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Tag: debt free theme

YFP 094: Debt Free Theme Hour

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Debt Free Theme Hour

On this debt free theme hour, sponsored by Airbnb, Tim Ulbrich welcomes Matt and Amy Farley who paid off $207,000 in just under 4 years. They talk about what motivated their journey, how they were able to work together and what’s next now that they are debt free.

About Today’s Guests

Matt and Amy have been married since 2011. Matt graduated from the University of Iowa College of Pharmacy in 2015 and has worked in the informatics space since then. Amy is a high school choir director at Washington High School in Cedar Rapids, IA. They have two kids and a dog named Millie.

Summary

Matt and Amy Farley share their journey of paying off $207,000 of student loans in 4 years. Matt accrued $60,000 of student loan debt from his bachelor degree and the rest in pharmacy school. When he graduated, his debt totaled $187,000. Fortunately, his wife Amy didn’t accrue any debt for her undergraduate studies.

Amy grew up in a frugal household where her parents didn’t make a lot of money but were able to provide them with a great upbringing. Amy says that her parents trained her and her siblings to budget and helped them find scholarships for their college education. With scholarships, Amy was able to complete her bachelor’s degree with no debt. She later completed her master’s degree which was cash flowed through their budget while she continued to work.

While Matt was in college, his view on money shifted. After reading Total Money Makeover by Dave Ramsey, he began to view possessions and money differently. Instead of seeing success marked by the purchase of a new car or large house, he saw monthly payments and debt. When Matt graduated, he saw a high debt number and realized that his take home pay wasn’t as much as he expected, even with a 6 figure pharmacist income. His motivation behind paying off his student loans quickly was that he wanted to be free of debt and have options in the future for other experiences. Amy’s motivation came from faith and wanting to be free from the control of money so that they could give back to others and their children, as well as have money for future goals and experiences.

Initially, Amy and Matt planned to pay off their student loan debt within 2 years. They realized that this trajectory wasn’t sustainable and “slowed” down how aggressive their payments were so that they could start a family and buy a house. The couple shares that their secret of success was found in their budget. They used the budgeting tool YNAB and created a zero-based budget so that every penny went somewhere. They talked regularly about their budget and made sure they were on the same page regarding large purchases and big financial decisions. They also used a debt snowball calculator in Excel to gain momentum to reach $10,000 milestones. Additionally, they were both paid biweekly which allowed them to budget with 24 yearly paychecks and use the additional 2 paychecks for larger payments or other goals.

Matt’s advice to those in pharmacy school is to minimize your lifestyle and not live off of your loans or take trips using them. He also suggests that residency, although can be very helpful for networking and specialized training, may not be necessary for everyone. If residency isn’t pursued, your higher income could be used to pay off your debt or work toward your financial goals.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. And we have a good one for you this week. I have Matt and Amy Farley with me, who paid off over $207,000 in just under four years. And they hit submit on that last payment of debt just a couple days ago as we’re sitting here doing this recording today. They’ve got a great story to share about their journey, what worked, how they have worked together effectively as a couple and now what is the future ahead that they’ve gone through this journey. You might remember, we asked you, the YFP community, what you wanted to hear more of on the podcast, and Debt Free Theme Hours was near top of that list. So we have another great one for you today. We’re going to hopefully continue to feature more of these into the future. So Matt and Amy, welcome to the show. And thank you so much for coming on.

Matt Farley: Hey, Tim. How’s it going?

Amy Farley: Thanks for having us. Hello.

Tim Ulbrich: Yes, excited. You have an incredible journey. We just talked briefly before the show, and I know Matt, you and I were messaging back and forth over the past couple months. But I am excited for our listeners to get a sneak peek into the journey that you went through. And it’s really incredible if you think about what you did. $207,000 of student loan debt in under a four-year period and just hitting submit on that last payment just two days ago. So first of all, congratulations on doing that. That’s an incredible accomplishment. And Matt, I’m guessing as you now log out of the Navient platform and you see that big $0, that has to be a great feeling, right?

Matt Farley: Yeah. Honestly, it doesn’t even feel real. You know? Like I’m so used to there being thousands and thousands of dollars on there that I just kind of started accepting that. But now, I log in and it says $0. It feels pretty good.

Tim Ulbrich: Yeah, it’s amazing when you log onto the platform and you see hundreds of thousands of dollars and, you know, we’ve talked before, it feels like Monopoly money. It doesn’t feel real, and sometimes, you send in those big payments, you don’t see the needle move very much. And I felt the same way when my wife and I hit this journey and we finished paying off our debt. Same thing, Navient platform, I was sitting at my kitchen table. I’ll never forget the moment, but it was like the fireworks, I needed them to come, and they never came. So it took awhile to really set in the reality of that. But you guys have a bright, bright future ahead. So Matt, why don’t we start with your background in terms of undergrad and then into pharmacy school? Tell us a little bit about your journey and some of the debt that you accrued along the way in terms of both undergrad and pharmacy school and then obviously, that collectively being the large part of the debt that you were working through paying off.

Matt Farley: Yeah, yeah, absolutely. So I went to undergrad. I did four years at the University of Northern Iowa and accumulated about $60,000 of debt. Wasn’t super wise with how I paid for school. I kind of lived on loans and paid for tuition all at the same time. Then I went to pharmacy school at the University of Iowa, accumulated the rest of the debt. Actually kind of going through pharmacy school got some pretty good scholarships that paid for a little less than half of pharmacy school. But you know, it just seemed like it still accumulated to when we graduated being at about $187,000. And so luckily and fortunately, my wife Amy didn’t have any debt from undergrad. So that was kind of the number we were looking at when I graduated pharmacy school. And so you know, after pharmacy school, I took a job as an IT pharmacist. My background’s in IT, in informatics, and I’ve been a part of a couple startup companies along the way and in pharmacy school and so was able to land that job out of school and just felt really motivated at that point to knock out this debt. And so that’s the number we started with, and yeah. Now I’m working as an informatics pharmacist for a pharmaceutical company.

Tim Ulbrich: Thank you for sharing. And Amy, talk us a little bit through your background. And as we talked before the show, my understanding is you grew up in a little bit more of a frugal environment and you kind of strapped your way through this with scholarships and ultimately, cash flowing a Master’s degree. And so I guess we can blame Matt for all this debt, right?

Amy Farley: Oh, absolutely.

Matt Farley: Unfortunately, it’s my fault.

Amy Farley: I reminded him of that once in awhile. But no. Yeah, so I grew up in a really frugal house where my parents didn’t make much, but they worked very, very hard to use every penny and give us a great upbringing. And then they trained me and my siblings along the way too of budgeting techniques and worked really hard alongside us to find a lot of scholarships going into college, so yeah. I went and got my undergrad at the University of Northern Iowa as well. But I was able to pay for all of that using scholarships that my parents kind of helped me figure out and learn how to do. And then I started working as a high school choir director and decided that I wanted to get my Master’s, so I did that online while working and while we were starting to pay off all of this debt. And just like you said, we cash flowed my Master’s.

Tim Ulbrich: That’s awesome. And so the work you’re doing now is in music education, and you had mentioned directing the high school choir, correct?

Amy Farley: Yeah, yep. So I direct show choirs and your regular choir that you think of and then a jazz choir as well. It’s a lot of fun.

Tim Ulbrich: Awesome. Yeah. So Matt, how many thank you cards have you written to Amy’s parents for helping out with all those scholarships?

Matt Farley: Yeah, I mean, definitely. We talk about it. I haven’t written any cards, but we’ve definitely talked about it.

Tim Ulbrich: That’s fun, that’s fun. So one of the questions I want to ask — and I’d love to hear from both of you on this — is we talk a lot on the show about, you know, the why, the motivations, the what’s behind the hustle and the grit. And for everybody, that often is different. But when I hear your story, $207,000 of debt that you paid off in less than four years, to me, that really says there’s a significant motivation and why around getting this debt off of your shoulders, for whatever reason. So Matt, let’s start with you. Talk me through some of the motivations of why you wanted to have this debt paid off — and let me even add on to that, I guess. Was it always that way? Or can you recall a moment where that transition had happened?

Matt Farley: Yeah, you know, for me, my view of money throughout this process has shifted a lot. I discovered a book, “The Total Money Makeover,” when I was in my second year of pharmacy school that shifted a lot of how I viewed money and possessions in general, right? You know? I think I used to view when people had a nice car, I thought that they were successful. Now, I almost view that as a negative. You know, not that it’s bad to have a nice car, but I always kind of wonder if that car has a payment attached to it or if that ginormous house has a payment attached to it. And so for me, that was when I started this process of viewing money differently and viewing my student loans differently, right? I kind of just thought when I was in pharmacy school that yes, I’m taking out money for school, but I’ll have so much income that it won’t really matter, right? That my lifestyle will be able to be whatever I want it to be, and I won’t have to think about money very much because we’ll have that six-figure income that a pharmacist gets. And so, you know, we graduated and just kind of recognizing that that was a huge number and that when you look at the take-home pay that you actually get as a pharmacist, there really isn’t as much as you might think, right? And so kind of looking towards the future and looking down at like all these different loans you could potentially have and all of the interest that goes along with them. For me, the motivation was being free of that. You know? When you’re talking about loans at 6% or 7% on this debt and then if you have a car payment, you add in 3-5% and then your mortgage is 3-5% or whatever, right? You start doing the math on this over 10-40 years on some of these loans. And it really eats away at your financial success. And so for me, a lot of my motivation was just looking towards the future and wanting to have options for the things that we wanted to do. You know? I love working, but it would be nice if I didn’t have to, right? Or it would be nice if we could just take three months off and think about things or you know, like I love being a pharmacist, but maybe someday I want to start my own company or something. It just seems like the options are available to you if you become financially free from these loans, right?

Tim Ulbrich: Yeah, and I love that, Matt, because we talked before the show a little bit that having options, it’s very difficult to put a number to how valuable that is. So you know, I’ve talked to pharmacists before that maybe they want to have an option like you mentioned in pursuing something entrepreneurial. Or they love their work, but they want to have the choice of doing it or how much. Or maybe they’re burned out, and they’re ready to seek something new. Or maybe they have an ill child and want to spend some more time at home. Whatever would be the case, the point is you have options, right? And that is incredibly freeing, and it’s very difficult in a financial plan to put a number on that. And I’m so glad that you had mentioned that. The other thing I really appreciate your comment there is just the concept of the future. And I think, you know, you had mentioned, if you look at really a pharmacist’s take-home pay after taxes and all the things that come out of your paycheck, that dollar amount isn’t necessarily as big as you may think it is. And when you look at the goals or things you need to achieve 20, 30, 40 years from now, you know, that’s not necessarily a whole lot of time to be able to get those things done, and there’s a lot of diligence that needs to be had there. So Amy, same question for you. Tell me a little bit about some of the motivations and why for you guys to be so aggressive because the reality is — and you know this well — is that as you’re dumping all this money at student loans, this means you’re not doing necessarily some other things and there is some sacrifice there. So what was the motivation for you to be able to pay this off so quickly?

Amy Farley: Yeah. I think one of the other things that was a motivation for both of us was our faith and just wanting to be free from the control of money. I think that we’re called to do that in our faith, and so just wanting to be free from that control and the love of money in that way so that we can give to others freely, that we can use our money to bless other people really easily. And then I think another side that Matt didn’t really touch on either is being able to give back to our kids or our future generations, you know, wanting to pay for their college or give them experiences that maybe we weren’t able to have growing up, those types of things too. Just so that we have kind of a freedom financially to live the way that we would like to.

Tim Ulbrich: Love that. Love that. Matt, you had mentioned that when you had initially started, you guys were thinking all in on two years, which I look at those numbers, and I’m like, that’s crazy talk. But and then you had to slow that down, “slow that down,” a little bit, and you did it in less than four. So tell us about that decision to pivot, slow down, be a little bit more flexible, because I think that’s important for our listeners to hear that is that sometimes, the plan changes, right? That’s just the reality. So talk us through that.

Matt Farley: Yeah, you know, kind of the trajectory we were on wasn’t super sustainable. I think it’s a good thing to be intense, but I also think that if you view getting to the point where you are debt-free is like the end-all, be-all of like accomplishment in your life, you’re kind of going to be let down, right? Like you’re going to get to $0 and be like, OK, well, that was probably not worth killing myself. It was really important for us to start a family when we did. And we had been living in an apartment, and we wanted to move to a house and kind of get closer to work. And so we made that decision about a year into that aggressive payoff that we’re going to just slow this down, we’re going to try to build up some down payment for a house, and then have kids, which obviously is expensive. We didn’t go crazy. We bought a townhouse, and we definitely did things that were below our means so that we could continue to be aggressive. But I guess it was just a heart change about viewing the debt. I almost was kind of idolizing it, like this is the reason for life. You know?

Tim Ulbrich: Yeah.

Matt Farley: And while I think it’s really important, I definitely think while you’re paying off debt, it’s important to make it a sustainable process. I almost compare it to like losing weight, right? Like if you go on a crash diet, it’s not something that’s going to be sustainable. But if you learn the fundamentals of eating right, exercising and having like a good lifestyle, that’s actually something that will last a lifetime. So I guess that’s sort of the change in mindset for us a little bit.

Tim Ulbrich: So as I look at that number, $207,000 in just under four years, you know, my first thought is, I want to know exactly how Matt and Amy did this. So as you look back on that journey, give us some insight for our listeners that maybe are struggling with a similar debt load and have the desire to become debt-free but are struggling with trying to figure out, how do I actually do this? What does it look like? So Amy, what was the secret of success for you guys in terms of getting this done? Is it the budgeting? Working together? You know, how did you practically get to the point where you could free up enough money each and every month to make extra payments toward your student loans?

Amy Farley: Yeah. Well, I would say the budget is No. 1. And we use a software called YNAB, which is You Need A Budget.

Tim Ulbrich: Yeah.

Amy Farley: YNAB. And one of the things in there is that every penny goes somewhere. So we got to the point where we were living on last month’s income, which I think was huge in all of this. So we knew going into each month, here is every penny we have to spend this month. And Matt’s our budgeting guy, so he would make sure that every penny went somewhere, and we really worked through like what is the minimum — or like what is actually what we need for groceries? What is what we need for all of these things? And then every penny that we didn’t need to use went immediately to debt. So I think that that’s a big thing is knowing where your money is going and having a plan for it so that you don’t just randomly spend and all of a sudden, you can’t make that loan commit, you know?

Tim Ulbrich: Absolutely. So it sounds like you guys used a zero-based budgeting process, I’m guessing if you’re using YNAB. My wife and I use that tool as well. It’s fantastic. We’ll link to it in the show notes, and I think it’s like $7 a month, right? Something like that if I remember right? $80 a year? Something not too crazy. But it is built off of — you’ve heard us talk before on this podcast about a zero-based budget, which essentially to Amy’s point, is accounting for every single — literally every single penny prior to earning that rather than tracking those expenses at the end of the month. And so we teach this process, we have some blog posts, we’ve talked about on the podcast. If our listeners go to YourFinancialPharmacist.com/budget, they can download an Excel template that will walk them through that process, and then they can upload it to a tool like YNAB or EveryDollar envelopes, Mint, whatever tool that they would want to use. So Matt, you are, it sounds like, the budgeting person. So how does this work for the two of you? Are you taking the lead and then you’re bringing Amy in as kind of the final decision or to make sure there are certain goals or things you’re trying to achieve that you’re on the same page? What does this look like week-by-week, month-by-month?

Matt Farley: Yeah, so we talk pretty regularly about the budget. Generally, I’ll put it together and then if there’s anything that’s a major change, we’ll talk about it together. We use the functionality in YNAB where when you’re making a purchase, you can log what you’re purchasing and actually check against how much money you have, right? So if I’m buying groceries, I know I have $200 left in that category. So that’s sort of how we communicate just through the app, in a way, because we can just know how much is there. And then when we’d have big purchases to make or we would have big decisions about how much to pay out towards loans, typically I would just consult with Amy before doing that, you know? It seems like we’re at this point with our budget where it’s standard about what’s going to happen. And then anything outside of that, we have a discussion about. Like I feel like I’m blessed that Amy is very just frugal in general, so if I just put her on autopilot, she’s not going to, you know, rack up a credit card or something like that, which is great.

Tim Ulbrich: So Matt, besides the budget, anything else you would add in terms of the secrets of both you and Amy being able to pay off so much debt in such a short period of time?

Matt Farley: Yeah, there’s a couple, actually. You know, one that doesn’t work for everyone, but we happened to be paid biweekly. And so when you get paid biweekly, you can live off two paychecks a month, and then there’s actually 26 paychecks a year that get paid out, so for both of us, we had two extra paychecks each year. So we basically live on 24 paychecks but get paid 26 paychecks. And that was actually really helpful for us from the perspective of like little bonuses and big chunks of money that came off the debt. So I think anytime you can do that, that’s really helpful. And then we use a debt snowball calculator in Excel to really visualize the dates that certain payments were going to be made. Yeah. This probably isn’t totally popular with everyone, but we didn’t consolidate our debt. We had lots of little debts, and that was almost helpful for us to get motivated, you know. It was like, we paid off another $8,000 debt. And then we paid off a $10,000 one. You could almost see that progress. Now, if someone’s more mathematically motivated, that doesn’t make sense sometimes, right? But that was helpful for us.

Tim Ulbrich: Sure. Well, and I think you’re highlighting — just to make a comment there — I think you’re highlighting two very important things that are behavioral aspects that allowed you to be successful. So for somebody, and maybe it doesn’t matter for somebody else, but if you’re paying off debt in a very short period of time, and you’re able to see that progress because you have multiple loan debts that you’re paying off and rolling to the next one, rolling to the next one, and if you were to consolidate or to refinance into one big payment, then that would have maybe lost some motivation along the way, especially when you think about a short time period and interest that’s accruing, maybe that behavior was more important, you know, than the math along the way. The other thing I love that you said, Matt, is the concept of the biweekly pay and allowing you to have some chunks of money that you could strategically put towards goals or things that you’re working on or debt payments, whatever it be, because I think — and I’m guessing it sounds like for you and Amy — those moments when you had those bigger payments or those bonus type of payments, those are the moments where you feel like you’re really getting some momentum that keeps you motivated, that keeps you going and going and going. And I see this with the model you’re describing, I see this with tax refunds or things that people use, but those wins along the way really help keep the motivation as you’re in it for the long haul, even here just under four years, but obviously, it’s a grind while you’re going through that.

Matt Farley: Definitely. It’s like for us, it was really motivating every time we went to the next $10,000 increment, right? So OK, we’re in the $50s now, we’re in the $40s now, we’re in the $30s now.

Tim Ulbrich: Yeah.

Matt Farley: So the chunks of money helped with that when you can jump those increments.

Tim Ulbrich: Amy, one of the questions I have for you — and Matt, certainly feel free to build off of it — but as everybody knows who’s listening, you know, finances and relationships are sometimes like oil and water. Right? And it can be difficult to be on the same page. Obviously, as we zoom out, you two have been very successful. My question is, you know, has it always been rainbows and cupcakes? I mean, has there been difficulties along the way? Or if not, what really have been the strategies that have allowed the two of you to work together and to be on the same page towards this common goal?

Amy Farley: Yeah, I think we have worked pretty well together and started off working really hard to be on the same page from the get-go, which has helped a lot. But yeah, it hasn’t been roses the entire time. I think there have been a lot of times when we’ve disagreed where our money should go. I know that like when we were buying a house, I really, really, really wanted that single-family home, and Matt was like, “Nope. We can’t spend that much money. We can’t.” You know? So we had arguments and disagreements in that way where we’d want to spend the money in different ways, and I think just being willing to sit down and really talk through it and, you know, make compromises where it’s necessary but also remind each other frequently that like someday, we will be able to have that single-family home if we want it. You know?

Tim Ulbrich: Sure.

Amy Farley: But for now, we’re going to make this sacrifice. And so yeah, it’s been good to just work together and be involved. For both of us to be involved in it so that when those hard times come up where we don’t agree that we can look back and be like, OK, here’s where the progress is, here’s where we’re going, you know, at this point in life, we’ll be able to do that. So I think it’s hard in our society where there’s a lot of comparison to other people. You know, you get on Instagram, and you see, oh, my friend just went to Cabo. Oh, crap. You know, like I would like to go. But just having to be like, that’s not for us right now, and that does not fulfill life.

Tim Ulbrich: Sure.

Amy Farley: And having to remind each other of those things frequently.

Tim Ulbrich: And the reality — we’ll talk more about this here in a few minutes about what’s kind of ahead — the reality is if you guys want to go to Cabo in the future, you’re certainly going to have the option, you know, to do that among with many other things that you want to do because of the position you put yourself in. What I love about what you said there, Amy, is the reality of, you know, two people being involved in the process. And even if one person’s taking the lead, I think if two people can get on the same page with the vision, that for you all the debt-free was the vision that you were really working towards, and obviously, that was going to be able to allow you to achieve the other things that were most important to you, the why types of factors. If you can get on the same page with that shared vision, the month-to-month budgeting I won’t say is easy, but it becomes easier because that vision is in the background. Right? You shared the direction, and now it’s a matter of month-by-month, what do we need to do to get there? So Matt, one of the questions I wanted to ask for you — and really, on behalf of the listeners because one of the things I often get asked is, ‘Well, what about retirement during this aggressive debt repayment?’ And obviously, you balanced other things, so you purchased a townhome, you cash flowed a Master’s, you cash flowed a car, but what was your retirement strategy? And were you contributing? And if not, like how did you reconcile the delay of doing that?

Matt Farley: For sure. Yeah. So we did contribute enough for a lot of those four years to get the match at our employers. But towards the last year, kind of bumped that up to more like 10% of my take-home — or sorry, of my pay. And I did struggle with this a little bit because you’ll hear different strategies, right, when you’re getting out of debt. You know, should you? Should you be investing? Or should you not? For me, I wanted a little bit of a mixed bag approach, knowing that — I guess what I would say is I’d rather cut my lifestyle than I would the potential compounding you get from investing, right? So I wanted a little bit going in there to just get things started. But I wasn’t as aggressive as I would have liked to be, obviously, if I didn’t have any debt. I guess I wouldn’t ever yell at someone for like not investing. It’s really hard for me to mathematically not take a match from an employer, though, just to give that up is hard.

Tim Ulbrich: Yep, I share that with you. And we kind of preach that here as well of, you know, the free money, and it’s hard to dispute that. And I think the other thing that it does is it keeps it top-of-mind. It doesn’t distract you from the goal, but it keeps it top-of-mind, and you feel like you’re making some momentum, even if it’s not the 15-20% that you want to get to. You’re starting to move that snowball, right? And it’s going to eventually get downhill and pick up some speed. So Matt, this next question I have for you since you were the one that had all the baggage with the student loans, so as you look back now on this journey, 8+ years of school, accruing undergrad debt and obviously that compounded in pharmacy school, you know, I’m really asking this question on behalf of the students that may be listening. If you could start all over again, you know, what would you do differently? And what would you have done during school to help minimize this position?

Matt Farley: I mean, honestly, if I was coming out of high school right now — I know that’s not a lot of the pharmacy students listening — I would be so much more aggressive towards scholarships and trying to be involved in those types of activities. In pharmacy school, it’s hard, you know? There aren’t as many scholarships to go around. And so I think the main thing you can do is minimize your lifestyle. We did have some scholarships, and I was able to get some of those, but you know, I think mostly, I just wouldn’t live off loans, right? Like we went to Europe off loans, which was obviously a really stupid decision. I think it’s easy to tell yourself when you’re in the situation, pharmacy school is stressful, right? That you kind of deserve to have fun activities, you deserve maybe to go somewhere for spring break or you deserve to make a really awesome trip in the summer. And I guess I would encourage people to not do that and recognize that your lifespan is likely to be really long, and this is just a season of life where things are hard. And so if you can minimize that lifestyle as much as possible, that helps a lot. And then just get creative, you know? I’m sure there are more scholarships out there than I was aware of to apply for, and so I guess that would be my advice. And then you know, I guess the last part of that is if you’re considering residency, I think residency is a great thing from the perspective of experience and kind of widening your network. But I do think it’s over glanced over on the opportunity loss that it costs to actually do a residency. You know? I was considering doing a two-year residency in administration when I came out of school. There’s no way I would be debt-free if I would have done that. Now, that’s maybe not the worst thing if maybe that’s exactly what you want to do for your career, but I guess kind of what I tell pharmacy students a lot is employers are looking for you to solve their problems not necessarily be qualified for a job. And so if you can work hard and you can understand how things work in the field you want to get into, it’s possible to do things without a residency. Now, I’m not discouraging people from doing that, right? But I do think it needs to be considered when you’re actually looking at your finances.

Tim Ulbrich: Amen to that. And I hope our listeners heard that last part there. I firmly stand with you that that first door is opening is such a critical one to open, and sometimes, it requires a training to get there. But once that door opens, if you have a good work ethic, and you’re somebody that can identify problems and propose solutions, you’re going to be very successful and other doors will open into the future. So I think that’s great wisdom there. So Amy, here you are, you and Matt are a fresh 48 hours off of being completely debt-free from your student loans. And you know, obviously, you guys have a good household income. My question is, what’s next? I mean, what’s ahead? What from here becomes a priority of you were making massive student loan payments, and now you’ve got this monthly income that’s freed up. What’s the game plan going forward?

Amy Farley: You know, I think that’s a great question. We haven’t talked a ton, but we have kind of looked at the things that we weren’t able to put money into that we would like to, kind of life goals, putting a little bit more into retirement, paying off — being able to pay for our kids’ college, things like that, and starting to save up for those now. So we’ve already done a little bit of looking at how we want to shift around this money into new places. But it also means that we have a little bit more freedom to kind of enjoy life. So hopefully, maybe a trip to Cabo or you know? I think that there are some of those things that we will definitely take advantage of now. It also just frees us up to be able to, you know, once we have more kids or whatever that if we would like to get a bigger house to fit those kids, then we’d be able to do that. So we haven’t really made an exact plan, but it just opens up us to live in a new way.

Matt Farley: As you might imagine, I’ve already put together a spreadsheet of where our money is going.

Tim Ulbrich: Thought so, maybe.

Matt Farley: And we haven’t talked through it.

Tim Ulbrich: You might want to fill Amy in, yeah. No, what I’m excited to hear from you guys over the past few months and year and beyond is thinking of the zero-based budgeting process. What’s so powerful about that is you had a line item for student loans. It was a very big line item, right? In YNAB. And now the question is, what does that become? You know? Is it giving? Is it experiences with the family? Is it entrepreneurial interests? Is it buying a home? What is that? But that really becomes that exciting conversation about life after debt-free, which is something we’re going to be talking much more about on the podcast going forward. So Matt, one question — I know you mentioned you read “Total Money Makeover,” so that was an indicator to me that you’re a financial reader/nerd probably.

Matt Farley: Yep.

Tim Ulbrich: So my question for you is, you know, how important was reading or listening to podcasts, you know, how important was that to your success? And is there a specific book or two or resource out there that you would recommend to our listeners?

Matt Farley: Yeah, definitely. So I think the biggest thing is just kind of consistently reading or listening to anything financially-minded because I think it causes you to pay attention to what’s going on, which is half the battle. You know, you might not be the best budgeter or the best investor, but if you just kind of know what’s going on with your money and understand the products that you’re purchasing from an investment standpoint, that is huge to me. So some of the books that I read — and I’m just going to preface it, I don’t agree with all these books. I don’t think they’re like perfect. Some of them tell you to do unwise things, but “I’ll Teach You to Be Rich” for me was an interesting book to read to understand investing a little bit better. I forget the author’s name, but he talks some about using credit cards more than I would be comfortable with using them. Actually, we did use a credit card to pay for a lot of our expenses, and we’re able to do that without any concern of actually carrying a balance. But I know that’s not the case for everyone. So if you have a tendency of doing that, right, I’d say avoid that. I listened to Dave Ramsey’s podcast pretty consistently and recently discovered yours, so I’ve been listening to yours recently too. And I think it’s another great podcast to listen to understand what’s going on with your money and hear from other folks that are like-minded.

Tim Ulbrich: So “I’ll Teach You to Be Rich” is a Rumeet Sethi book. That’s a great book. I would also recommend that. I share the same feelings that you do. There’s some things in there where, you know, I may approach them differently, but I really like the way he teaches. I think it’s very easy to understand, and it’s a very digestible book and resource. So we’ll link to that in our show notes as well. But I would echo, Matt, your comment about just absorbing information. And sometimes, you know, I’ll listen to something or read something, and I’ll walk away with a very tangible action item. But many times, it’s just that keeping the topic front-of-mind, right? And that’s true with anything, you know? It could be your goals around spirituality, it could be your relationship. But the things that are most important to you, always having those top-of-mind and making sure that you’re always prioritizing those, setting goals on those, and reflecting on how things are going. So.

Matt Farley: And one thing if I could add — I don’t mean to interrupt — but one of the things that I actually learned the most on that got me started with investing was a Frontline documentary on PBS called, “The Retirement Gamble.” It’s like a 40-minute video, and it’s pretty old at this point, but for some reason, it actually resonated with me for how to invest, what’s an expense ratio, what’s a mutual fund, what’s an index fund. That was really helpful for me to actually watch, so I would suggest that to anyone who’s interested in learning more about that as well.

Tim Ulbrich: Absolutely. Awesome. Thank you for that. And Matt and Amy, thank you so much for your time, for coming on to share your journey, really an incredible journey of paying off over $207,000 in just under four years. And I know you’ve inspired me personally, and I’m confident you’re going to do the same for our listeners. And I can’t wait to hear and talk from you in the years to come to see the amazing things that you’re doing. So thank you so much for coming on the show.

Amy Farley: Yeah, thank you.

Matt Farley: Yeah, thanks for having us. You can do it, everybody!

Tim Ulbrich: Yes. Thank you guys.

Sponsor: Before we wrap up today’s episode of the podcast, I want to thank our sponsor, Airbnb. Today’s the day to consider joining the community of more than 2 million people that are earning extra cash by hosting on Airbnb. Whether it’s hosting while you’re out of town or making the most of that extra room that sits empty for most of the year, think about it as an investment in your future. Maybe it’s paying extra on student loans, maybe it’s investing more for the future or saving for kids’ college, whatever it be, this can help you fast-track the financial goal that you’re working on today. It’s free to list, and Airbnb has a tool that will help you price your place just right. Again, there’s no need to worry about your property as Airbnb offers a host guarantee that helps protect your property in the unlikely event that something goes wrong. And you’re the boss when you host on Airbnb. Your home, your rules. Host when you want, how you want. List one bedroom or the entire place. It’s completely up to you. So whether you’re looking for some side cash or a steady income, hosting on Airbnb might just be the best investment you haven’t made yet. When you go to YourFinancialPharmacist.com/Airbnb and start hosting, you’ll receive a $100 Amazon gift card if you generate $500 in booking value by June 30, 2019. Terms and conditions do apply.

Tim Ulbrich: And one last thing if you could do us a favor. If you like what you heard on this week’s episode, please make sure to leave us a review in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to YourFinancialPharmacist.com, where you’ll find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week.

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YFP 082: Debt Free Theme Hour with the Teacher & Pupil

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Debt Free Theme Hour with the Teacher & Pupil

On episode 82 of the Your Financial Pharmacist Podcast, Tim Ulbrich, co-founder of YFP, welcomes Joe Baker and Blake Johnson to the show for debt free theme hour. They talk about Blake’s journey paying off $150,000 in student loans in three and a half years and how the class he took at the University of Arkansas, taught by Joe Baker, helped prepare him to be on his way to achieving financial freedom.

About Today’s Guests

Joe Baker, MBA, has been a sales representative with Pharmacists Mutual Companies for almost 28 years and an Adjunct Assistant Professor at the University of Arkansas for Medical Sciences College of Pharmacy for 20 years where he teaches a personal finance elective for P3 students. Originally from Emerson, Arkansas, Joe graduated from Southern Arkansas University with a Bachelor of Business Administration (BBA) degree, and earned his Masters of Business Administration (MBA) from the University of Central Arkansas. Joe is also a Chartered Financial Consultant (ChFC) and he obtained his Series 7 securities license in 1986. Joe has been a guest speaker at the NCPA national meeting five times, and has spoken to various pharmacy schools across the country on wealth accumulation, particularly as it relates to young pharmacists.

Blake Johnson is a 2013 graduate of the University of Arkansas for Medical Sciences. Upon graduation, he married his wife Kristyn and he began working in a small town independent pharmacy. He worked there for 2 years and is now working in Conway, Arkansas at a local independent pharmacy. Upon graduation, Blake decided that paying off student loans would be a top priority, while still being able to travel and save for his retirement. After three and a half years, he was able to pay off his and his wife’s student loans. Since then, Blake has been able to increase his savings and start purchasing rental property. In his spare time, he enjoys traveling as much as he can and teaching others about finances.

Summary

This episode of the Your Financial Pharmacist podcasts highlights an inspiring debt free story. Joe Baker is an Adjunct Assistant Professor at the University of Arkansas for Medical Sciences College of Pharmacy and teaches a personal finance elective for P3 students for the last twenty years. Blake Johnson is a pharmacist and former student of Joe’s who has paid off $150,000 of student loan debt in three and a half years.

In this episode, Blake shares his story of not only becoming debt free but also of building wealth through investing. Blake was inspired by Joe’s class and the principles he shared. His wife, Kristyn, grew up with the teachings of Larry Burkett. These two teachings combined helped to create a strong financial foundation for Blake and Kristyn. In regards to prioritization to get to this point, Blake first budgeted to see what they needed to live on. Budgeting is his biggest piece of advice to students while in school and upon graduation. He and Krysten lived like they were still in school after graduation which allowed them to develop a lifestyle of living below their means. After Kristyn graduated, they used her paycheck to pay off student loans and watched their debt melt away. Now, they continue to max out their 401k contributions, increase their savings, and are about to close on their six real estate rental property.

Joe Baker says that creating a lifestyle like this is crucial to getting out of debt and building wealth. He suggests living off of $50,000 as your income each year even if you are making much more. This way, you are sure to stay below your means and have extra money to pay off debt and start contributing to retirement funds or other investments. He has created a list of “Baker’s Dirty Dozen” that he teaches in his college course that are discussed in the show.

Joe Baker’s Dirty Dozen Tips on Getting Rich

  1. Invest in appreciable items, such as education and house. Minimize depreciable items, such as car, clothes, etc. Student loan money should be spent on bare necessities.
  2. Utilize the time value of money. Time is on your side when you are young.
  3. Max out on your 401(k), 403(b), Roth 401(k) and Roth IRA. Stocks, Bonds & Cash. 100% – your age = % in stocks. Stock Index Funds or Target Date Fund (2055 Fund). At the minimum, contribute enough for employer match – free money!
  4. Save money consistently and systematically throughout your life (dollar cost averaging). Don’t take money out of your retirement account. Penalties and taxes will apply.
  5. Make sure your future spouse has the same financial goals as you. Pre-marital counseling that includes financial goals and spending habits. If already married, try to get on the same financial page. Dave Ramsey offers a Financial Peace Workshop.
  6. Stay away from credit cards. “If I cannot pay balance off each month, I cannot afford it!” Debt is NOT your friend. ALL debt is bad. Proverbs 22:7
  7. A vehicle is NOT who you are – it’s transportation only! Beware of the illusion of wealth. This is one of the biggest obstacles in wealth accumulation.
  8. Keep an eye on the small choices you make in life. Buying Starbucks Coffee. Drink water at restaurants!
  9. Avoid lotteries, multi-level marketing (pyramid schemes) and time shares.
  10. Choose a 15 or 20 year mortgage over a 30 year. Pay 20% down (avoids Private Mortgage Interest). Make additional payments toward the principal.
  11. Protect your assets! Adequate personal liability coverage. Life & disability coverage protection. Have your own individual pharmacist liability policy.
  12. Read Seven Figure Pharmacist by Tim Ulbrich, Pharm.D & Tim Church, Pharm.D. Sign up for Your Financial Pharmacist blog. Kiplinger’s & Investopedia, like on Facebook.
  13. Make a difference in your family, community & place of worship. This will make you wealthy in your heart, body and soul. Amen!

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this episode of the Your Financial Pharmacist podcast. I hope your new year is off to a great start. And boy, do we have a special episode for you today, a two-for-one special. We get to interview new practitioner Blake Johnson alongside his personal finance mentor and teacher at the University of Arkansas, Joe Baker. Blake really has an incredible story to share of him and his wife Kristen paying off $150,000 of student loans in a short period of time and building a strong financial foundation, which as you know, we talk about often on this show. And Joe Baker, nearing the end of his career, has a passion for teaching personal finance and has influenced hundreds, if not thousands, of new practitioners to pave a successful financial future. He has the famous Baker’s Dirty Dozen Tips for Getting Rich, which we’ll talk about briefly on the show today. So Joe and Blake, welcome to the show, excited to have you.

Joe Baker: Thank you.

Blake Johnson: Yeah, thanks, Tim.

Tim Ulbrich: So I’m going to start with brief introductions so our audience can get to begin to know each of you before we unpack the story. So Blake, why don’t you start? Give us a quick background on when you graduated, what you and your wife Kristen were facing financially as a new graduate, and the current area of practice that you do in pharmacy.

Blake Johnson: OK. So I practice pharmacy in Conway, Arkansas. It’s about 30 miles north of Little Rock. And I’ve been out of school for almost six years in May. My wife’s a nurse practitioner, she graduated I guess about three years ago. And upon graduating, we had my student loans, they were about $120,000. And then my wife was in school at the time. It took her about two years to graduate after I did, and hers was about another $30,000-40,000, so all together, we had accumulated close to $150,000-160,000 in student loans once you added interest. And we’re proud to work for a community pharmacy in Conway now and been there for about three years. And prior to that, I had worked in Clinton, Arkansas, which is about an hour outside of Little Rock. So been in community pharmacy for since the time I gradated, and I really do enjoy it.

Tim Ulbrich: So we’re going to unpack that more here in a little bit in terms of what allowed you and your wife Kristen to be successful in that journey and how you did it, how you’ve worked together. But first, Joe, give us a brief introduction of yourself, the history of your work in the pharmacy world, and how you became so passionate about teaching this topic of personal finance, which resulted in I think you being the first, I believe, of starting this coursework in pharmacy curriculum. So give us some background.

Joe Baker: Well thank you, Tim. It really goes back to the late ‘70s, when I graduated from Southern Arkansas University with a business administration degree. And going from different jobs, including real estate, which unfortunately, at the time of the late ‘70s and early ‘80s was 17% interest on mortgages. It was a tough time. But I did find my niche teaching high school marketing. And I really loved the education because of the immediate feedback. And I would probably still be there today if it had not been for a friend of mine who ran for Congress and asked me to help him, to get involved in his campaign. I did so. Unfortunately — or fortunately — as life has it, we lost in runoff by 2 points, so then, after that, I had to get a real job and found my way into insurance and was fortunate enough to get on board with Pharmacists Mutual Insurance, which was 27 years ago. And during that time, I always wanted to get back into education in some way. And I thought the best way or the one that I was looking for was to teach college on some level. So I decided after 20 years to get my Master’s degree, got an MBA. And during this time, I was about to wrap up, I happened to be at the College of Pharmacy at UAMS, University of Arkansas Medical School, and I was visiting with the dean and the assistant dean. And this was in the late ‘90s, 1999, and I said, “You know, what about teaching some type of business course for the pharmacy students?” And they were very open. They said, “Yes. Our pharmacy students are making around $45,000 a year and going out and getting broke making this type of big money.” So you can see how the money has changed.

Tim Ulbrich: Times have changed.

Joe Baker: And even today at $120,000, we have pharmacists and other professionals going out and getting broke. So the fall of 1999 was when we started the personal finance class, a 2-hour elective at UAMS College of Pharmacy in Little Rock, Arkansas, and it has really blossomed. And it has just helped me fulfill my education desire. And with the financial literacy, I just think it all worked out greatly.

Tim Ulbrich: Yeah, and I appreciate — I was actually stalking you on LinkedIn, Joe, I know we’ve been getting to know each other. I didn’t know the background of the congressional campaigns, and I knew the rest of the story. So appreciate your support of what we’ve been doing at YFP. And for those that have been following our journey at YFP, Joe has been at this long before we have. So speaking on this topic, he mentioned the personal finance course since 1999, we’ve got some exciting collaborations coming forward. You’re going to be hearing more from Joe and hopefully seeing about their speaking and on the blog, so we’re excited to be collaborating and working with you. And I certainly appreciate the path you’ve paved that has even made it a little bit easier for us at YFP as we’ve been on this journey. So what I want to do, actually, what stimulated this interview is Blake had sent an email over to Joe, so his former professor, on this topic. And I’m going to take a minute to read this email because I think, Blake, as I went back and looked at this as I was preparing for the show, I feel like it really helps outline your story but also helps outline what I think to be the importance of personal finance education and helping especially young pharmacists get started. So here’s that email, and then we’ll begin to unpack a little bit further. So Blake says, “Joe, things are going great for me. I’ve been out five years now. I am so glad I took your class. It has been a truly amazing journey. I came out of school and my wife, who’s a new practitioner and I had $150,000 in student loans. We paid those off in 3.5 years. During that time, I maxed out my 401k and was able to put 20% down on my house!! I’m about halfway to my ‘millionaire net worth journey’ that you talked about in class. The best thing that we ever did was partner up with a friend on some real estate. We have five rental homes right now. It has been very good for us. Anyways, I thought I would share that with you because I really do trace it back to your class. On top of that, I’m now able to teach this principles in a class at our church in Conway.” So Joe, as you saw that email, what was your feeling as you kind of reflected on the success that Blake has had and the impact that your class had on that.

Joe Baker: Well Tim, I was just ecstatic because, you know, to get that type of feedback from one of your former students is just — makes you feel really, really good that you’re really accomplishing what you have set out to do. I know there are many success stories out there, but to see it in print and to someone that I’ve known for several years, I just can’t put it in words how it made me feel.

Tim Ulbrich: Yeah, that’s great. I think as I read it, I got fired up. I can only imagine as you guys have that relationship and teaching that course. So Blake, as I read that and I read that email, five years out of school, no debt, of course, except the home, which you mentioned putting 20% down on. I’m guessing you have that even further paid down, you maxed out your 401k while doing that, which is no small feat. And you have five rental properties in that time period. And so to me, as I read that, this is really the definition of what we talk about on this show and on the blog about a good foundation. No debt, equity in the home, a fast start to retirement savings, and I’m assuming obviously an emergency fund in there as well. So my question, Blake, is what were the secrets for you and your wife Kristen that allowed you to have such significant progress in a short amount of time. If you had to distill that down to a few things, what do you think allowed you guys to have progress in such a quick amount of time?

Blake Johnson: I think two things. No. 1, Joe’s class. At that time, right when I was taking that, my wife and I had just started dating, and so I attribute it to Joe’s class and teaching that. But No. 2, also to my wife. Her parents taught her the old school Larry Burkett, Dave Ramsey-type stuff. So when we got married, we were able to within about six months, add to what she had saved up to be able to put 20% down on a real nice home just because of that and Joe’s principles, we were able to kind of kick it out of the gate with this good of money principles. I had read Dave Ramsey while we were engaged. And between Joe’s class and what Dave Ramsey teaches, we kind of took that, kind of agreed on what we would live on, and just kind of went from there.

Tim Ulbrich: And what I love about your story, Blake, as I mentioned, we talk so much on the podcast or when we’re speaking on the blog about the importance of this foundation and really investing the first number of years out of school to build this foundation where you’ve got a solid position to work from because as I’ve seen with so many practitioners that are 10, 15, 20 years out, it’s really hard to unwind some of the things and to play catch-up. And so Joe, I’m curious from your perspective, you know, what I’ve seen and I’m guessing you’ve seen — you’ve been at this longer than I have — is that it seems like some new practitioners like Blake and his wife Kristen get a quick start and really have some momentum at a very early point in their career whereas others, you know, maybe it takes 10 or 15 years or even longer to turn things around and kind of come to that “Aha!” moment where my salary is good, but it doesn’t necessarily mean a good salary is a secure financial foundation. What do you think differentiates the two of those? Is it mindset? Is it knowledge? Is it behavior? Is it a combination of it? What do you think?

Joe Baker: Well, I do think it’s a combination. But what I have stressed to the students is when you get out, making six figures, don’t live like you’re making six figures. Don’t buy a huge house, automobiles, which is the biggest obstacle for wealth accumulation. If you can just live like you’ve lived, hopefully like you’ve lived through your college years and put back the money, you can do great things. It all begins as soon as you come out of the blocks. Just like a race, you’ve got to live below your means starting out because then, it’s much more difficult to get where you want to be financially if you live like a person making six figures. So behavior and what you do.

Tim Ulbrich: Yeah, and I think just to build on that, Joe, what I’ve seen — and I’m guessing what Blake and Kristen did almost treating it as if you make some lower percentage of your salary. If you can really convince yourself that I make $100,000 a year, but really I make $50,000 or $60,000 and budget off of that, and then use the remainder for paying down debt, building equity on the home, getting involved in investments, real estate, all of a sudden, it’s a lot easier to pivot to those opportunities. But then also when life throws you something unexpected, you’ve got margin, right? And I think that that peace of mind when you have margin — so as I look at Blake and Kristen’s story, no debt, equity in the home, fast start to retirement savings, they’ve got rental property, they’re building equity. If life throws them something that they’re not expecting, they’ve got options to handle that. Whereas if you’re living up to your entire income or beyond, obviously that can be taken away from you. So Blake, as you and Kristen were going at this, one of the things I see a lot of young pharmacist struggle with is trying to balance multiple priorities. And so I see here, you obviously were paying down debt, which is a lot in five years by itself. But then also, you were able to build up equity and max out retirement savings and get involved in real estate. So my question is, did you prioritize and focus on one or two of these at a time? Or were you really balancing all of these priorities at once?

Blake Johnson: So we sat down when we got married and kind of made some decisions. No. 1, we kind of went against what Dave Ramsey teaches in paying off all debt before you start doing the 401k. Because we noticed at 25 years old when I graduated, I could at that time put close to $18,000 a year into my 401k. And it didn’t really reduce my paycheck by that much. So that was our No. 1 priority. The second priority was we wanted to put a minimum amount on our loans until my wife got out of school. So those two things were set. I mean, we did our whole budget based on those two amounts taken out. And outside of that too, we also love to travel. So we wanted to be able to travel some too. So what we did was just do a budget every month. We would say, “Hey, we want x amount of money to travel on a year. We’re going to put this minimum amount on the loans. And we’re also going to put towards the 401k.” So until my wife graduated, we did that. And as soon as she graduated, we had this lifestyle that was set, and we never increased it at all. We just basically took her paycheck as a nurse practitioner for about a year, and that literally took the hammer down on the loans. We were used to a lifestyle, we didn’t change it, and just kind of hammered it down until it was all paid off. We looked up, we had money in our 401k, we had equity in the house, and now we’ve been able to build more and more off the top of that. Our lifestyle — honestly, our lifestyle and budget hadn’t changed since the day I graduated.

Tim Ulbrich: Yeah, and as you know, once you get to the point where you are, now it’s game on with really starting to see the benefits of those investments grow and compound and take over time. And I wanted to take you a little bit deeper there because I think sometimes, when we have guests on the show and we share a success story like yours, and it’s like five years, you paid off debt, you’ve got retirement, you’ve got some equity in your home. And it’s like, poof! It’s magic. But I heard in there, you know, you talked about budgeting. And I’m guessing that was a fundamental piece for you and Kristen in doing this. So tell us exactly what that looked like for you. What’s the budgeting method that you use? Did one of you take the lead on that? How did you come to consensus and agreement on it? What did that process look like for you and Kristen?

Blake Johnson: It was a rocky start to start out with because I’m all about Excel sheets. I can remember out of the gun, coming out of the — as Dave Ramsey says, coming out of the den with this huge spreadsheet. And it was overwhelming. I mean, it was ridiculous. I think I had like $300 for groceries per month and like $100 for going out to eat. And I mean, that’s evolved into a lot more. But I mean, it is tamed down kind of over 4-5 months, figuring out what we lived on, what we felt comfortable with, and other than that, we’ve used it from then on out. It took time to get a grip on things. The No. 1 thing too is set goals. So I mean, if you want to go on a vacation a year from now, why don’t you start now saving a small amount each month. That way, in a year, you’ve got the money set back instead of having to scrounge for it. So I just think it’s, you know, it’s a push and pull type thing. You sit down, work with your spouse and just kind of figure out what works best for you.

Tim Ulbrich: Yeah, and I like that. We talked about to your last point there, I think it was in Episode 057, we talked about the power of automation and sinking funds, getting your concept there. If you have a vacation in 12 months or whatever is planned, really being thoughtful about what those goals are and funding those. So Joe, my question here for you is, you know, when you hear Blake’s story, it appears from the outside looking in that he and Kristen were working together on this, although as he mentioned, you know, may have had a rocky start. But they obviously got there. And I know you’ve talked about this before, you and I have as well, is the importance of two people working together on their financial plan. So my question for you is what advice do you have for new graduates that are facing a financial uphill battle? Lots of student loans, maybe they have aspirations on a home, but they don’t have a down payment. So they’re really trying to figure this out. And what advice would you have for them in trying to get on the same page and work together?

Joe Baker: Well, a number of things. First, the keyword is lifestyle that Blake used. Starting after graduation, I know it can be overwhelming if you’re looking at $150,000-200,000 in student loans, just sit down and develop a plan. And if you are in a situation, relationship, married, fiancee or whatever, make sure you’re on the same financial page because that is very, very important. Blake was very fortunate. I know his wife, Kristen, and they were on the same page financially. And that is — I cannot stress how important that is to make sure you’re on the same financial page. Because it would be really tough if you were not so. But I do tell them that if you can start off with a lower lifestyle and I also even point out to plug your “Seven Figure Pharmacist” book, there’s a section in there — and I’m paraphrasing — about living on $50,000, which is the median income of the United States right now?

Tim Ulbrich: Yeah. Household.

Joe Baker: Yes. And $50,000, that’s — at least in Arkansas — that is a lot more than most make. So if you could live with that lifestyle of making $50,000 a year and start paying off your student loans like Blake and contributing to a 401k or 403b, Roth IRA, you’ll be just way ahead in the years to come. So that’s what I try to get across, not only to the students but also whenever I speak to pharmacy students is your lifestyle.

Tim Ulbrich: I think that’s a great point there, and I think there’s wisdom in reframing the perspective of your salary, right? Because I think that I know what I felt coming out of school in 2008 is there tends to be that pressure of peer comparisons. If I’m in residency and I’m making a whopping $31,000, and I look up and my friend’s making $120,000 with a sign-on bonus, which I understand don’t exist these days, that feels like it’s unmanageable, right? But if I reframe the perspective to me as a single person or even me and my wife as a combined income, and then you put that in the perspective of a median household income in the United States or we recently shared an article on the Facebook group this week about the top 1% in the world when you look at it in terms of the world economy, I think that helps reset the perspective of really what are you working with and what are the opportunities that are ahead. So Blake, one question I have for you is that as you think back, even though you’ve done a lot of things well, I’m guessing you look back to your former P1 self and say, “I wish I would have…” or “I wish I would have known this or done this differently.” What advice would you have for the students that are listening of some things that you may have done differently in your journey?

Blake Johnson: I think the No. 1 thing to look back on is budget while you’re in school. I mean, one thing that Joe talked about in the class is the power of compounding interest. It works for you, and it can work against you. If you come out with $120,000, you’ve got 6-7% interest working against you. Or you could have more money to put in the market and have that work for you. So I think during school, the less amount that you can take out, maybe by working more or just watching your expenses, I think that’s one of the big things because interest rates really do work against you and do take a good amount out of pocket.

Tim Ulbrich: Absolutely. And the follow-up question I have for you is we actually just wrapped up a book discussion with YFP, we’re doing a book discussion on “Rich Dad, Poor Dad,” by Robert Kiyosaki, which for those listeners who haven’t read that book, I would highly recommend it. It’s a great book that really just helps shape your mindset around money. But what really stood out to me in that book, second time through, is this focus on real estate investing, which obviously you are tuned into. You mentioned five properties. So tell us a little bit about why you are interested in real estate is my first question. And my follow-up is for those of the listeners that are thinking, maybe I want to get started in real estate investing, where would you recommend they even begin to learn more?

Blake Johnson: It all started, I guess about two years ago, right when we were wrapping up paying our debt off. I was looking at different ways for us to invest. And I love the stock market, we were maxing out our 401k, and I started a Vanguard fund, I started that and putting money in that. But I wanted something that could be “passive income” down the road. With the Roth IRA, you can’t access it until you’re 59.5, and other investments, it’s hard to get to. So I wanted something that could work for me and earlier in my lifetime that I could use as investment. So I started doing research, and me and my wife were talking about it for a long time. And I’ve always just enjoyed real estate. So it takes me a long time to decide on something. So after about two years of really looking into it, a friend of mine who moved back in town, we got back together, and he already had rental property here in Conway. And after about three or four months listening to him, I just kind of asked, “Hey, would you like to partner on something?” And we ended up partnering on something, and it ended up being nice because his interest and my interest as far as partnership meshed real well together, so we purchased two homes together out of the chute. That was back in April, and here we are in November. We actually just closed on our sixth home as of last month. So it’s been a fun journey and going back to where you can find info for that, there’s a great website called BiggerPockets. It’s basically a Facebook for real estate investors. And it is packed full of information. And I highly recommend it because real estate’s something you need to do a lot of reading on because you can get yourself in big trouble if you don’t get in there with good equity in homes to make the right decisions.

Tim Ulbrich: I second your recommendation of BiggerPockets, I’m actually binge listening right now to their podcast, so it’s fantastic. And I feel like every day, it just provides some new insight into I had no idea about this aspect of real estate or this aspect, especially if you grew up in a home where real estate investing wasn’t a part of growing up. So great stuff. Congratulations on the closing of the sixth property, that’s awesome. And I think the reason I wanted to bring that up is I know many of our listeners are interested in identifying potential revenue streams that don’t necessarily have to wait until withdrawal of retirement funds at the age of 59.5. So I think real estate is something we’re going to be talking a little bit more about. So Joe, I want to briefly just mention what I think are your famous Baker’s Dirty Dozen Tips on Getting Rich that I’ve seen referenced from coursework and people on LinkedIn where you’ve done talks and social media posts and engagement. I think they’ve become quite well known and famous. And we’ll link to them in the show notes, but I’m just going to briefly read through a few of them and then reference our listeners to the show notes and ask you a couple follow-up questions. So in this list, you have things like invest in appreciable items such as education and a house, minimize depreciable items such as car, clothes, etc. Student loan money should be spent on bare necessities. You mentioned utilizing the time value of money, that time is on your side when you’re young. You mentioned save money consistently and systematically throughout your life, such as dollar cost averaging. Don’t take money out of your retirement account; penalties and taxes will apply. You mentioned choosing a 15- or a 20-year mortgage over a 30-year, paying 20% down, avoiding PMI and making additional payments. So as you think through that list, do any of these stick out to you more than others in terms of their level of significance when you think of your own journey and mentoring numerous pharmacy students on their own financial path?

refinance student loans

Joe Baker: Well in class, I’m pretty much an open book. And not to go into any personal details of my financial path — I did not achieve true financial wealth until all debt was paid off. Because I believe — I disagree with a lot of financial planners that say there’s good debt and bad debt. Eh. I think all debt is bad. There’s some that’s less bad than others if you forgive my grammar, so being that, I say, “Listen. I didn’t make a six-figure income until I was 47 years old. And completely debt-free at age 50 and then it was just amazing how much money was accumulated.” And fortunately, Blake is, he’s 20-25 years ahead of where I was at his age. It’s just amazing. I don’t think it was mentioned, but Blake, I’m going to tell on you. You’re 30 years old. So quite amazing. When I was 30 years old, I wasn’t even married. And had a little credit card debt, but found a lady that was a math teacher, taught me a little bit about the time value of money and saw that I had potential and married me. So I was very fortunate in that. But I really stress to my students and even when I speak too is you’ve got to get rid of the debt. The debt is the biggest albatross, and then I’ll speak also on buying automobiles. That seems to be a big hindrance in wealth accumulation. But the debt is the biggie in my book.

Tim Ulbrich: Yeah, and I’m thinking back to Episode 068 where Tim Baker and I talked about what we thought are kind of the pros and cons of Dave Ramsey’s baby steps, and I think one of the things we’ve realized, whether it’s our own financial plan or talking with hundreds and thousands of pharmacists is that for everyone, obviously different situations are going to allow for unique circumstances, but I think the piece that is often consistently missing in financial advice — although to Tim Baker’s credit, I think he does an outstanding job of this — is the behavioral mindset components. And it’s very hard to put a value to that. And for some people, it’s more important than others. But I share a similar belief, Joe, and when my wife and I hit that point of becoming debt-free with student loans, there was a mindset shift that happened that I cannot even put a value on what that’s done for how we’ve thought in terms of opportunistic ways of our financial plan. Now, could we have gotten there while doing it while we were in debt? Maybe. But I think it’s hard to articulate exactly the impact that that had, and it certainly has been significant for us. So Joe, talk us through your course a little bit. How do you approach that course? And the reason why I want to do address this is I think that while we have a handful of pharmacy schools out there that teach personal finance, we have probably 90+% that do not, and I know we have many faculty that may be listening to this or students that may go back to the school and say, “Hey, we want to do something like what Joe is doing.” So what does that course look like? And what are the fundamentals that you’re trying to teach and address in that course? And even the level of students that take that course.

Joe Baker: Well first of all, if anyone is interested, I would be happy to share any information that I have for you to take back to your dean of the college of pharmacy, even my syllabus, etc. And the way you sell it to your college of pharmacy is to say, “Listen. We’ve got people going out, and if they become financially independent, accumulate wealth, it will benefit the college of pharmacy in the future because the students will be more — the former students will be more inclined to give because they have, quite frankly, deeper pockets.” So that’s how to sell it. But the course that I teach, it’s at the beginning, we talk about all the different styles of stocks, bonds, mutual funds, ETFs. Then I graduate a little bit into the — not a little bit, a lot — into the retirement plans and some of those all the while, showing them examples. And then we gravitate into some other areas. It’s a two-hour elective, which is 30 classroom hours. So it’s hard to get really in-depth for too many subjects. So I want to give them a little overview, get them a little excited, showing them how if they start investing early versus investing late, then we go into some areas like buying and selling a house. I have a mortgage speaker that comes in and speaks along that. I also have an income tax person that comes in. She is not only a CPA but an attorney, so we cover the basis in the income tax area. I personally cover the personal property taxes, which we have in Arkansas. Of course, the insurance areas and then towards the end of the course, I have the student loan speakers come in from the state and explain how, what to do with their loans, some ways of paying them off, etc. So basically, it’s we have 15 class periods, two hours per week, can’t get it all in, but at least it sets a foundation. I tell them, “If I can just motivate you to do the things that you need to do at the beginning, everything else will take care of itself.” But it’s a lot of fun. It is. It is a blast. I get immediate feedback and quite frankly, I tell you, “You’re not doing this for a grade because if you miss one class, it could be $1 million. So you want to make sure you come in for all the classes, participate,” and I will say, up until your book was introduced — and I will brag on your book again — I finally had a book that I said, “Wow. I have a true textbook for my class.” Because before your book, I had “The Automatic Millionaire,” but it —

Tim Ulbrich: Yeah, David Bach, yeah.

Joe Baker: But it obviously wasn’t directed towards the pharmacy students. So thank you for that. But I was just so excited when I saw your book. And that’s the textbook, if you will, that we use in class.

Tim Ulbrich: And I love to hear your outline of the curriculum, but also obviously to hear Blake’s story and the success it’s had, and I think a key piece there you mentioned is motivation. It’s really planting seeds, right? You’re not going to cover everything about the financial plan in 30 hours. But you’re beginning to train behavior, beginning to establish mindset, and Blake’s story is one example. I’m sure there are hundreds of others that have had success because of that course. So I would also like to throw out there — and Joe, I know you and I have talked about this — we have a vision at YFP to see every college of pharmacy in the country be educating their students on personal finance. I personally believe — I obviously have a bias — but I personally believe this is a fundamental part of professional development of pharmacy students and new graduates, which to your point, has benefits to a college beyond their graduation, but I feel is an obligation that we have as a part of the professional development because what I’ve seen personally in my own life, in research I’ve done, in working with other pharmacists is personal finance and the stability of one’s personal finance impacts other areas of their life, including their career and the impact that they’re having in their day-to-day work. If we can help provide stability and a foundation through education, I think we’re going to have a better workforce that’s out there. So other colleges that are listening, this is the call to action. We would love to see you pick up an elective course. Anyone from ACP is out there listening — I’m not sure they are — we’d love to see this long-term as a portion of the accreditation standards in the future. So Blake, I want to end on this question. So you and your wife Kristen have done an unbelievable job in setting a strong financial foundation. We’ve talked about you guys becoming debt free, having equity in your home, maxing out retirement accounts, getting into rental properties, and you’re an incredibly young age. What is next for you guys? What are the goals that you have going forward?

Blake: You know, the biggest thing that I love about being debt free and being able to accumulate wealth is the fact that it frees you up to give. I feel like as a community leader, as a pharmacist, you know, we’re called to be leaders in the community. And through that, whether it’s to church or just to any type of organization, it frees you up to give more. So that’s kind of our goal. As years go by, we want to be able to give more and give more away. And we really do enjoy it. It brings a lot of joy to us when we can help others and do that type of thing. So outside of that, we’d like to get some more rental property and just continue to save. I’d like to leave a good inheritance to my kids and grandkids in the future.

Tim Ulbrich: That’s awesome. And I love your vision that you and your wife have on giving, which takes us to No. 13 in the Baker’s Dirty Dozen Tips on Getting Rich, which is make a difference in your family, community and place of worship. This will make you wealthy in your heart, body and soul. And I can see he has helped cast that vision to you all as well as obviously the impact that your family has had. So hopefully we look forward to having you back on the show when we get to that net worth of $1 million. And let me say to both Blake and Joe, on behalf of the YFP community and the YFP team, thank you so much for coming on today’s show and for your support of the work that we’re doing over at Your Financial Pharmacist. We greatly appreciate it. So thank you.

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