adhere to and preach when we talk about long-term investing, one of the things that I’ve heard you say before is that a good investing plan should be as about as boring as watching paint dry. And Tim, this is just really hard to do in a time period like this.

Tim Baker: It really is. I mean, even sometimes I like have that moment of pause and I have those doubts. Then I quickly get over that and realize that no, stick to your guns, you know, what the market does over long periods of time is actually sufficient. And it’s that singles and doubles approach to building wealth over a period of time. But it’s easy I think to get distracted because of the news and the news cycle, especially in the times that we’re living in today. When you think about like even in the last downturn, ‘08 and ‘09, the news cycle, even just the social media presence of like what is everyone doing, and then if you go back to the ‘90s where the dot-com, that stuff is not like always in your face like it is now. So it’s like really easy to compare and contrast of what you’re doing versus what everyone else is doing and really kind of derail your long-term plan if you have a long-term plan. So you know, more so than ever before I would say, it’s like really being disciplined and kind of sticking to your guns and allowing the plan to unfold as you’ve outlined. And for a lot of people, like I said, it’s a slog because of water cooler talk, you know, about, hey, crypto, or this stock or buying houses. I just was talking to a couple the other day, and they’re like, “Yeah, we have this timeline of buying a house in the next 3-5 years, but we’re seeing our friends buy a house and them being really happy and excited, and it’s tough not to compare or tough not to get sucked up with kind of that keeping up with the Joneses mentality,” so it’s a challenge.

Tim Ulbrich: Yeah, and it is. I mentioned I think it’s really had to stay true to that long-term approach in the midst of a time period such as this. And as we’ll talk about here in a little bit, you know, this isn’t unique. The circumstances may be, but what we’re going through in terms of volatility certainly isn’t unique, certainly is not unique. And so we’re going to talk through five considerations for folks, again, that are investing during this volatile time period in the market. Now I do want to be fair that while we’re going to talk about the long-term approach, you know, I do want to acknowledge the difficulty that is there considering the volatility that has happened. So for this show, I went and pulled the S&P 500 numbers, just as one indication that we can look at. And Tim, check this out: February 14, 2020, so that would take us back to pre-pandemic or at least our recollection of pre-pandemic before life had changed. And at that point, the S&P was 3380 on Valentine’s Day of 2020. Now, one month and one week later, March 20, 2020, it went from 3380 to 2304. And then today, it stands at 4350. So February 2020: 3380, March 2020: 2304, today: 4350. So it saw a 32% decrease in one month and a little bit of change. Then an 89% increase from that dip after the pandemic started to now. We saw an 89% increase. And if you look at the net change over the time period from February 2020 to now, it’s been up 28%. So I think it’s important that it’s perhaps a little bit easier to talk about this long-term investing approach and strategy but like these are real numbers. And you shared with me before you hit record that you individually did a nice job of ignoring some of this noise when the dips happened. I didn’t do as good a job as you did. But you mentioned logging onto that 529 account for the kids and having that “gasp” moment, right?

Tim Baker: Yeah, I mean, I think people think that I’m like joking, but I’m not. Like when the correction came — or not the correction but just the dip because of the pandemic came last year, I did not look at my accounts. I think because I know the reaction. It wasn’t until, I don’t know, maybe like May or June of last year when it hadn’t completely recovered where I logged into the kids’ 529s. And I did get that — I looked at the balance and kind of dip and I was like, I got that like pit in my stomach and I was like, oh my goodness, it actually did fall quite a bit. But the reason for that is that I know that — and we’ll talk about this a little bit more — but you know, investing is such an emotional thing. And oftentimes, what you want to do in investment is the opposite, right? So like let’s go through that roller coaster. When the market declines like it did and you’re seeing, if you’re logging into your account — and I’m sure there’s a lot of people listening that look at their accounts daily — when you’re seeing hey, I had $100,000, now I have $80,000, now I have $65,000, that plays with your emotions, right? So in that moment, the feeling that you have is — and I kind of say you want to take your investment ball and go home. You’re like, ‘Alright, I don’t want to play this game anymore. It’s not fun. I’m going to go home.’ And what happens is that that relates to basically people selling off their investments low and getting into cash where it’s really cozy and safe. And then when it rebounds and it goes back up 60%, 70%, 80%, 90%, you miss that upswing. Right? So then you’re trying to figure out when to get back in. You’ve missed a lot of the returns. So more often than not, if you know your risk tolerance and you set your allocation, less is more. The less that you kind of fiddle with it and look at it, probably the better off you will be. And I know that’s not like an exciting answer, right, because the sizzle that typically is involved in a financial plan if there’s any sizzle at all, but if you’re a financial nerd like us, like it is the investments. They’re interesting. They’re somewhat exciting. You see your wealth compounding as a result of an efficient long-term investment strategy. But typically, the most efficient and I think successful are just really boring. They’re not individual stocks, they’re not cryptos, they’re not all these things that you hear about on the news that may or may not be a fad — I’m not saying crypto is a fad — but it is index funds and buying the market and things that are not necessarily exciting to someone that might be reading the Wall Street Journal every day or in terms of like what is the — what are the things that are making headlines, what’s going to print so people will read that? That’s just the reality of it.

Tim Ulbrich: So since we just proclaimed this as boring, we might as well just send the episode right there and call it a day. So now let’s jump into these five considerations for those that really are trying to reaffirm, Tim, I think much of what you just shared. No. 1 — and I mentioned this a little bit earlier — is recognizing while the circumstances of today’s market are unique, market volatility is not unique. And so what I’m referring to there is of course, we all have lived through firsthand a global pandemic, we know the supply chain issues that has caused, we know that obviously there’s some issues that we see currently happening around inflation and of course with the housing market and lumber prices that were up crazy and now they’re actually going down the other way. And so circumstances may be different, but the volatility and the concept of volatility is not unique. And I think, Tim, this feels relevant because for those that are investing, I would say within the first — I don’t know — 10-15 years of your career, if you have maybe known only this bull market, like this might seem or feel like behaviorally that some of this volatility is unique. So tell us about just historically, the precedence of volatility and why this concept is important.

Tim Baker: Yeah. So you know, the markets are very fickle. And it’s interesting to see that something that a president might tweet or a jobs report or whatever can really swing what is happening on Wall Street. So it can be influenced, I would say rather easily. I think that again, even more so because of the news cycle, but it’s really not a new thing. So I think the status is that since World War II, I think there’s been 12 or 13 economic recessions where you’re seeing these things do come in cycles. You know, it’s very rare to have the expansive bull market that we’ve had, meaning that we haven’t had a major correction. But along the way, it has gone up and gone down. And it’s evident by what happened early last year with a lot of the economy shutting down because of the pandemic. So the long-term investors should know that along that road, it shall be somewhat bumpy. But you know, the more that we zoom out, if we look at an investment portfolio over a month or two months or six months or even a year, very, very volatile. Lots of swings. But the more we zoom back and we go to five, we go to 10, we go to 20 years, it’s actually very predictable. And that’s the comfort that I have when I start to doubt myself is to know that over long periods of time, the market is very predictable. And it takes care of you. It allows us to outpace things like inflation and kind of get ahead of the tax man, so to speak. So that’s the comfort that I have. But — and I try not to get too caught up in the week-to-week, month-to-month, day-to-day stuff because I know, you know, as a human being, it can be — the volatility can be very emotional. And it can lead to things that causes us to do irrational things. So I’m cognizant of that, and that’s what I try to preach to clients. But again, it’s in that moment, you have those feelings and reaction that compels you to do things. And again, most of the things — all of the decisions that we make in life, Tim, are really based on an emotion. And if it’s an emotion like loss, we typically — and we talk about things like loss aversion — we typically do things at the detriment of our long-term plan.

Tim Ulbrich: Absolutely. So that’s No. 1. No. 2 is understanding common biases. So Episode 124, I had the opportunity to interview Dr. Daniel Crosby, who wrote “The Behavioral Investor.” And in the book, he actually talked about 117 behavioral biases at the time — perhaps there’s more since he’s done more research and others — 117 behavioral biases in total that he has come across throughout his research. We’re not going to talk through obviously all of those on this show but some that we think are relevant to the time. We also talked about this in Chapter 1 of “Seven Figure Pharmacist,” where we talked about the concept of mind over money. And so Tim, the first one that comes to mind here is overconfidence. And tell us a little bit about what overconfidence bias is and ultimately what it may lead to so that we can be on the lookout for some strategies to prevent this.

Tim Baker: The overconfidence bias is a tendency for people to have just more confidence in their own abilities. So like one of the things I always think back on when I learned about this is that if you were to poll pharmacists out there and you would say, “Hey, how well do you think you’re doing your job?” the overwhelming majority of people would be like, “I’m great,” or “I’m average or a lot better.” But we know that like on a bell curve, you’re going to have people that are really outstanding, people that are average, and people that are kind of below expectations. But the way that we view ourselves is we never really — even though sometimes we are our hardest critic, we’re not saying that when we’re actually taking stock of our abilities. So I see this a lot in pharmacists. And sometimes I see this in pharmacists that we work with in a sense of we get through a portion of the financial plan, and it’s like, “Hey, I got this.” And I’m like, “Well, do you? Because three months ago or six months ago or 12 months ago, you said, ‘I have no idea what I’m doing with my money.’” And you know, I think it’s a good thing we’re making progress, but sometimes there is this feeling that ‘Hey, I’m good to go,’ or ‘I have it all figured out.’ And it’s untrue. It’s an inflation of our own ability to manage the portfolio, manage the taxes, or whatever that might be with regard to the area of life that we are looking at. To me, overconfidence can really come into play with how we react to our financial planner or where we’re placing money. Again, it could be to the detriment of the long-term direction of the financial plan.

Tim Ulbrich: Yeah, and I think this is one, Tim, you know, I kind of put myself in the bucket of guilty as charged here. Like I was looking at one of my 401k statements recently and giving myself the pat on the back, right, of what’s happened over the last year. Like I literally have done nothing except like, you know, the hard work of a plan up front, obviously you played an integral part in that, but doing that and rebalancing — like that is the market doing its thing. And I think it can be in times like this where it has been significant growth — I graduated in 2008, so I started investing after the dip of the financial crisis of 2008. So it’s only been up in my career, for the most part, outside of —

Tim Baker: Only been up, yep.

Tim Ulbrich: Only been up. So you know, again, my comment about newer investors, like history I think is an important lesson to learn in terms of the trends but also that when we think about something like overconfidence, you know, is success in one area, does that necessarily translate to other areas or not? And how much of this is the market doing its thing versus undue credit we may give ourselves for making certain decisions.

Tim Baker: Yeah, and this might be something — you know, I’m just thinking about this now as we’re talking about this. You know, you often hear stories about people that grew up during the Great Depression. And there was almost like this underconfidence bias, right? Not necessarily just in maybe themselves or just even in the system, and maybe it’s the sign of the times, but I just wonder if there was the inverse of that. And sometimes you see that with like, with when people do come out in terms of the job market and things like that, they are more conservative in that part of life that was really kind of down-and-out. So it’s like, ‘Hey, I don’t really want to take this job for granted or do a move because it’s safe here because when I came out, I was $200,000 in debt and I couldn’t find a job.’ So you know, I think we — I do see a lot of overconfidence. And you want to be cognizant of it. Like what you were saying, Tim, is like, you know, you set your asset allocation, and that’s the right thing to do. But for the most part, the right thing to do is probably just to keep on keepin’ on and not overextend yourself or do things that I think will ultimately lead, again, to the detriment of the long term.

Tim Ulbrich: The next bias, Tim, that seems really timely right now is herd mentality/bandwagon effect/groupthink, whatever we want to call it. So tell us about this one, maybe some examples in the moment of what we’re seeing and obviously why this can have some negative impact.

Tim Baker: Yeah, this also can be called like mob mentality. So like this is the tendency of like the individual in a group to think or behave in ways that kind of conform with others in that group rather as individuals. And you know, probably I see this more in like things like AMC or GameStop or even crypto. It’s like, it is kind of like that water cooler talk of everyone’s doing it and we were kind of talking about this off-mic of, you know, I might not really be interested in that, Tim, but because I kind of want to be part of the conversation and part of what’s going on, maybe I do invest, right? And we were kind of — the analogy somewhat is fantasy football. Like if my pro football team stinks but I am in a fantasy football league and maybe there’s a little financial incentive there to win it, there’s some sizzle there, right? There’s some incentive for me to kind of be plugged in and pay attention. And I think sometimes that’s true. And I think it’s also because it’s like the new, like at least with crypto, it’s kind of the new thing and it’s not really understood. And I think there is like a lot of promise and upside, but it’s really speculation right now. I think the thing that I get a little frustrated with is that a lot of the people that I see that are investing in crypto don’t really have business investing in crypto. But it’s really easy with some of the apps that are out there and things like that that kind of drive that forward. And it’s exciting, right? We do things that excite us. We’re talking about, hey, keep it boring, don’t do anything that there’s a lot of juice behind it. It’s like ah, it’s so boring, Tim, like I don’t want to do that. I want to do something that I can get excited about. But oftentimes, those are more expensive to the investor and again, not necessarily the best thing from a fee perspective or just in the long run in terms of the swings in the market.

Tim Ulbrich: Yeah, I mean, I think we just take a step back, Tim. Like opening xyz app and making an investment purchase, like there’s an endorphin rush that’s happening, right? Not looking at your account balance for three months, like you ain’t getting any endorphin rush from that. I mean, there’s just one that obviously tends to be a little bit more exciting, might attract us in that direction, and one that’s going to take some discipline behavior, perhaps a coach to kind of help keep us on track in that. And I want to be clear, as we talk about some of the current trends, we’re not saying in any way, shape, or form there’s not a place for cryptocurrency.

Tim Baker: Right.

Tim Ulbrich: I think you made a good point there in terms of like the priority of that or you and I have talked before about for folks that are interested in individual stock picking, we’re not saying nobody should ever think about that. I think what we’re suggesting is looking at the bigger picture, where does that fit? Are we putting the priorities in the right order? And then if we’ve got to scratch that itch, like OK, but let’s make sure we’re doing it within a reasonable way in the context of everything else we’re trying to achieve.

Tim Baker: And just know what you’re getting into. And for a lot of people, people don’t. And again, not investment advice, but we’ve talked about keeping it boring, low-cost, passive index funds. They’re about as boring as they can get. But for the most part, I think it’s kind of that building out a portfolio like that that buys the market, doesn’t try to make strides to beat the market. And you know, what we said about the market is that it takes — it does take care of you. If you can stick to your guns during those volatile markets, it’ll take care of you over the course of the long run. And some of these things that we talk about — and again, it’s not to say that these things don’t — some of these things don’t pan out.

Tim Ulbrich: Sure.

Tim Baker: Sometimes they do. It’s like hey, if you would have bought Amazon at this — you know, you see those clickbait articles: This guy bought Amazon at $x per share and now he’s sitting on a beach somewhere. Like those things do happen. But for the most part, if you’re looking at — if you’re a novice investor and you’re looking at building a robust investment portfolio that is going to see you through to retirement or whatever your goal is, that’s typically the being greedy instead of successful portfolio.

Tim Ulbrich: Tim, let’s talk briefly about loss aversion bias. Again, there’s many biases we could talk about. But I think these three in particular are really relevant right now. Talk to us through about what is loss aversion bias and what are some of the implications here.

Tim Baker: It’s a cognitive bias that kind of explains why individuals will act in a way that they avoid pain or they say that the emotions of pain are twice as impactful than the pleasure of a game. So the loss felt from money or an investment or in some type of valuable object or something like that can feel worse than gaining that same thing. So the example is that if you were to lose $20 reaching your hand in your pocket and pulling your keys out and that falls on the side of the road, you feel that a lot more than finding that $20 in your couch. Now, that’s pretty awesome if you find $20 in your couch, but to me — and the movie that I always think about, Tim, when I think about this bias is “Rounders.” And I think I’ve talked about this on the podcast before. But “Rounders” is about — Matt Damon’s character is an amateur poker player who’s studying I believe law. And he is trying to scrape together money to go to Vegas to kind of make a run at the World Series of poker. And his character describes I think early in the movie where it’s like, you don’t remember the huge pots that you rake or the huge hands that you win. What you really remember and what sticks to you are when you go bust and you really lose a terrible hand. And I even see this, even this week, Tim. And I found myself doing this is like, we’ll sign on two, three new clients, but the first thing that comes out of my mouth when the team congratulates me is like, “Well, we lost this one,” or, “This person didn’t show up to that meeting,” and I feel like I’m happy that we are growing YFP and people are coming on and working with us on their financial plan, but it’s almost this unconscious reaction of I feel that loss and I’m like, well what could I have done? What could I have done better? Or what could we have done to kind of win those too? So it is really a thing that drives us is that we will recall those negative losses and that will affect our behavior, and we overweight that more than any gains that we have. And I look at it in this market really from two sides. You know, you see people that look at the market, and they’re like, ‘Tim, this is kind of scary. It’s up and it’s down. It’s like super unpredictable.’ And I’m like yeah. And we look at the risk tolerance, and it’s super conservative. But you’re a 25-, 35-, even 45-year-old pharmacist. There’s a lot of time horizon there. Like there’s a lot of time before — and again, we’re talking about long-term investing for retirement. Over long periods of time, we should be somewhat aggressive because it’s just, again, you’re not going to remember what happened in 2021 when you go to retire in 2051. But we — because of the losses, that dictates our behavior. But the other thing too is from a loss aversion perspective, Tim, and I see this also where it’s like, ‘Hey, Tim, like how’s it going? Like financial plan looking good? A lot of people talking about crypto, a lot of people talking about this stock or that stock.’ Like it’s almost this FOMO, this Fear of Missing Out on this trend or this herd mentality that’s going on of excitement around these things. And this fear of missing out or this kind of the loss of missing out on this opportunity is driving people maybe to be more aggressive or more speculative, I would say, in investments they would not have otherwise thought about or even entertained. So I think it can play on both sides of the loss of if my portfolio does go down but also the loss of like a missed opportunity. And I think that, you know, I look at it, and I try to — I try to look at this with context, Tim. So like, you know, I hear a lot of people say like, “Ah, the country is going down the drain, blah, blah, blah.” And like I’m sure that they said during the hippie and free love movement. Right? Like it’s this bias that we have like right now, it’s — and maybe that goes into the recency bias — but like it’s this bias that we have that everything — and the same is true with things like crypto — is that like when the dot-com crisis was going on, people were insane in terms of what they were doing to take out second mortgages to buy — I always joke — cats.com or whatever or this.com or even in the subprime mortgage crisis where people were doing really aggressive and ill-advised things to buy real estate because the market was just so hot. And again, if you think about it from an emotional perspective, what you’re feeling, Tim, is probably the — what you should be doing is the opposite of what you’re feeling in a lot of ways. So to me, it’s just really interesting to see how these play out in real life. And it’s just, again, part of the value that I bring, even though I’m human and even though I feel a lot of the same things is that check. And you know, Paul has even said this, Paul Eichenberg who is our IRS-enrolled agent, leads the tax work, he’s like, you’re there to kind of be like the stopgap to my portfolio because there are things that he wants to do and he wants to tinker and I’m like that barrier, so to speak. So even people within the profession that are espousing this and talking about this with clients still have those biases or those emotions because we are human. And these are things that just are innate to us.

Tim Ulbrich: Yeah, and I would argue, Tim, just to drill that point home, sometimes the closer you are to it, the harder it is to keep your hands off of it.

Tim Baker: Yep.

Tim Ulbrich: Well, good stuff. No. 2, we could talk about biases certainly probably a whole separate episode and dig into that further. But the whole purpose of that as we think about these five considerations investing in a volatile market, this is all about knowing yourself. Right? So if we can understand the biases that we’re perhaps more tending towards or leaning towards, then we can start to think about some of the strategies to overcome those. No. 3, Tim, is understand your investing philosophy and goals. One of the things I think about often with investing, especially right now, is that we’re talking so much about the x’s and o’s, right, whether it be what stock am I investing in or what am I doing in terms of what account I’m putting money in? All important stuff. However, we might be doing that without taking that important step back to say, what’s the vision? Where are we going? What are we trying to achieve? What’s the purpose? And then from the vision, we start to derive, OK, what’s the plan in terms of how much we need? And then we start to think about the x’s and o’s, right? Where are we going to put the money? What accounts, asset allocations, all those types of things? So I think a time period like this where so much of the attention and noise is on the x’s and o’s, it takes some discipline to take a step back and think about the direction, the vision, where are we trying to go. So Tim, talk to us a little bit about the importance of this. And I’m thinking specifically from the planning perspective, how do we go about this in terms of working with clients to really make sure we’re defining that vision, that purpose, that why, for our investing side of the plan and then ultimately keeping that front and center as we make those decisions of how to execute?

Tim Baker: Oftentimes, this is something that’s like way overlooked, right? So with philosophy, a lot of people, they don’t necessarily know what their philosophy is or know enough to kind of verbalize what that is. But in terms of goals, I think people that do have goals, a lot of times what I find is that they’re very singular in nature or what I’m trying to say is like, ‘Hey, we’re just trying to pay off this credit card debt,’ ‘We’re just trying to get through the student loans,’ ‘We’re just trying to save $30,000 for our emergency fund,’ or, ‘We’re just trying to save 10-20% for a down payment on our house,’ or whatever that is. But — and it’s almost like when I think about fitness, it’s like the person that’s trying just to get like six-pack abs. Right? But we know that just like the financial plan and kind of like systems of the body, they’re all interconnected, right? So to me, I think those things are good. But I really want to look at when we’re talking about understanding where you’re at in the universe, at least financially, is what does the balance sheet look like? Because a lot of this stuff in investments — actually, we just signed on a client that were very really big into Dave Ramsey. And one of his big tenets is like, don’t invest even with a match, don’t invest until the debt is gone. And I’m paraphrasing here, but like, that’s what they were doing. And they recently just switched gears a bit because there was a pretty healthy match, and they wanted to get that going and they kind of stumbled upon the FIRE movement and x, y, z. So I think it’s really looking at that balance sheet because there are going to be some people — again, we see it. We see people that have massive amounts of credit card debt but they have a Robinhood account that’s investing in crypto. Like those things necessarily don’t compute. So I think it’s looking at, again, like what are the — we’re always talking about the baby steps. What does the emergency fund look like? What’s the consumer debt? Is there a plan for the other types of debt, whether it’s a mortgage or student loan? So really understanding where we’re at on the balance sheet, on the net worth statement, and then from there, you know, I think the big thing that people talk about a lot these days is like self-care. And I think sitting down — my wife and I, Shea and I, we did this last night. We went out, kind of an impromptu date night, got a babysitter, and it was just talking about where are we at and kind of where do we want to go and really kind of looking at, you know, the next couple years and what’s really driving us — and Tim, we’ve talked about this a bunch — is our daughter Olivia is 7 this year. And that means we have about seven or eight years before she no longer wants to hang out with Mom and Dad. So we’re cool. So like we really want to capitalize on those years. And that’s really what’s driving that emotion, that loss, is really what’s driving what we want to do today. And I think really taking that time to reflect yourself, reflect with your partner, I think it’s about as good as you can do from a self-care perspective. And unfortunately, because we’re so busy, we have all these screens in our face all the time, we don’t do that ourselves. And sometimes I even see this with clients just talking out loud or I just did this this week with a client that we reviewed their goals that they made 2.5 years ago, and they’re like, ‘Wow. We’ve done a lot of these things. There’s some things we’ve got to tweak, right, we’ve got to work on. But it’s amazing how well we’ve done, and yeah, and the numbers are looking good too.’ So I think once you get there and then we start diving into different pieces of the financial plan, a la investments, that’s when you’re really looking at what is your risk tolerance or what’s your risk capacity, how much risk can you take, what are the long-term goals, Tim? So for you, it’s maybe you want to retire at 50. Maybe you’re like, I just want to retire at 70. Maybe it’s I want to relocate. What are the things that are really driving you? And then I think that really sets things like the asset allocation — so the asset allocation is just how you divide up your portfolio into different percentages. And again, we’re going to be super boring with that. And then rebalance it over the course of time and then adjust it as you get closer to whatever that time horizon is. So it is a lot of moving pieces. Again, we haven’t really even talked about things like tax. But there’s a lot of things that we see that are not being fully fulfilled on the tax side — and Paul could probably come on here and he’s probably shared it — where it’s these are real dollars that we can save that we’re not realizing but we’re focused on speculating over here or doing that. And I get it because again, taxes are also super boring.

Tim Ulbrich: Boring.

Tim Baker: There’s no sizzle there, Tim. So yeah, so like but in terms of like real dollars and things like that, there’s a lot of things that are typically not uncovered or captured before we start doing some of these other things that, again, kind of catch all the headlines.

Tim Ulbrich: I know we’ve got some nerds out there listening because I’ve talked to them that got super excited when we started talking about tax strategy.

Tim Baker: Oh yeah.

Tim Ulbrich: But for the other 99% of the people, we lost them for a moment. Yeah, you know, Tim, I think what you’re saying here is a good reminder. You and I talked recently about why net worth matters. And we talked about the importance of the balance sheet, taking care of our future self, but it’s not just about that, right? And I think this is a good reminder that the balance sheet matters, right? But ultimately, like what’s the purpose? What’s the goal? Where are we trying to go? And I’m encouraging folks because I’m encouraging myself when I say in real time is that the balance sheet and what’s in your accounts and your net worth shouldn’t be the finish line and the measuring stick. Right? It’s an important thing that we’re going for, but ultimately, we’ve got to look at what else is of greatest priority and ultimately the concept that we talk about often, which is living a rich life along the way. Tim, No. 4, you know, you talked about the analogy of the financial plan being interconnected just like the body and the systems of the body. And I think that is a nice segue into No. 4, which is avoid investing in a silo. So you’ve said it many times, I believe it firmly as well, that investing is one, albeit an important one, one part of the financial plan. And so here we’re talking, again, in this time period of volatility, that we’ve got to take a step back. And you alluded to a couple things of the baby steps in terms of thinking about the emergency fund and paying off that high interest consumer debt, but give us that reminder, Tim, that investing is one part of the financial plan, an important one, but it’s just one part.

Tim Baker: I’ll say this caveat here, like I was going to say, the thing that’s capturing all the ink right now, it is the market. It’s the investments. And you’re not really seeing a lot of front page stories about life insurance or tax. I mean, you’re seeing a little bit more because like we’re looking at what does a Biden tax code look like versus what’s currently there in Trump and how is that going to affect everything? And I know we talk about the child tax credit, so that’s getting a little bit of press. Debt is getting a little bit of press, especially student loan debt, because of things like the PSLF shakeup and FedLoan servicing basically waving the white flag here. But for the most part, what you’re reading about are the markets. And you’re driven by the fact that you’re looking at your balances and you’re logging into your 401k and that’s affecting you. So again, it is a piece of the financial plan. But it is just that. And I will say that one of the big drivers of building wealth over long periods of time, over the course of a pharmacist’s career, is I look at it as really three main things. And there are other pieces of the financial plan. But it’s going to be the thing that really I think gets you to an inflection point where you really start to build wealth is that you have an efficient debt strategy, right? So I think the two big buckets for pharmacists are going to be student loans and your mortgage. You know, a lot of people are very willy-nilly, especially with the student loans — now we’re seeing a lot more people have a heightened degree of attention toward student loans, and I think we probably should take some credit for some of that, definitely the mindset and the knowledge of people that we talk to is completely different than when we started, when I started working with pharmacists years ago. So efficient debt payoff strategies, efficient investment strategies, and efficient tax strategies, which kind of overlay everything. And I think those are the big drivers that build wealth over time. So it is — those are ongoing things, but again, those things are not really worth anything, Tim, if your financial plan is not protected. So those are things like insurance and estate planning or if you don’t have the proper health insurance and you have a catastrophe or whatever that is. So these are all interconnected just like systems of the body that you are only as strong as your weakest link, to use a phrasing that people can relate to. So one client that I met with, they surpassed $1 million in net worth, but they still didn’t sign their — still didn’t get their life insurance stuff. It can be sometimes, ‘Oh, that’s not going to happen to me. I don’t need to worry about that.’ But that’s a big weakness of their financial plan. So investing is important. It’s not not important. It is part of the plan. And it is one of those things that’s going to drive your wealth-building over the course of your career. But you’ve got to make sure that all the other things line up and they’re kind of working in rhythm with driving your balance sheet forward, your net worth up, and allowing you to align the resources you have to execute to the goals — so these are the qualitative things, the things that are less about the 1s and 0s and more about what is a wealthy life to you, Tim? What is a wealthy life for Jess? And if you’re not doing those things, who cares? Like what’s the point? What’s the point of all of this stuff? What’s the point of paying down the debt or earning the salary or whatever? To me, it has to be this feeling of taking care of you today but then the future version of yourself. And for a lot of us because we’re not really introspective because of the busyness of life, we kind of fail to do that. And then we wake up 10 years later, and we’re like, ‘Oh. A lot of time went by, and I’m still exactly where I’m at with this goal that I want to achieve.’ So yeah, it’s definitely — it’s an integral part to the rest of the financial plan and important to recognize that.

Tim Ulbrich: Yeah, and I bring this one forward, Tim, not to suppress the importance of investing but rather to elevate the importance of the others that I think may get overlooked out of the exciting aspects that come with investing. We see this firsthand, right? If we run a webinar at YFP on investing, bam! People are excited. If I run a webinar on like long-term disability and life insurance, like nobody is coming to listen to me talk about that or, you know, few people will be there. So you know, I think it’s just a good reminder that we look at the financial plan in a holistic manner. And that’s why we talk adamantly about the importance of comprehensive financial planning and making sure that we’re getting advice and input across the spectrum of the plan because at the end of the day, they are very much interconnected. Tim, No. 5 — and you’ve highlighted this a little bit already, and we’ve talked about it on the show before on Episode 073 — and that’s to re-evaluate the priority for investing. And you know, on that episode, Episode 073, we talked extensively about thinking of the different buckets, of course that’s not investment advice but just some general considerations around the priority of investing. And we’ll link to that in the show notes as we’ve got a really great visual that people can look at as a way to further educate themselves on this. But Tim, you mentioned tax-advantaged opportunities and seeing some of that in tax season as one example of this. But this time, again, I think is another example when we’re seeing ourselves perhaps because of something we’re hearing about or what other folks are doing is we’re losing sight of that priority of how we might be want to be investing the limited dollars that we do have to invest.

Tim Baker: Again, a lot of this is influence of even growing up, my mom was like, “Hey, there’s this new thing, a Roth IRA, we need to open those and get money into that.” You know, there’s these things that are kind of impressed upon us even growing up or not, or not impressed upon us at all. But I think it’s because, again, the ease of what is in people’s face in terms of like what they should be doing. But again, I think if you have kind of the basics in place with you can pay your bills, you have some 3-6 month reserve set aside in an emergency fund, the debt kind of is in check and is manageable, and there is a surplus for you to work with, that’s really when — or if not even before things like a 401k match or retirement plan match is really the first place that you look at because, again, you know, what we always say, it’s free money. So if you have a — if you make $100,000 and your employer matches 5%, and you’re not putting 5% to get that match, so to speak, if that’s the way it rolls out, then guess what? You just got a 5% raise essentially. That is typically step one is that if there is free money available in a match, you definitely should do that. From there, it gets a little bit more muddied because people — and even if you don’t have the match, it’s a little bit more money — from there, it’s things like an HSA if you have a high-deductible health plan that allows you to open up to an HSA, you know, you want to look at that because of the triple tax benefit that we’ve talked about in past episodes. It’s one of the big things that regardless of how much money you make, you can escape tax and allow that money to grow tax-free similar to an IRA, which is unheard of. You know, from there, you kind of have to do a little bit of digging and it depends on the strategy that you have with things like students loans and what your 401k might look like. But it might be to go back to the 401k, it might be look at things like IRAs, Roth IRAs, that type of thing. A lot of times, not all the time, money in a 401k can be more expensive, meaning there’s a lot of fees and things attached to those accounts that are very opaque or just not transparent to you. Not always the case, but a lot of times the smaller the employer, the more — you know, that’s a good rule of thumb — the more expensive it can be. So you kind of have to do a little bit of research, does it make sense for me to go back into the 401k and try to max that out to that $19,500? Or do I look at trying to max out an IRA, Roth IRA, which is $6,000? And then from there, we kind of talk about this in visual, like if you have access to a SEP IRA, a lot of people, especially a SEP IRA is typically for a small business or things like that. But that’s another avenue that you could potentially sock away some money for long-term investment that has a tax break. But then it’s things like a brokerage account where you can put as much money into there. A lot of people use brokerage accounts when they exhaust all of these accounts that we just mentioned or there is more of a near-term, so not necessarily a long-term, a near-term need. So my wife and I, we use a brokerage account that has a more conservative allocation because it’s just not as much time for like a car purchase, right? So we’re not being done any favors in the interest rates in terms of a saver, so right now it’s .5% in a high yield, so we’re trying to get a little bit more than that in a brokerage account, but that’s a slippery slope, right, because we don’t necessarily know how long we’re going to have that money invested, and the market could turn south tomorrow. But then I know some people get into real estate and other things, but the thing that we typically see here, Tim, when we talk about the priority is that these priorities aren’t necessarily what would be advisable when we actually look at the balance sheet and we actually talk about what the goals are for that particular — sometimes, they are out of order just because of curiosity or ease of use. “Hey, I can sit on the couch and see a commercial on Robinhood and open that and put money into crypto or this stock or that stock.” It’s just that’s how it is. And again, it’s more exciting than doing some of these boring things of like — it’s not exciting, Tim, to put money into an HSA. It’s just not. Even though us nerds are like, ah, triple tax benefit, it’s awesome. It’s not exciting. It just isn’t. I get it. But again, that’s why I think having a coach or an advocate to kind of help ask good questions and line up are these the things that are important to you and let’s line up the resources in a way that maximize or give you the most efficient outcomes? That’s what we’re trying to do.

Tim Ulbrich: So Tim, have you officially relabeled yet your brokerage accounts for the Swagger Wagon? Because it’s going to happen, the minivan, right? I mean…

Tim Baker: Oh, man.

Tim Ulbrich: If Shea’s listening, she’s like, “Heck no!”

Tim Baker: Yeah, well, she’s not listening. She’s not impressed with me at all. But no, it is not labeled. It needs to be. I’m on the wagon. I just don’t think she is yet. But maybe eventually.

Tim Ulbrich: Great stuff. So we talked about five considerations for investing in a volatile market. And you know, one of the themes I think of throughout this topic, Tim, is the obvious value that can come from accountability. You know, you mentioned in the form of coach, obviously we’re biased and firmly believe in the value of one-on-one comprehensive financial planning and coaching that we do with our team at YFP Planning. So for folks that have been thinking about that for some time and are listening and want to see if that’s a good fit for them and their financial goals and their plan going forward, you can book a free discovery call with us if you go to YFPPlanning.com, you can book that call right there. We’d be happy to talk with you further about our one-on-one planning service. As always, thank you for joining us on this week’s episode of the Your Financial Pharmacist podcast. And we could use your help in getting other pharmacists to find this show as well. And you can do that by leaving a rating and review on Apple Podcasts or wherever you listen to the show each week. Thanks for joining, as always, and have a great rest of your day.

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YFP 212: Checklist for Building a Strong Financial Foundation


Checklist for Building a Strong Financial Foundation

On this episode, sponsored by CommonBond, Tim Ulbrich shares his checklist for building a strong financial foundation.

Summary

Tim Ulbrich shares insight from one of his most popular talks for pharmacy students and recent pharmacy graduates, Preparing to Be Financially Fit. In this episode, he walks the listener through his checklist of five items and actions necessary for a solid financial foundation.

  1. Develop and automate a monthly system: Not only is it a good idea to create a vision for success with tangible goals and a budget for each month, but it is also equally important to automate when possible to get out of your way when it comes to saving, investing, and planning.
  2. Knock out the baby steps: Work to eliminate high-interest credit card debt and build your emergency fund.
  3. Have a student loan repayment plan: Inventory your student loans and determine your starting point. Work on a strategy to pay loans down. Your repayment options may include tuition reimbursement or repayment, loan forgiveness, or refinancing.
  4. Prepare for the catastrophic: This checklist item is referring to various types of insurance. Pharmacists should plan for potentially catastrophic events by ensuring that you are aptly insured both professionally and personally.
  5. Develop a plan for long-term investing: Lastly, a long-term investing plan is key to your financial independence and freedom however that may look for YOU.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, everyone. Tim Ulbrich here, and I’m flying solo this week as we talk about a checklist for building a strong financial foundation. Now, we’re a little bit over the halfway point through the year, and perhaps if you were like me for this year, you set some big, audacious goals, hopefully some of those financial goals, at the beginning of this year in December or January. And here we are, and maybe those goals have fallen by the wayside or we’ve forgotten about them. And this is a great time of year to bring those goals back, dust them off, and see where we’re at and adjust and see what we need to make for the second half of the year. And that’s what we’re going to talk about today when we talk about a checklist for building a strong financial foundation. My hope is that whether you’re listening and you’re someone who’s got $300,000 in student loan and feel like you’re spinning your wheels with trying to figure that out among other goals or whether you’re listening and you’re someone who’s got a net worth of $1 million or more, my hope is that everyone can take at least one or two things away from this episode.

You know, it dawned on me that one of the most common talks that I give to a group of pharmacists or pharmacy students or residents is preparing to be financially fit. And in that talk, I talk about five things that I believe make up a strong financial foundation. And the way I describe that financial foundation is if we think about our financial plan as if we’re building a home, right, before we can talk about or even think about the upgrades or the remodel of the kitchen or finishing the basement or adding on that patio or deck or even upgrading our landscaping or lighting, we’ve better make sure we’ve got good foundation in place from which we can then grow and make some of those decisions. And the same is true with our financial plan. And so sometimes, we’ve got to go back to the basics no matter where we are at our financial journey and make sure that we’ve got a good, solid foundation in place, one that doesn’t have any cracks or if we identify cracks, we fill some of those cracks in so that we can build and walk confidently in our financial plan, knowing that we’ve done the hard work to put that foundation in place. And one of my key takeaways and hopes for this episode is that we can all recognize that building wealth, achieving financial independence, living a rich life, whatever we want to call it, is really dependent upon having a good, solid foundation in place. So I’m going to walk through five areas that I believe make up this foundation, a checklist for building that foundation and within each one of these, I’m going to provide some additional resources and more information that you can dig deeper on any one of these topics.

Alright, so let’s jump in. No. 1 is Developing and Automating a Monthly System. Developing and automating a monthly system. Now what I’m talking about here — and you probably figured this out — what I’m talking about here is a budget, right, is a system, is a playbook that we can follow each and every month. And then we automate that system and really get ourselves out of the way so we can ensure we achieve our goals. I often don’t lead with the term “budgeting” because it’s not flashy, it’s not exciting, but it’s so foundational to the financial plan, no matter what budgeting method or process that you use.

So in this first step of developing an automated monthly system, you know, a few things that we need to think about. No. 1 is we’ve got to have a vision. We have to know where we want to go before we can take some steps forward. So before we get into the weeds of what budget system or template or method or tool or app, we’ve got to know where we’re going, right? We’ve got to take a look up and see what’s the vision? What’s the path? What’s the guiding light for our financial plan and the decisions that we’re going to make and ultimately the goals that we want to achieve? And we do this by asking ourselves some big, yet important questions, questions like what does financial success look like for you? For you individually, what does financial success look like? How would you define that? You know, why do you care about this topic of money to begin with, right? Money is simply a tool. So why don’t we care about this topic of money. Or perhaps another question may be one that I ask to many folks. You know, if you were to fast forward 25 years and look backwards, what would need to happen that you would think to yourself, you know what, well done, really good job with that whole topic of personal finances? You know, we believe at YFP Planning that really good financial plan takes care of your future self but allows you to live a rich life today, right? We’ve got to have this balance of the future, we’ve got to be looking ahead. But we also need to be prioritizing the things that are most important to us today. So when we’re talking about developing an automated monthly system, we’ve got to first start with the vision.

You know, next from that vision, we’ve got to set some tangible goals, right? So we’ve got to come away from the clouds, come down from the clouds and that dream and vision we have, and let’s set some tangible goals. You know, what are three or four things that we want to achieve over the next 6 or 12 months such that if we achieve those, we’re on the path towards achieving our long-term vision. So we’ve got to set some tangible goals and the more specific, the better.

Then we’ve got to track our spending, right? We’ve got to look backwards and say, ‘OK, I’ve got this vision. I’ve got these goals. Am I actually spending in a way that’s going to allow me to achieve these goals?’ I always encourage folks to do a 90-day lookback at their spending. This can be humbling. This can be eye-opening at times. Often, we may underestimate our true expenses in any given category. And perhaps for some of you, that’s not the case. But this is a good snapshot, 90 days. We’re not necessarily just looking at one month, which may be an outlier for any reason, but getting a good average over a 90-day period of how we’re spending in any individual category of the budget.

Then once we’ve set the vision, once we have some tangible goals, once we’ve looked back at our spending, now let’s jump into the budget, right? And a good budget I believe is one that we’re really proactively thinking about how we’re going to direct our dollars and how they’re going to be spent and allocated toward the goals we want to achieve. It’s that proactive intention in addition to then tracking the expenses throughout the month. And then finally, we want to implement a system that can automate the process. You know, one of my favorite interviews on the YFP podcast was when I interviewed Dr. Daniel Crosby, who’s the author of “The Behavioral Investor.” And he studies how we think and behave around this whole topic of personal finance. And one of the things he said, which really resonates with me and his research supports, is that we often individually, ourselves and the decisions we make are often some of the biggest barriers that we put in front of our financial plan and achieving the goals that we want to achieve. And so automation, Ramit Sethi does a great job of talking about this in his book, “I Will Teach You to Be Rich.” Ramit Sethi talks about how automation can be one of the most powerful and profitable systems that you can build when it comes to your financial plan, right? So once we’ve done the hard work of setting the vision and we have some tangible goals and we know and can track our spending and we’re then able to set the budget, let’s put on automation, let’s fund our goals first, and let’s feel confident in knowing that we’ve developed a system that’s going to help accelerate our financial plan.

So that’s Step No. 1 here is Developing and Automating a Monthly System as we work towards this checklist for a strong financial foundation. Some resources here I would point you to is we’ve got an Excel budget template at YFP that we’ve developed. Certainly not the only way to do budgeting. At the end of the day, a good budget is one that works for you. But if you’re looking for a place to get started or perhaps to take a new, fresh look at the budgeting system you have, you can go to YourFinancialPharmacist.com/budget and download that Excel template. Another resource here I would point you to is Episode 057 of the podcast. We talked about the power of automation in your financial plan. And so that may be another one to visit if you want to learn more about that concept of automation and how to implement that in your own system. So that’s Step No. 1, Developing and Automating Your Monthly System.

Step No. 2 is Knocking Out the Baby Steps. Now, if we think about the foundation as five physical bricks that’s making up a foundation, these five things that we’re talking about, I tend to think of this one, No. 2, Knocking Out the Baby Steps, as if it’s really the foundation of the foundation, if you will. Brick No. 1, right? And so we’re talking about the things here that for some of you that are listening, if you’re thinking, Tim, I just feel overwhelmed with multiple goals that I’m trying to achieve, I don’t know where to start. Perhaps I’ve got six figures of student loan debt. You know, I’ve got decisions that I need to make around some credit card debt. And I want to build an emergency fund or grow my emergency fund. I’m trying to purchase a home or I’ve got expenses for the family. I really want to accelerate my investing plan, and I just don’t know where to start and how to prioritize this. Knocking out the baby steps, this Step No. 2, is really meant to be the first step from which you then build even further. And the two things I’m talking about here are high interest rate credit card debt and emergency fund. So these are the two baby steps that we need to think about as we walk into our financial plan. Now I think these are fairly obvious, two things we’ve talked about on the show before, high interest rate credit card debt, we’re talking about here not any credit card expenses or bills that you pay off each and every month but rather that revolving credit card debt that’s accruing double digit interest, cards that are accruing 15-25% interest. And for obvious reasons related to that interest rate and the impact that that can have on the rest of your financial plan, we’ve got to knock that credit card debt out, that high interest rate consumer debt out as soon as possible. So think of this as really the piece where we need to stop the bleeding, right? We need to stop the bleeding before we can then begin to take some of these other steps forward.

The second part here of the baby steps is the emergency fund. We’ve talked about this before on the show, Episode 026, we actually talked about both of these things of baby stepping into your financial plan. And emergency fund, you know, some general rules of thumb that I think about are 3-6 months worth of expenses, 3-6 months worth of expenses. There’s some determination and of course decision-making in there. Is it 3 months? Is it 6 months? Is it somewhere in between? And that depends on several factors. We’re looking here, in my opinion, at an emergency fund as a place where we’re not necessarily very excited about the growth or the interest or the accrual of that account. This is the place where we want this account to be liquid and accessible, where we can get to this money when an emergency happens without disrupting the rest of our financial plan. So we’re going to be doing our investing elsewhere in the financial plan, right? So we want this to be liquid, we want it to be accessible, perhaps it’s going to earn a little bit of interest, nothing too exciting in the moment based on what rates are at on things like long-term savings accounts and money market accounts and so forth. But the purpose here is really more about the liquidity and the accessibility of this fund. So that’s Step No. 2 here, Knocking Out the Baby Steps, high interest rate credit card debt and the emergency fund.

No. 3, Having a Student Loan Repayment Plan. Now, notice I did not say being debt-free. Right? For some of you, perhaps that is the case. Maybe there’s an aggressive debt repayment. But for others of you, it may be loan forgiveness. And that might be 10-year Public Service Loan Forgiveness. That might be a longer time period of non-Public Service Loan Forgiveness or 20-25 years. This might be a federal plan that’s going to take a little bit longer or, again, could be an aggressive payoff. So it’s about having a plan. You know, so many folks that I talk to — and I felt this very much in my own journey, sometimes it’s about the intentionality of knowing that you’ve evaluated the options that are available to you — here, we’re talking about student loans — that you’ve weighed those options, you’ve considered those in the context of the rest of your financial plan and your goals, and you’ve made a decision and determined a path forward and have a plan for how and when this debt is going to get paid off, whether that debt getting paid off is 10 years from now, whether it’s two years from now, or whether it’s even longer or shorter than either of those. So this group listening knows very well, whether it’s those that are in the weeds of those or just been aware of the conversation around student loan debt and pharmacy education, but we’re facing a significant challenge right now. Today’s graduate is the median indebtedness of a pharmacy graduate right now is $175,000. Ten years ago, that was $100,000. We’ve seen a $75,000 increase in the median indebtedness of a pharmacy graduate over a 10-year period. That is what it is. Right? And if you actually look at that stacked up against what a pharmacist is making as reported by the Bureau of Labor Statistics, you know, pharmacists’ income generally speaking have been relatively flat, right? We’ve seen some rise that you could argue accounts for some cost-of-living adjustments. But really, outside of that, we’re not seeing a significant bump up that would account for anywhere near what we’re seeing in terms of the rise of student loan debt.

And so we’ve got some work to do to put this plan together. And Step No. 1 is we’ve got to inventory our loans. We have to know exactly where we are at today. And I suspect many of you have already done this. This is knowing a list of my federal loans, a list of my private loans if applicable, who’s the loan servicing company, what’s the type of loan, what’s the interest rate on that loan? We’ve got to know everything about these loans so we can then determine what might make the most sense from a repayment option and strategy. And the reason why the inventory is so important is that often the loan type is going to direct, especially as we talk about federal options, is going to direct which repayment options may be available to you. And so sometimes — great example would be Public Service Loan Forgiveness — sometimes there’s some work that we have to do to consolidate those loans to then open up repayment options that allow us to pursue certain paths such as Public Service Loan Forgiveness.

So there are three main buckets — when we talk about student loan repayment, there are three main buckets that we want to be thinking about. And I encourage you to think about them in this order. No. 1 is tuition reimbursement repayment. No. 2 is forgiveness. And No. 3 is just paying them off. And that could be paying them off either staying in the federal system or paying them off by moving those loans with a private company through the process known as refinancing. So when we think about these three options, if I had to go from those that would have the least number of listeners probably pursuing it, it would be probably tuition reimbursement payment, a little bit more would be forgiveness, and probably more would be that third bucket where you’re going to pay them off either through a refinance or through staying in the federal system. That first bucket, tuition reimbursement repayment, is referring to those pharmacists who enter employment situations where typically in exchange for some type of service — so think like military pharmacist types of positions, Indian Health Service and so forth, some VA locations through the Education Debt Reduction program — typically in exchange for some type of service, you’re going to have a portion or maybe in some cases all of your student loan balance that might be forgiven. And more often, we think here of federal programs. There are some situations where there are state-based programs. So for example, here in Ohio, there was a program for a period of time for pharmacists that were working in qualified healthcare clinics that were serving patients that were adversely impacted by the opioid epidemic, so think of pharmacists that might work in like federally qualified health centers, could be charitable pharmacy organizations and so forth. More often than not, though, we’re thinking here about federal programs. But it is worth looking into anything that might apply on the state level. So that’s the first bucket. The second bucket is forgiveness. Now within forgiveness on the federal level, there’s two options: one that is better known, Public Service Loan Forgiveness. We’ve talked about extensively on this show. It’s gotten a lot of national attention, some good, some bad, more bad. But I think that probably hasn’t been necessarily fair to that plan. And then the second option, which is not as well-known, is what we call non-Public Service Loan Forgiveness. And there’s some key differences, three things that I really think about differentiating PSLF and non-PSLF. No. 1 would be who you work for. So with Public Service Loan Forgiveness, you have to work for a qualified employer. Typically this is going to be a 501(c)3 not-for-profit organization for most pharmacists. Some also would be a federal agency or organization. So think of pharmacists that are working in a hospital or health system setting, perhaps an academic environment and so forth. So that’s the first main difference between the two is who you work for. So PSLF, you have to work for a qualifying employer. Non-PSLF, it doesn’t matter who you work for. Second thing would be the time period. So with PSLF, it’s 120 payments, does not have to be consecutive, but 120 qualifying payments until you can apply for and receive tax-free forgiveness. So minimum of a 10-year period. With non-PSLF, you’re looking at a 20-25 year timeline. Third main difference is related to the taxes and the forgiveness. So with PSLF, if we cross our t’s and dot our i’s, that’s tax-free forgiveness. And with non-PSLF, it is taxable forgiveness. So let’s say 20 years from now, you go to — you’re at the point of forgiveness for the non-PSLF option with an income-driven repayment plan. Let’s say you make $100,000 in that year and you’ve got $100,000 that’s to be forgiven. And that year, your income would be taxed — or you’d have a taxable amount that would be $200,000, not $100,000 because that $100,000 that’s to be forgiven would be treated as taxable income. So this is referred to in the student loan groups as the tax bomb, right? So something we’ve got to be thinking about, we’ve got to plan for if we’re going to be pursuing this option. To many pharmacists that don’t qualify for PSLF and especially those that have a higher debt load, this is something that may be a viable option. And then the third bucket, as I mentioned, is we’re just going to pay them off. So we’re not going to have someone else reimburse/repay, we’re not going to have forgiveness, we’re just going to pay them off, either in the federal system or moving with a private lender through refinance. Now lots of logistics to think about here if you do refinance, different terms, different rate considerations, companies have differences between them. We’ve got lots of resources available on this at YourFinancialPharmacist.com on refinancing, fixed v. variable rates and so forth. And then not all the benefits and considerations are the same in the federal system as they are in the private. So things like income-driven repayment plan, forbearances, forgiveness upon death or disability, these are things that you want to be thinking about if you’re going to move your loans from the federal into the private system.

So I’m just scratching the surface here as we work through this checklist of a strong financial foundation and we talk about having a student loan repayment plan here in No. 3. I would point you to a great resource that was written by Tim Church, “The Ultimate Guide for Pharmacy Student Loan Repayment,” where it’s a blog post, really more of a mini e-book. He did an awesome job of going through a comprehensive, in-depth look at student loan repayment. And you can access that for free at YourFinancialPharmacist.com/ultimate.

OK, so that’s No. 3, Having a Student Loan Repayment. No. 4 is we have to Prepare for the Catastrophic, perhaps the least exciting part of the plan to be thinking about. So here, we’re talking about insurance, right? And while there’s many types of insurance that we want to be thinking about, of course health, auto, home, renter’s, etc., the ones I’m mainly spending time here on in No. 4 is professional liability, term life, and long-term disability. Now we’ve talked about these on the show before, Episode 155 we talked about the importance of professional liability insurance, what it is, why it’s important, who needs it, what to look for when shopping for a policy. So I’d check that out. We also have a great resource on term life and long-term disability. If you go to YourFinancialPharmacist.com main page and click on “Insurance,” you’ll see that information there. And my encouragement for you in this section as we talk about insurance briefly is please take the time to really understand these policies, as non-exciting as it may be, these are incredibly important. And I think this is an area where it’s easy to either be under- or over-insured. And both of those are things that we want to try to avoid. Right? Of course, under-insured, if we have a need for something like term life insurance or long-term disability and we don’t have that policy, that could perhaps be catastrophic to the financial plan, especially as we’re doing the hard work in the other areas that we’ve already talked about. But the other side of the equation also has a cost associated with it, right? If we have a policy which perhaps is more than we need or is not a best fit for our current needs in our financial plan, then that means those are dollars that are going towards a certain part of the financial plan that perhaps we could allocate elsewhere, whether that be investing or debt repayment or another part of the financial plan. So both are important. And this is an area I talk with pharmacists commonly about. And this is an area where I think that someone like a fee-only financial planner can really help provide objective advice and really be able to point someone in the right direction where they don’t necessarily have a vested interest in terms of how those policies are being sold. So make sure to check out some of the resources here on professional liability, Episode 155, and then term life/long-term disability by going to YourFinancialPharmacist.com, clicking on “Insurance.”

No. 5 here is Developing a Plan for Long-Term Investing. And we have talked extensively on the show about investing, from some of the basics, you know, in terms of what are the different accounts, whether that’s a 401k, a 403b, a Roth IRA, a traditional IRA, HSAs and so forth, and you can find all of that on previous shows. We’ve got more information on the website. We’ve also talked about things like the priority of investing. So you know, if we know we need to save each and every month, well, how do we begin to think about the priority? Right? We’ve got considerations around employer-sponsored retirement accounts, individual accounts, perhaps some other investment opportunities like real estate. And so how do we begin to think about the priority of investing? Very important topic. We’ve also talked about things like fees and how do we keep fees low? And if at the end of the day we’re going to be doing the hard work to save, how do we make sure we’re doing that in a way that is tax-efficient and we’re doing that in a way that is minimizing the fees that might eat away at that investment. So I would encourage you to think about at least the beginnings — remember, we’re talking about the foundation here — the beginnings of your long-term investing plan in three stages. And that is setting the vision, Part 1, then determining what the need is or how much to achieve that vision, that’s Part 2, and then we get into the x’s and o’s in Part 3 of actually determining how much are we going to save every month and where are we going to allocate those funds? And within those funds, how are we going to determine what we’re investing in, which aligns with our goals, which aligns with our risk tolerance and all of the other things that I’ve previously mentioned.

And so this is an area that I think for folks that are really at the beginning of their financial journey or even folks that maybe are listening and you’ve amassed a half a million a million dollars of wealth just through consistent, regular contributions into tax-advantaged retirement accounts but necessarily haven’t dug into the details or thought about how to take that to the next level, right? Both of those could apply. And so my encouragement for both groups and folks that are in between there is to really take a step back and ask yourself, what is the vision for my long-term investing plan? I mentioned at the beginning, money is simply a tool. What’s my vision for retirement? What does that look like? What do I want to do? What do I want to accomplish? Because that’s going to then inform how much do I need? Once I know what the vision, once I know what I want to accomplish, I can then start to determine OK, how much am I going to need to be able to make that a reality? Now, for those of you that have done this step, how much you need, you might have run some numbers in a nest egg calculator, it’s a topic that I often talk about when we’re speaking and sometimes I’ll even have folks that will go through that in real time. And inevitably, anytime we go through a nest egg calculation, you can see kind of that glossed-over look when you punch in the numbers and you hit “Calculate,” and you see that number that’s $3, $4, $5, $6 million. And it becomes number one, very overwhelming and number two, it feels very abstract in the moment. Whether retirement is 20 years away, 10 years away or 40 years away, that can be a big number that it’s hard to say, what does that actually means today? What do I do with that number, right? And so I think a good financial plan will really take that information and distill it down to OK, let’s discount that information back to today’s numbers, what does that mean for how much we need to be saving each and every month, and then let’s begin to put a plan in place and automate that plan so we’re contributing in a tax-efficient manner, we’re keeping the fees low, and we’re allowing compound interest to do its magic and time value of money to take its course. Right? And so we’ve got to bring it into terms that allow us to digest this and make it real or otherwise we’re going to get some of that paralysis analysis, five years goes by, 10 years go by, and we feel like we’re trying to play catch-up on our investing plan.

So as we walk through these five steps, we talked about developing and automating a monthly system, No. 1. We talked about knocking out the baby steps, No. 2. We talked about having a student loan repayment plan, No. 3. Preparing for the catastrophic, No. 4. And then No. 5, developing or perhaps accelerating your long-term investing plan. And for those that are listening, I want you to imagine for a moment, I want you to imagine for a moment that you’ve got a sound monthly system in place that accounts for all of your goals. You’ve thought through the things that are most important to you. You’ve looked at your current expenses. You’ve built in those goals into a monthly system, and you’ve automated the savings to begin to realize those goals. Imagine that just for a moment. I want you to imagine for those that are struggling with ‘I need to really flesh out and build out the emergency fund,’ or ‘I need to knock out that credit card debt,’ what would it feel like if you no longer had any credit card debt? What would it feel like if you had a fully-funded emergency fund? What’s next after that? For those that are thinking about their student loans, right, it’s hard to often look at other things when you’ve got a huge balance of student loans. As I highlighted earlier, yeah, you know, getting that to $0 is a goal, of course. But what would it feel like if you had a plan, knowing that you’ve evaluated all of the options, all of the federal options, forgiveness, non-forgiveness, private, etc., you’ve looked at the numbers, you’ve thought about the other considerations, you’ve determined a path forward that is best for you personal situation, and you’ve determined a plan that now allows you to look at your monthly expenses knowing that you’ve put a plan in place that that repayment option is best for your personal situation and you know exactly what that’s going to cost each and every month to achieve that goal and when you’re going to have that debt paid off? What would it feel like for those that are thinking, you know, ‘Am I underinsured when it comes to things like long-term disability or term life?’ or perhaps folks that are feeling like, ‘You know what, I bought a policy awhile ago that maybe wasn’t a good fit.’ What would it feel like if that got shored up? If we really looked at making sure we’ve got the right amount of insurance, not too much and not too little. And what would it feel like if we had a sound vision for the future of our financial plan in terms of what retirement may look like? And how much we would need to accomplish that goal and what it would take on a month-by-month basis — and of all of the financial lingo of 401k’s and IRAs and HSAs and brokerage accounts and all of these other options that we had a plan and path forward, knowing that we’re saving x per month with this goal, and we’re going to do it in this account with this strategy?

So I think as we think about those, even as I’m reflecting on those in my own personal journey, you know, there’s always work to be done. Right? Whether, as I mentioned at the beginning, whether you’re listening and have a net worth of $1 million or net worth of -$500,000, there’s always work to be done. And while there’s always work to be done, wow, what a different position and mindset to be in when we can operate from a place knowing that we’ve got a strong foundation upon which we can build the rest of our financial plan. And so I’d be remiss here if I didn’t highlight that what we do at YFP Planning, one-on-one comprehensive financial planning, this is it, right? We’re looking at every situation on an individual basis to determine what does this foundation look like for you or for a pharmacist who’s really trying to focus on accelerating the second half of their career, is approaching retirement and wants to really think about more of the distribution phase and what’s involved in that from a tax standpoint. One-on-one financial planning allows us to really dig deep and really evaluate your situation on an individual basis. And so I would encourage folks if that’s something that you’ve been thinking about, you can schedule a free discovery call to determine whether or not what we offer is a good fit for you. You can do that at YFPPlanning.com, you can schedule a discovery call and learn more about what that looks like.

As always, I appreciate you joining for this week’s episode of the Your Financial Pharmacist podcast. And I think we have an exciting second half of the year ahead. If you’ve liked what you heard on this episode or previous episodes, please do us a favor and leave a rating and review on Apple Podcasts or wherever you listen to your podcasts each and every week. That’s how more pharmacy professionals can help them to find this show and ultimately help us on our mission of helping as many pharmacists as possible achieve financial freedom. Have a great rest of your day.

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YFP 211: The Ins and Outs of the 529 College Savings Plan


The Ins and Outs of the 529 College Savings Plan

On this episode, sponsored by Insuring Income, YFP Co-founder and Director of Financial Planning Tim Baker takes a deep dive into the 529 plan. He discusses a framework for how to project and save for kids college along with the construct of 529 plans including what they are, tax advantages, what are qualified and non-qualified expenses, and considerations when investing money within a 529.

Summary

Pharmacists are well aware of how expensive college costs and that paying for it is no easy feat. The average student loan debt load pharmacists graduated within 2020 was $175,000 and the cost of college will likely continue to rise. The 529 college savings plan is a tax-advantaged account that is an option families are using to help get in front of the cost of college.

Tim shares that he and his wife are saving an education nest egg for their two children, however, they are not going to forgo saving for their own retirement or other priority financial goals. When it comes to advising YFP Planning clients, Tim mentions that it really is a personal preference; some clients want to completely fund their children’s education expenses, some want to support in a small way, and others aren’t interested in putting money away to pay for it. Tim shares a framework that folks can follow if they are interested in helping their kids pay for college but aren’t sure where to pull the money from. The framework follows a three-bucket rule where the first third of the money for college comes from your current salary (which is really your future salary at the time your child is in college). The second third is made up of money that you’ve saved in the past such as from a 529 plan, brokerage account, savings account, Roth IRA, etc. The final third is money from scholarships, grants, and loans that your child will/can receive.

Tim also talks about the ins and outs of the 529 plan and answers some questions asked in the YFP Facebook Group.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, deep dive on 529s. Are you ready?

Tim Baker: Let’s do it. Yeah, excited.

Tim Ulbrich: So this is a follow-up from Episode 195, so we talked about saving for kids’ college in that episode. And we’re going to link to that in the show notes. But we wanted to dig deeper on 529 given that a number of our clients and the YFP community members are at various stages of kids’ college planning, some perhaps on the front end, just getting started, others on the back end, you know, distributing those funds or maybe even some further along that are helping with the grandkids or other family members’ college savings. So we want to dig deeper into the 529. We also had a recent blog post by Dr. Jeff Keimer on seven things to consider before starting a 529 plan on the YFP blog. Make sure to check that out. We’ll also link to that in the show notes. And here, we’re going to dig into some common questions that come forward as it relates to college savings. Now, we don’t need to tell this group about why college savings is necessary. I think many pharmacists are well-versed in student loan debt, unfortunately. Average graduate in 2020 faced about $175,000. This is a $1.7 trillion problem that we have as a country. And so obviously the goal with 529 savings is to try to get out in front of that. Tim, tell us from your perspective, obviously a parent of young children yourself, what is your personal thinking, your framework for saving for kids’ college. And not only how you think through this for your own children but also ultimately guide some of our clients at YFP Planning.

Tim Baker: Yeah, so it definitely is a — it definitely is a personal preference, Tim. So like I can kind of share with you my own and then kind of what I hear from clients. So you know, when I grew up in the great state of New Jersey, the Garden State, way back in the day, my mom was a teacher, my dad worked for a chemical company, Rohm and Haas in Center City, Philadelphia. And basically, the message to us was, ‘You’re on your own, kids. Like figure it out.’ And that kind of — I think it was partly to light a healthy fire under our rear end to make sure that we were good in school and we got scholarships and we just put ourselves in the best position to pay for school. They ultimately I think did help my siblings. So I think a lot of it really stems back to like how you were kind of raised in terms of your own parents and how they brought you up. So some people, they — it’s par for the course, they do the exact same thing that their parents did. And some people are the exact opposite. Or if you overlay kind of the horrid state of higher education and what it costs and what it’s doing to a lot of pharmacists coming out of school, that also plays a part. So I’ve heard everywhere from, ‘My kids are on their own,’ to, ‘I don’t want my kids to ever have to go through what I’m doing.’ So I would like a 100% solution for undergrad and also postgraduate school. Because a lot — you know, unfortunately, a lot of the pharmacists that we work with, I hear this — I don’t know if you hear this, Tim, when you’re speaking to prospective clients of YFP is — ‘Yeah, I didn’t really have many loans coming out of undergrad but then when I hit pharmacy school, now I have $150,000, $175,000, $200,00.’ So a lot of people are like, ‘Yeah, I would just like to get through my kids’ undergrad, but that doesn’t necessarily solve the problem. So me personally, Shea and I when we look at our kids, Olivia and Liam, Olivia who’s 6 and Liam who’s about to turn 2, it is definitely an exercise too that we want to help them as much as we can. And we want to be able to have a good education nest egg, so to speak, there for when they do go to school if they decide to go to school. But we are not on the one side of the spectrum where we’re going to forgo things that we want to do today, our own retirement, etc., just to hit that goal. So it’s a personal preference, though. I’ve actually heard of clients say like, ‘We’re just going to have the one kid because of the education and we want to basically put them in the best situation as possible.’ That’s a preference. What I’ve found in most cases is that clients have a semblance of kind of like what they want to do, but they have really no idea of how to actually go about like setting up an account or funding it or all of kind of the ins and outs of that. And that’s obviously some of the things we’re going to talk about today.

Tim Ulbrich: Yeah, and one of the things that I like — and again, we’re talking just basics here in a general framework. And a shoutout here to Kelly Redy-Heffner, one of our lead planners at YFP. You know, she mentioned a framework, a third, a third, a third, which to your comment, you know, there is no one right answer when it comes to kids’ college savings. So keep in mind as we talk about these buckets, but I think this is a good just general framework that folks can wrap their arms around and begin to think about alright, I like that, I don’t like that, or how do I modify that for my own personal situation. So tell us about what those buckets are, Tim, when we say a third, a third, a third for college savings.

Tim Baker: Yeah, so you know, one of the components of education planning is the funding aspect. We’ll talk about the vehicle with the 529 here more so. But the funding aspect is super important. So what the 1/3 Rule states is essentially that — and these are, this is typically like what we put in front of clients if they don’t really know what they want to do. But then once we have this as kind of our rule of thumb, then this is how we basically design the plan around it and actually show them the numbers of what they need to do. So the ⅓ Rule states that when you look at the tuition and fees and all the expenses related to going to college, we want to basically divide up where that money is coming through by really into three buckets. So the first bucket or one-third of the money is going to come from current salary. So what that — so we say current, but we actually mean future salary. So example: When Olivia, my daughter, is 18, so 12 years from now, whatever money I’m making and Shea is making, one-third of that we would cash flow to wherever she’s going in terms of tuition. So that’s the first bucket. The second bucket is basically what we’re going to be talking about today is what’s saved, you know, in the past. So this is like the 529 account, this is maybe a brokerage account, a Roth IRA, a savings account, a piggy bank, maybe an investment property that you invested in, so all the different kind of creative ways that we’ve basically saved and invested money over the course of the child’s life. So that’s the second bucket. And then the third and final bucket would be the scholarships, the grants, the financial aid or even the loans that that is student receiving as they’re going to college. So one-third for kind of cash flow in the moment, one-third from what we save and invest in over the course of the child’s life, and one-third from grants, scholarships and aid and debt — aid and loans to kind of basically put that picture together.

Tim Ulbrich: So let’s jump into the 529 plan, Tim, a little bit further.

Tim Baker: Yeah.

Tim Ulbrich: And give us the high-level, 101 definition of a 529 plan.

Tim Baker: So the way that I look at a 529 plan, a 529 plan is basically, it’s like a 401k or an IRA for your education. So the idea here is that you set money aside into an account that you typically fund with after-tax dollars — now, some states allow deductions and even credits to fund a state plan. So you fund it with after-tax dollars. Those dollars grow tax-free. And then when you distribute them for the purposes of higher education or even K-12 now, they come out basically tax-free. So one of the big things that we often throw around is like, what’s this whole thing of growing tax-free? So some people are like, ‘Well, why wouldn’t I just invest this or save?’ So to kind of just illustrate this point, if you are in a tax-advantaged account like a 529, when you invest — say you buy inside of that account a XYZ mutual fund. So you buy that at $100, Tim. And over the next — so you buy that right in the year of your kiddo’s birth. So that particular mutual fund over time, over those 18 years, is going to go from $100 to $200 to $500, whatever the share price is. And then say in 18 years, you sell it for $500. If it is outside of an account like an IRA, like a 529, and it’s in a brokerage account, a taxable account, you have to pay tax on those capital gains. So in this case, $400 per share times the amount of shares that you have. So the tax bill on that can be pretty prohibitive in terms of like what is actually left for you outside of paying Uncle Sam. So obviously if it’s held for a long period of time, you have long-term capital gains, which for most pharmacists is going to be about 15%. So inside of a 529, you don’t have capital gains. You basically — that’s the tax advantage, that it can grow from $100 to $200 to $500 — and that $400 gain, as long as it’s inside of that account, you don’t pay tax on. That’s the beauty of the 529. Now, the problem is a lot of people are like, ‘OK, what’s the catch?” Right? So for retirement plans, you can’t take it out unless you’re a certain age and all of these other things. And for education, there are some drawbacks. One is if you distribute it that are not for education costs, there’s a 10% penalty. You know, you do have to pay the taxes on it, etc. But if you do use them for qualified expenses, then that tax advantage holds true.

Tim Ulbrich: Good breakdown. I think sometimes we just throw around terms like tax-advantaged and so forth. So that’s really helpful. And I’m going to jump into some common questions I think that come up that folks may have about 529 accounts. And some of these are going to be coming from YFP community members who have posted questions in the YFP Facebook group. And I think these questions all fit into one of two areas. When I think of 529, there’s really two phases for saving for kids’ college. And this feels very similar to how we think about saving for retirement. And that’s the accumulation phase where we’re trying to fund the future need. Here, we’re talking about the cost of college. And then there’s the withdrawal phase, and then we get into different concepts and perhaps questions around there as well. And you already outlined some of the tax advantages, and I think that’s probably one of the most common questions, and you mentioned how the taxes can work in terms of that tax-free growth. And then as long as we’re using them for qualified expenses, we can pull them out without penalty. And then you also mentioned that many states offer some type of state income tax deduction or credit. And I just wanted to give folks one example of that. Here in Ohio, in the great state of Ohio, Ohioans can deduct their Ohio 529 contributions from their Ohio taxable income up to $4,000 per year per beneficiary. So you know, when you’re talking about that from a state savings, is that huge sums of money? Not necessarily, but you know, every little bit helps in terms of what you might be able to save on some of your state taxable income. So Tim, let’s talk about qualified and unqualified expenses. So we want to make sure, of course, that if we’re saving this money — you mentioned what’s the catch? — if we’re saving this money and it’s growing and we’re ultimately going to put it to its best use and not have to pay penalty, we want to make sure that we’re thinking about what is qualified and what is not qualified. So walk us through some of the common qualified expenses and some of the common nonqualifying expenses.

Tim Baker: Yeah, so you know, typically the things that you think of that are qualifying are kind of the common things. So that’s going to be like tuition, room and board, fees associated with tuition, that type of thing. And it could be food, it could be textbooks, transportation, those are — actually transportation is not. Sorry, transportation is not typically part of that. But these are books and supplies. It could be expenses for special needs. A lot of the computer and technology and internet, those are all under that. And that has kind of changed over time. So a lot of it is — and I suspect, so like one of the things that people kind of get tripped up on, Tim, is like, ‘Well, you know, I would like to do this, but I feel like it’s too restrictive..’ And even in our lifetime, you know, in really the next last 10 years, they’ve become more — or they meaning the government — has become more and more less and less restrictive in terms of what these dollars are for. So like as an example, you used to not be able to use it for trade school and things like that. Now you can. You used to not be able to — which is crazy, and they even still cap it, which I’m not sure why they do this — but you used to not be able to pay — if you had money in a 529, you couldn’t use it to pay your loans without — that was an unqualified expense, which is crazy. Now you can. I think the cap is $10,000.

Tim Ulbrich: $10,000. Yep.

Tim Baker: So the use is broad, and I expect it to be more broad in the future. The other big thing that has changed with the 529 that has really allowed to open up other doors is you can now use it for K-12 expenses. So Tim, if you ever were to decide to send the boys to private school, you can actually use that. In a lot of cases, it’s less of an accumulation, it’s more of a pass-through because obviously your boys would be going through school now. But if you were to — if you wanted to set up a 529 for grandkids for K-12 or even their college, it would be more of an accumulation. So in terms of qualified expenses, it’s fairly broad, and I think it’s going to continue to broaden as we go, even as more nontraditional ways of education sprout up. I think that the 529 will be — I anticipate that they’re going to continue to try to find ways to mitigate this issue with just rising expense and debt levels, etc.

Tim Ulbrich: Yeah, I agree with you. I think if anyone’s been following along in the national conversation around student loan debt, I think it feels like we’re in a direction towards, ‘What can we do to try to minimize that?’ And I think one way might be to loosen up even further, although to your point, it’s come a long way in terms of 529 qualifying expenses. Tim, what are some other downsides — if any — to the 529 that folks might want to consider beyond potential penalties for nonqualifying expenses. We’ll talk in a moment about, ‘Hey, what if my child doesn’t end up going to school?’ and using this. Any other downsides that come to mind that folks would want to at least consider and evaluate as they’re making this decision?

Tim Baker: Yeah, so some of the downsides would be, you know, not being able to use the dollars for like what we would consider unqualified expenses, which might be like college application and testing fees, which we know can be fairly high. It could be you can’t use them for transportation, health insurance, extracurricular activities, and some room and board costs, which again can add up. So that’s one of the things that’s a downside. I think the other thing would be the fact that, you know, because you have to use it for higher education and if your kid doesn’t go to college, like what do you do with the money? So I think that you don’t lose the money. I think some people think like, if I put that in and they don’t go to college, I can never get it back. At a minimum, you would take a haircut, a 10% penalty and pay the taxes on those gains, and that wouldn’t necessarily be ideal. But you could think really beyond traditional college. So again, I think as the government continues to look at this, whether it’s helping another college with K-12 or re-assigning the 529 or basically changing the beneficiary from one kid to another, you can do that. You can transfer it to another account. It could be going back to college yourself. Like if you decide — if a kid decides that they don’t want to do this, you can use it for that. Or at a minimum, you can withdraw it. So I think if there is an iota — and again, not advice — but if there is an iota that your kid is going to do something post-high school, I would plan for it. And a lot of the — I think it also depends on the state because of the state deductions will incentivize that. But even like the tax benefit of growing it tax-free, if you’re looking at 18 years, if you’re looking at 10 years, that’s a real period of time where you can get a lot of gain out of an investment account and to be able to direct. And it could be a legacy, Tim. It could be a legacy thing, Tim. Like Liam, like if Olivia doesn’t want to go to school or say she gets accepted to West Point and we don’t need it because there is no tuition, it’s just time service, we would basically shuttle that off to Liam. Liam would get the account. But then if he decided he wanted to start a business or things like that, I think what I were to do in that moment — unless I really needed to use the cash — I would look at my nieces, my nephews, I would potentially look at it as a legacy thing to send my grandkids to college.

Tim Ulbrich: Yeah, let it ride.

Tim Baker: Yeah, let it ride. Just let it do its thing. And you know, allow that to be a legacy thing for me that I know we have clients that — the lucky few that get through pharmacy school that’s like, ‘Oh, my grandma and my grandpa sent us.’ Like I would love to be able to give that gift. I’m not thinking about that, that’s chess right now. I’m really trying to think about our kids. But if that situation would arise, I would take that one-third pool of money that we’re working towards and either repurpose it for the other child or look at the next generation.

Tim Ulbrich: Tim, you know, I often say when I’m speaking with a group about kind of Investing 101, that when it’s something like a 401k or an IRA, Step No. 1 is you actually put the dollars in. Step No. 2 is then you actually figure out what you’re going to do once those dollars are in the account. Same thing here, right? We’re talking about money that hopefully is going to grow over time, which means we’ve got to have some thought and intention to how we’re investing that money. So clearly, this is not meant to be investing advice inside of a 529, but just talk to us about how you think through that or how you work through that process with clients of, you know, it’s great we’re saving. But now we’ve got options. And how do we evaluate that and is that just a very similar process to what we’d be thinking about as we would in a 401k or in IRA or even in a brokerage account?

Tim Baker: So yeah, so this is another big piece of like now that we have — like we’ve identified what we want to save and in this case, we’re talking about the 529 so that’s kind of the organization of the account. The second piece is kind of the contribution/funding of it. But really, the last piece is kind of the allocation. And this is kind of how we break down recommendations for clients. And again, it’s going to dependent on their situation, their goals, the state they live in, their tax situation, etc. The allocation piece is just like retirement plans, 401k’s, the by-and-large most popular thing that we see is the target date fund. The target date fund says, ‘OK, if my kid is going to go to school in 2030,’ it basically has an allocation that changes over the year. So it goes from more equity-focused the further out and then basically changes and alters itself as it gets closer to that 2030 timeline and becomes more bond-focused. So the target date fund for 529s, you know, that’s basically how it works. Personally, I don’t like target date funds, not because they don’t work. They do. But more so because they’re more expensive. So you know, for our kids, we just use like a total market. So the Maryland 529 — we’re moving everything over to Ohio now — you know, there’s a total market fund that we use that we want to be super aggressive and then as Olivia gets closer to her, I’ll just do that manually. Now I do that because that’s what I do for a living. Some people, if it’s kind of out-of-sight, out-of-mind, they’re not working with an advisor, they maybe should look at a target fund. But just know that dollars are going to be a little bit higher in terms of expense ratio and things like that because they’re doing that work for you. So I think the other thing too from — the reason I don’t like target date funds in particular with regard to retirement is that a lot of people, the retirement date is a little bit more — it’s more of a moving target whereas not so much with college. Most of the time, a child graduates high school and they’re going to be off to college the next year. But that could be another reason that you don’t necessarily look at the target date fund. But yeah, when you look at most 529s — and again, the 529s are not created equal. There are some that are really good, meaning they offer good — or they offer an array of investments that are out there that are cheap. Some, there’s a lot of fees and higher expense ratios that are not necessarily great for the investor. So a lot of that is dependent on the type of plan that you’re in and where you’re at.

Tim Ulbrich: Hey, that sounds like an episode we just did recently on not all investments are created equal in terms of fees.

Tim Baker: That’s right.

Tim Ulbrich: So same thing here.

Tim Baker: That’s right. Yep.

Tim Ulbrich: Tim, one of the questions we had from the Facebook group, Ernesto asked, “Can you start these for nieces and nephews?” as one example. I guess others may think of the same thing for grandkids. We talked about the transfer of them, so you used the example if Olivia or Liam doesn’t use it that you might be able to transfer it to your nieces or perhaps in the future grandkids. What about actually starting or opening an account for a niece, nephew, grandchild, etc.?

Tim Baker: Yeah, you can absolutely do that. And I think maybe a downside is how it affects financial aid. So you know, the — it does affect financial aid when it’s owned by a parent. But the benefits that you receive, it’s going to be very slight how it affects financial aid. For a child, you definitely don’t want to have it in — the ownership in the child’s name. But for someone like an uncle or a grandparent, I don’t even think it’s on the radar. So yeah, you can absolutely do that, get your tax deduction too as you go, which is nice. In terms of like changing ownership, you know, you can do — I think you can do a rollover, so I can move money from Olivia to Liam. I think you can do that partially. You can do a partial rollover, or you can just do a straight beneficiary change where you’re saying that this account is no longer for Olivia, and now it’s for Liam. So I think there’s a wide variety of how you can kind of manipulate that, which gives you kind of maximum flexibility to kind of get the most out of the plan.

Tim Ulbrich: Another question we had was from Casey, which is one that I have heard before. So I know this comes up often. And in addition to giving a shout-out to Kelly Redy-Heffner, which was pretty awesome, Casey asked, “Main question is 529 v. IRA. Should I instead put the money in an IRA so I can have more options to invest, also more flexibility if continuing education is not desired and take out only the amount that would not give a tax penalty, i.e. after five years? Are there percentages to manage the accounts or are 529s and IRAs usually similar?” So this question I think often comes up of like, why not just use something like a Roth IRA when you think about kids’ college?

Tim Baker: Yeah, I mean, again, just like IRAs are not created equal, obviously I know that the IRAs that this client has are very efficient, you know, because we want to make sure that we’re not paying any fees that we don’t need to. I still — I think because of the — from a tax perspective, they’re still going to be very similar in terms of growth. But I think especially because if you’re in a state that gets a benefit, I think it’s worth it. So you know, what most people forget is like with a Roth IRA, if you contribute to a Roth IRA, any dollars that you put into a Roth IRA, you can get out of the Roth IRA penalty-free and really tax-free. So like your basis really for any purpose — so if I wanted to buy a sports car, I can move money out of my Roth IRA without penalty or tax as long as that is — it’s not the earning. It’s just that. And the savings really too for the education accounts, like you know, if it’s used for — when it gets penalized is the earnings. So they don’t want you to have any kind of that unfair advantage. So I still like for if there’s an option for if the education stuff is on the table, I still like that — even given this idea that I think it’s going to be broader in terms of what it can be used for — I still like the 529, even though typically they can be a little bit more expensive. But the thing that most people don’t know is that you can basically open a 529 in any state. So if you look at the state of California, which unfortunately does not offer any type of deduction or credit for California taxes, you know, you can go out and look at what are the best 529s that are out there? Two of the ones that are typically popular are Nevada, which is run by Vanguard and we know why, Vanguard is very efficient and affordable, and then typically the Utah 529, which is also another good one. So you can go and open those. I still think that the benefits you receive inside of the 529, even with a little bit more expense compared to the IRAs, is worth it.

Tim Ulbrich: Yeah, the other thing I think about, Tim, here too in addition to the state income tax benefits, if that is applicable, is I do think there’s something powerful just about the behavioral separation.

Tim Baker: Yeah.

Tim Ulbrich: Like, you know, you and I have talked about this because I asked you this question several years ago as we were just thinking about this with the boys. And I think it’s true. Like you know, maybe the math doesn’t necessarily change, but there’s the kids’ college bucket and then there’s the retirement bucket. We’re thinking about long-term savings. And I think there is something valuable for having that focus where you’re budgeting and thinking about one and you’re budgeting and thinking about the other. Not to say you couldn’t get to that same outcome if it was all in one bucket, but I think that value of separating them sometimes and having fresh attention on each of those and their individual goals can be really important.

Tim Baker: Yeah, what I think too is like, you know, people that can contribute to an IRA or a Roth IRA, they have to have earned income. So if we are trying to open one for your son Sam, even though I think they’re going to building this multimillion-dollar company with the Ulbrich Brothers LLC, he has to have earned income to be able to fund that IRA and use it in the future for education or you carve those dollars out of your own contribution that you and Jess are putting into the IRAs and then it’s kind of like bucket confusion, which again, I’m a big believer in clearly delineating what is this account for, what is that account for, because it can get lost in the shuffle. ‘What are we doing? What are we not doing?’ type of thing, so I think the benefits are similar, but I think yeah, when you go down to the behavioral and drawing clear lines of OK, what is this money for? and not get it kind of confused with your retirement assets, then I think that’s a plus as well.

Tim Ulbrich: Last question I have for you here I think is a good one because it probably will come up in this situation but perhaps also others that might be thinking about K-12 education. So question here from Katie in the YFP Facebook group is, “Cash-flowing husband’s grad school. Is it worth it to put it into a 529 prior to tuition being due? Then pay it via the 529.” So she says, “In Illinois, there’s a significant state tax deduction. We would not be using it for the investment options since we’re only saving one semester ahead.”

Tim Baker: Yeah, so yes. So in this case, you would think of the account less as an accumulation and more as a pass-through. So you know, you would basically seed the account with what you would need for that semester of tuition and then basically get the deduction for Illinois and then kind of rinse and repeat until you’ve really maxed it out for the year. So if you lived in California, as we previously stated, that doesn’t have a state deduction — I don’t think Kentucky or North Carolina do either — you would — I think Maine is the last state that doesn’t either — there would be no reason for you to do that because if you did, if you were trying to get like gains, then the gains would be so minimal because as soon as it goes in, it goes right out. So it’s kind of like also sometimes when you fund an FSA for dependent care, it’s to get that money into the account so you can get the deduction. Then you’re basically paying your daycare or whatever, it’s kind of the same idea. But it’s a great benefit because it — every little bit helps on the tax side. So you know, and I know Illinois state taxes can be somewhat brutal.

Tim Ulbrich: Great stuff, Tim. Really appreciate the deeper dive into 529s. As I mentioned at the beginning of the episode, if you haven’t yet done so, check out Episode 195 where we talked a little bit broader about kids’ college savings and we included some of that discussion on other options beyond the 529 as well as the recent posts from the YFP blog, “Seven Things to Consider Before Starting a 529 Plan.” And for those that are in the midst of saving for college in a 529, whether you’re in the beginning of that journey, whether you’re in the withdrawal phase of that journey, or perhaps, again, even saving for other family members, we’d love to talk with you to see how this fits as one part — an important part, but one part of the overall financial plan. And so if you’re interested in that conversation and evaluating the fee-only comprehensive financial planning that we do at YFP, make sure to book a free discovery call at YFPPlanning.com. As always, we appreciate you joining. And hope you have a great rest of your day.

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YFP 210: Why Net Worth Matters


Why Net Worth Matters

On this episode, sponsored by APhA, Tim Baker discusses why net worth matters, how to calculate your net worth, and why net worth, not income, is the true indicator of your financial health.

Summary

Net worth can be the most critical data point for determining your financial health. Tim Baker explains how to calculate your net worth, detailing that it can be as simple as the value of your assets minus your liabilities. Tim shares that many people do not know their net worth because few tools available to the general public can quickly aggregate that information. Years ago, you would take out a pen and paper and compare assets to liabilities. Now, you might do that same work in a spreadsheet, but the document wouldn’t be a living document like your net worth truly is. Tim also details which items to include in asset and liability columns and why certain accounts or property might remain off the balance sheet.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, good to have you back on the show.

Tim Baker: Hey, Tim. Good to be back. Glad to chat with you for a full episode here. Excited to dive into today’s topic.

Tim Ulbrich: Yeah, really excited to talk about net worth in detail, a concept, a term we’ve mentioned many times but I don’t think we have thoroughly explained, really dug into how is net worth calculated? Why is it so important to the financial plan? And why do we choose to use net worth as one factor in terms of how we price our financial planning services? And so we’re going to talk about all of that and much more on today’s episode. I want to start briefly and mention to our listeners that net worth for me individually is something that is really important when I think back to my own personal journey and financial plan. So 2012 — short story here — 2012, four years after I graduated with my PharmD, my wife Jess making a good, decent, six-figure pharmacist income, and realized at the moment after hearing about this term of net worth, realized that I had a net worth that was -$225,000. And we’re going to talk in a little bit about how to calculate that. But that was a very pivotal moment for Jess and I and our financial plan to say, wait a minute. Income looks good, we don’t feel like things are necessarily off the rails in any way, but mathematically, the net worth is not necessarily showing that we’re in good financial health and good financial position. And so that was a key moment for us to really turn the ship in terms of our financial plan and ultimately led us to paying off the rest of our balance of a pretty big amount of student loan debt and then obviously able to move on to other financial goals from there. So Tim, for you, when did you realize that net worth was not only important to you individually but also really such a primary factor that you built it into the financial planning model that in terms of how we charge clients, that one factor of that is net worth.

Tim Baker: Yeah, it’s a great question, Tim. And I think like you talk about your personal story, like same. Like I’ve gone through phases of my life, I look back even growing up and when I was in high school I was really a good saver. You know, we were kind of told that we had to pay for college and if we wanted to drive and all that kind of stuff that we were kind of on our own. So I kind of went through this period of being like a really good saver. And then when I was at West Point, my first year at the academy, you know, 9/11 happened and our view of the world drastically changed. And I think my spending kind of changed with it. I was kind of more of like a YOLO, not necessarily worried about tomorrow but really focused on today. And from a spending perspective, that didn’t really help me, my balance sheet. So I’ve definitely gone through times in my life where my net worth was not growing. And I don’t know that for a fact, but I just know that some of the debt that I was taking on and that my savings was not growing, that was the case. And I think part of the problem or part of the reason that a lot of people when they hear “net worth,” they’re like, “I don’t even know what mine is,” because there’s not really an app for that, so to speak, where it ties everything together. So we know that hey, we can kind of see what our credit card bills are, and we can kind of see what’s in our checking account and we might look at our 401k from time to time and our home value and what’s left on the mortgage, but really to tie that together, it takes a bit of work to do that. But then I kind of evolved and got into financial planning and really my mindset around money has really changed and really even has changed even more so so I’m less — you know, I kind of went from YOLO to being a financial planner and kind of believing a lot of the things that a lot of the gurus in save, save, save. But I think I’ve also softened on that a little bit in terms of like having a strong financial plan is important and making sure that the numbers are moving in the right direction, the 1s and 0s with regard to your net worth. But that ain’t the end-all, be-all, Tim. And I know we talk about this obviously a lot. It really is an exercise in trying to thread the needle between again, taking care of yourself today, so YOLO, but also making sure that we can retire comfortably and we want to plan for tomorrow. So in terms of planning, you know, when I started Script Financial way back in the day before YFP Planning and our work together, you know, I was looking at what a lot of financial planners were doing, and I came across this income and net worth model. And the more I thought about it, I’m like — and this is as I was trying to, even before I launched my firm that was really dedicated to helping pharmacists with their financial plan — I was like, I really like that because it’s kind of — it captures everything. Like everything financially typically touches the balance sheet, right? So you know, so if you’re thinking of like, what is net worth? Net worth is really, it equals your assets, the things that you own, so think checking, savings, investment accounts, the value of your home, minus your liabilities, which are the things that you owe, so student loan debt, credit cards, the mortgage left on your house, the loan to your crazy uncle Steve for whatever, like those are the things that are the subtractors. And that’s your net worth. And for a lot of pharmacists, especially starting out, that can be super negative. So we’ve had clients that have come on that their net worth is almost -$1 million, but then we also work with clients that are multimillionaires. So to me, it made sense to really focus on the net worth because we can’t control everything about the financial plan, but there are a lot of things that we can control, and I think the net worth kind of encapsulates a lot. And I think it’s the biggest, it’s the best number to focus on as you’re trying to view progress and improvement with regard to the financial plan over time.

Tim Ulbrich: So Tim, as you mentioned, simple calculation, right? Net worth is assets, what you own, minus liabilities, what you owe. Some common questions I think that I know I’ve gotten and I’ve thought myself when people actually start to put pen to paper here are, you know, what assets might I include or not include? I know there’s some thought about like depreciating assets such as a car. Is that something I should include as an asset or not? And then on the liabilities side, things like revolving credit card debt or obviously that could be ongoing with interest accruing but things that pay off each month or those types of things. So when you’re actually getting in the weeds on assets minus liabilities, is this worth really starting to get into ah, is this truly an asset or is this not an asset? This has this tax and so forth. How do you think about what actually falls into these or does not fall into these buckets?

Tim Baker: Yeah, I mean, it goes back to that whole idea of like garbage-in, garbage-out, right, Tim? So the better the data is, the more accurate and the more empowered you can potentially be to make good decisions. Something like a 401k and the value of your home, that’s a no-brainer because for most people, that’s typically the largest assets that is on the balance sheet.

Tim Ulbrich: That’s right.

Tim Baker: The home is going to be a little bit of a moving target because, you know, you look at the Zestimate, you might say, “No way that I can get that for my house,” although, right now everything is en fuego. A home — and yeah, something like that, what people will pay for is, that’s the value. So that can be a little bit of a moving target, but I think it’s worth tracking over time. The question about a car, you know, like when we talk about that, we typically don’t include that because in most cases, the value of the car depreciates as the note does in a lot of ways. Now if you buy a car cash, then maybe that’s a different story. But things like a credit card, yeah, I mean, if you have a balance that you’re carrying, I would definitely include that. If you don’t, maybe not, if that’s your behavior. But I think like — so back in the olden days, Tim, this would be like a pen and a notepad, right? So you would put all of your liabilities on the left side, big line down the center, put all your assets, add those up, and then basically what’s the difference, and that’s your net worth. Now, you know, either with Excel or something like that, you can do it a little bit — that’s still manual because you still have to look at these balances. But there are lots of tools out there that you can actually aggregate all of the different financial institutions that you’re using. So for our tool, basically when a client comes on board, once they become a client, the first thing that they do is we send them a welcome email and they get links to their client portal, and they link their checking, their savings, their credit cards, their student loans, their mortgage, basically all of their financial accounts. And for a lot of people, Tim, if you think about it, it’s the first time they’ve seen all of their stuff in one spot. So like how can we plan for things if we don’t really know what we have or we know kind of in the abstract of what we have. But then especially for couples, right?

Tim Ulbrich: That’s right.

Tim Baker: It’s the first time that they see all of their stuff in one spot. So you know, and that’s because we bank over here, we invest over here, our student loans are over here, so to have that on one platform, that is so powerful just to see like where the heck are you? Where are we at? Which is a big component of — it’s half of the equation of when I say, “It depends,” that’s one of the big components is like, where are we at, so that we can advise you on where we want to go. I think the net worth, again, and what you include in that, by and large, you want checking and savings, your cash accounts, investments, the value of your house, student loans, credit cards that you’re carrying, personal debt, mortgage, etc. Some of the other stuff might be if you have like fine art or things like that, you can include that all in there. But you know, depending on how big that is in your portfolio, I know there’s some people that their business is one of their biggest assets that they would account for on their net worth or maybe a cash value life insurance. So it’s going to depend, but I would say don’t get lost in that minutia. I think the act of just going through it and doing it and just seeing — it’s just like budgeting, right? — just seeing what works, what doesn’t work. If you don’t think that tracking x number is important, then don’t do it. So that’s my thought.

Tim Ulbrich: Yeah, no fine art in this house, Tim, with four boys. So that would get trashed for sure.

Tim Baker: Yeah.

Tim Ulbrich: You know, I was just logging on, we use, as you alluded to, we use a tool for our planning clients called eMoney. And one of the things I love about that is, you know, I just logged onto my account, front and center is net worth. Right?

Tim Baker: Yeah.

Tim Ulbrich: And you know, we talk about in the book “Seven Figure Pharmacist” that net worth is really your financial vitals check. It’s a great indicator of your financial health. And I find this helpful because there’s times — and it can be days, sometimes it’s within a month — where you’re like, man, things are going really well or the opposite, I feel like things are falling off the rails financially, right? And then you log on and this allows you to take a step back and say OK, what is the direction that things are going? And what’s happening in the asset column, what’s happening in the liability column? And I think having this front and center and tracking the progress over time and obviously through growing assets and paying down the liabilities, we want to see this number tick up over time. And of course, that’s going to be a big part of what we’re trying to do with the financial planning process. Tim, talk to us for a moment, you know, Sarah Stanley-Fallaw, who we had on, author of “The Next Millionaire Next Door” on Episode 200, in that book and I also remember discussion of this in “Rich Dad Poor Dad,” this idea of income-affluent versus balance sheet-affluent. Talk to us just a little bit at a high level, you know, what those two things are referring to and why this mindset is so important.

Tim Baker: Yeah, so I think so many — and we talk, we actually talked about this or around this, Tim, in terms of like YFP and the growth of the business where like we have these revenue goals and things like that and we really want to grow YFP and really touch as many pharmacists as we can. But that’s an ego metric, right? You know, to say, hey, we grew this many in terms of in revenue. It’s the same with income. What really matters from a business perspective is profitability. And it’s kind of the same on the individual side is — and we’ve talked about it, although we kind of do talk out of both sides of our mouth. So like one of the things that we’ve said, especially with pharmacists that are coming out that may have bought into the mantra of like, hey, don’t worry about your student loans, don’t worry about your finances, once you get that six-figure income, everything works itself out. And we know that that is not necessarily true. But the flip side of that, Tim, is one of the most valuable things that a pharmacist has with regard to their finances is their income, right? So without income, nothing moves. I think when we look at income affluence versus like balance sheet affluence is that we also know that there’s a lot of people and listeners out there, you can be one of them, I used to be one of these people, you could have friends and family that are like that, is that if you earn $100,000 and that’s the money that comes in the door, $100,000 goes out or $120,000 goes out because it’s kind of an exercise in keeping up with the Joneses. And the whole idea behind “The Next Millionaire Next Door,” which was following up on “The Millionaire Next Door,” is the whole idea is that most millionaires that you come across are not flashing it around. Right? So they’re not driving the $80,000 sports car, they’re not living in certain neighborhoods. So the idea is that this is more about what you keep, right? So to grow wealth over time is to kind of steer clear of some of those more ego things and really direct resources to what matters most. So like I don’t have a problem with a client spending money on a luxury sports car if that lines up with their goals and what their view of a wealthy life is. But we also know that money is a finite thing, so we can’t necessarily have our cake and eat it too in every part of our financial plan. So there is give-and-take. So what we try to do is really shift the idea behind, hey, this is the amount of money that we make to really focus on the net worth and show how that really drives progress and drives the conversation of what is a wealthy life. Because there’s a lot of people that make seven figures worth of income and have nothing to show for it. They’re not necessarily achieving their goals of travel and being able to take care of loved ones and giving and being able to be on track at a certain retirement age. So that is really what financial planning is designed to do is to align this great resource that pharmacists have and direct that towards the goals that they have to make sure that we’re maximizing or optimizing what a wealthy life is for that particular individual.

Tim Ulbrich: Yeah. And Tim, I want to talk about that further because I think that concept of living a wealthy life, you know, I suspect many pharmacists like myself might be of the mindset of, hey, I can squirrel money away and I can save it for the future, but I think there’s balance when it comes to the financial plan. And I think this is one area, to your credit of the model that we’ve built at YFP, that our planning team does an awesome job, and that’s ensuring that one’s financial plan is considering both the now and the future. As you say, it can’t just be about the 1s and the 0s in your bank account. So we’ve got to find this balance between taking care of your future self but also living a rich life today. And that really comes down to quantitative and qualitative factors of the financial plan. And I think financial planners are known for focusing on the numbers, right? And we’ve really built a process I think that is so important that we’re also covering some of the things that aren’t numbers-based. And certainly they could be number-based if we’re going to determine how we’re going to spend and allocate money, but in terms of goals and things we want to achieve, it’s not about, again, the 1s and 0s in the bank account. So tell us from the planning perspective, what does this actually look like? You know, I’m a new client, I’m meeting with you, like how do I actually begin to tell that story and what are you doing to extract this information so that we can then weave that into the numeric part of the financial plan?

Tim Baker: If we start with the balance sheet, Tim, right, so the net worth, we’ve got to know where we’re at, right? That’s the vital check that we’re really looking for. So that’s really our first data point. The second part of that is now that we know where we’re at, where the heck are we going? So that is where we actually slow down and ask clients some introspective questions about like what is, what do you want out of this life? What is a wealthy life for you? Like if today was your last day, what would be things that you haven’t yet done that you want to do? Or if you had 5-10 years left or if money were no object, what would be the thing that — how would you build your day-to-day schedule? So like really kind of going through a series of questions and extracting information so it really paints a picture of now that we know where we’re at, at least financially, where do we want to go? And those two things, Tim, is what changes the whole answer of like, ‘Hey, well, should I do this or that?’ Before I know those things, it’s like, ‘Well, it depends.’ Now that we know these things, where are we at and where are we wanting to go, we can actually advise clients on their financial plan. So how we do that really is to look at all the different pieces. So like once we figure out that picture, our job, which ultimately, our job as a planning team, which ultimately supports our mission at YFP which is to empower a community of pharmacists to achieve financial freedom, our mission in the planning team is a little bit different. It’s a little bit more granular. Our job with clients is to help clients grow and protect income, which is the lifeblood of the financial plan — without that, nothing moves — grow and protect your net worth, which is essentially what sticks, while keeping your goals in mind. That’s our jam, right? So that’s how we feel that we can best help pharmacists achieve financial freedom. So we do that through all the different pieces of the financial plan, which is fundamentals, which might include savings plan and debt management, cash flow and budgeting, insurance, investment, the tax piece, the estate plan, and then all of these other supplemental pieces like credit, salary negotiation, the home purchase and real estate investing, education planning. It might be ‘I’m an entrepreneur, I want to start a business.’ All of that stuff basically are the — those are the processes that get us to really refining out the financial plan and then the quantitative, and then we kind of observe the quantitative and qualitative results and then adjust from there. So the quantitative results, the one that we focus on most, is the net worth. So the idea is that when you become a client, we’re going to say, “Hey, your net worth, you’re starting at -$50,000. And our hope is in a short amount of time, we go from the negative to the little bit less negative to the positive to that multi, that seven-figure pharmacist status.” Or if you’re already positive, it’s to kind of keep that rolling and make sure that we are efficiently growing the net worth. I think the other thing, which I think often gets lost with other financial planners, is the qualitative. It is really that, the things that are outside of the 1s and 0s, which for pharmacists, sometimes that could be tough, Tim, because you guys are scientists, you want to say, “OK, what’s — if I pay this amount in fees, this is what I want to get back.” I completely get it. But to me, it’s the qualitative stuff that really is typically the things that when I get off of a call or I’m here and Robert and Kelly talk about their interactions with clients, that I want to run through a wall because I’m just so jacked up about like what we’re doing and how we’re transforming clients. Like that’s the special stuff. And I really, what I really like to say is that we want to build out a life plan that is supported by the financial plan, not the other way around. Right?

Tim Ulbrich: Yes.

Tim Baker: That’s our jam.

Tim Ulbrich: So important, the life plan that is supported by the financial plan. I just think that’s a completely different way of thinking. You know, I’m going to overgeneralize the industry for a moment, but I think that, again, it’s easy to focus on the numbers, and we’ve talked extensively on the show about why often that may be the case, you know, all the incentives in terms of why the dollars. So if you’re sitting down with a client, you know, and this is one of I think the beauties of a fee-only model where you’ve got their best interests in mind, if something is more experience-based, Tim, sometimes that might be let’s spend some money to make this happen because we said it’s important, and we’ve accounted for it in the rest of the goals and what we’re trying to do. Now, again, it’s a balance. We need to take care of our future self while taking care of ourself today and living a rich life. But you know, that traditional model would be take that money and stuff it into an IRA because that might be a greater percentage of fees — you know, we talked about fees recently on the show. So I think that is so important when folks are looking for financial planning, whether that’s with us or somewhere else, is is that life plan being connected and have a strong connection thread with the financial plan? And I’ll say from personal experience, Tim, for Jess and I working with you, like it just feels like life goes by at lightning speed. And part of that may be phase of life, you know, young family, whatever. But just to slow down and not only think about these goals but then to have somebody actually put these back up in front of you every so often and say, “Hey, Tim and Jess, you guys said this was important. Like what are we doing about it?”

Tim Baker: Yeah.

Tim Ulbrich: You know, “What are we doing about it?” And I need that because I am the person that I’ll try to squirrel away $4 instead of $3 million. And I know, like I know in my head, that when it’s all said and done, I’m not going to care if that was $2.5 or $3 or $3.5 and $4. Like there’s a point where enough is enough, but it’s the experiences and the other things that I think are really going to matter.

Tim Baker: Yeah. You are going to look back and be like, ‘Ah, I wish I would have done this with Sam and Everett and Levi. Like I wouldn’t — and Ben and done all these things.’ And we’ve talked about this, and I’ll cite a personal story. You know, my wife and I, we’ve been saving money really to kind of look at the next level from a real estate perspective, and we kind of just took a pause and we had this extensive conversation of like, do we really want to do this? You know, Olivia is our 6-year-old, we have Liam who’s turning 2. And we really have a window of time, right? We have a window of time where we have them as a captive audience, right? Maybe 10 years before Olivia is like, ‘Dad, get out of my face.’

Tim Ulbrich: Yeah, you’re going to be still cool for awhile. Yeah.

Tim Baker: Yeah, like so I look at that like my dad — actually, my dad jokes do not land with her. She’s like, ‘Daddy.’ So I’m already losing that a little bit. But in terms of being able to spend time and have those experiences, that’s a small window. It is a very small window. And the discussion is really around should we put this into an investment, which from a number perspective is going to be probably the best thing that we can do, right? There’s no guarantees, right, with real estate or any investment. But to put this chunk of money there or do we do what my vision was in my life plan — so I’ve recently completed the Registered Life Planning designation, and when I was life planning, I still remember it like it was yesterday. You create this vision, and you create this energy behind this vision sometime in the near future. And for me, it was buying an RV and having the freedom in the summers and on the weekends or long weekends and maybe weeks at a time to go and travel and adventure and see national parks and things like that. But part of me, Tim, is like — the financial planner in me is man, if we purchase an RV, that’s a use asset that’s depreciating over time, I can’t rent that — I guess I can kind of rent it out. And it’s kind of nonsense, right? It’s kind of like a no-brainer. And it’s a struggle, right, even for me where I’m pushing, we’re pushing clients to really achieve that wealthy life. This is the thing when I talk about it, I get excited and passionate about. And for some people, it’s starting a family, for some people, it’s playing in a band. For some people, it’s horseback riding. These are examples that we’ve had with clients that, you know, they were like, when they talk about it, they just light up. And I’m like, this has to be in your financial plan. Like when you talk about becoming a mom or you talk about before you were in pharmacy school, these were the things that you were passionate about. I know we have, and I know we have some credit card debt, and I know we want to get the investment game rolling, but we’ve got to stop and smell the roses along the way and make sure that we’re taking care of ourselves today. So it’s just a passion of mine, and these are the things, like when you kind of look at a situation that clients think — and we know this with millennials in particular but we’re seeing it with like sandwich generation and Gen X and even Baby Boomers in terms of how they can retire, with millennials, it’s everything is going to the right. Like marriage, home purchase, kids, and I want to challenge that. I want to — if you work with a professional, I want to challenge that. And I think if we’re doing things — and sometimes, we as a team, we don’t necessarily think about all the things that we do technically, the things that most people expect about an efficient debt payoff process, an efficient investment process, efficient tax plan, like we don’t really think about those as much as we should, and we should pat ourselves on the back in terms of what we do with clients. But that to me is like table stakes. It’s the next level of things to then challenge the client of like, ‘Well, maybe that timeline of 5 years is not accurate. Maybe we can do a little bit more.’ And I think if you then couple that with an efficient budget and spending plan, I mean, really the sky’s the limit. And that’s what I really get jacked up about. You know, I get jacked up about the pharmacist that says, “Hey, here’s my 4-month-year-old, this is your fault, Tim,” in more of a conversation like, we thought that we would have to wait so much longer, not because we paid off our loans or we did this or that, it’s because we have confidence in our plan. And that to me is what continues to drive me and jack me up and really push forward, and that’s why we get up in the morning to really push forward that mission, again, to empower pharmacists to achieve financial freedom. It’s a great job, it’s a great position to be in to be able to influence that in such a way.

Tim Ulbrich: Tim Baker, great stuff today. Loved the discussion on the importance of net worth and setting both quantitative and qualitative financial goals. And throughout the episode, several times we mentioned and referred to specific parts of our planning process at YFP Planning. So for folks that are listening to today’s episode and are interested in learning more about our one-on-one comprehensive financial planning services, you can head on over to YFPPlanning.com, you can schedule and book a free discovery call and determine whether or not our services may be a good fit for you. As always, we appreciate you joining us for this week’s episode of the Your Financial Pharmacist podcast. Please do us a favor and leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. That helps other pharmacy professionals find out and learn about this show. Thanks again for listening, and have a great rest of your week.

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