financial goals

YFP 392: Keeping Your Investment Portfolio FIT

Posted on by YFP Media

Tim Baker, CFP®, and Tim Ulbrich, PharmD, share strategies to address fees, inflation, and taxes, helping you keep your investment portfolio fit and achieve your financial goals.

Episode Summary

In this episode, Tim Baker, CFP® and Tim Ulbrich, PharmD discuss a crucial topic related to personal finance: keeping your investment portfolio fit.

Tim and Tim explore three silent threats to your investments—fees, inflation, and taxes. Learn practical strategies to manage fund fees, mitigate inflation’s impact, and use tax-efficient approaches to safeguard your portfolio. Whether you’re starting to save or nearing retirement, this episode delivers valuable tips to protect and grow your wealth.

Key Points from the Episode

[00:00] Introduction and New Year Greetings
[00:12] The Importance of Keeping Your Investment Portfolio Fit
[01:32] Understanding Investment Fees
[02:08] Expense Ratios Explained
[09:12] Other Types of Investment Fees
[12:35] Advisor Fees and Their Impact
[20:36] Inflation and Its Effects on Investments
[26:19] Strategies for Pre-Retirees and Retirees
[31:06] Taxes and Investment Income
[36:37] Building a Retirement Paycheck
[39:39] Conclusion and Final Thoughts

Episode Highlights

“ Step one is we got to save money. That that’s hard enough. But when we do that important step, we want to make sure that we can hold onto as much of the pie as we possibly can.” – Tim Baker [9:01]

“ And not all financial planning services are created equal. And so it’s not just a black and white discussion of what are the advisor fees, but what’s the construct and the makeup of the advising. And then those fees can look very different and whether they’re transparent and whether or not it has a return on investment with it.” – Tim Ulbrich [13:00]

“ I always tell the story of when I got into the industry and my parents were working with an advisor and I asked the question, “ Hey, what are you paying for that? The answer I got was like, oh, it’s free kind of through your dad’s work. And I’m like, uh, you know, there’s no free lunch.” -Tim Baker [13:55]

“ If you’re in a relationship and you’re not sure how the advisor is making their fee. That’s a big red flag.” -Tim Ulbrich [17:39]

“ The best number in terms of progress with the financial plan is your net worth, right? The assets, the things that you own minus the liabilities, things that you owe.” -Tim Baker [18:33]

“ The timing of when you retire is going to be one of the most important things. It’s related to your success in terms of having your assets not run out on you.”-Tim Baker [29:02]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Tim Baker, happy new year. Welcome back to the show.

Tim Baker: Yeah. Happy new year. Uh, can’t believe, uh, we’re on the other side of the new, uh, the new year already. The holidays, it’s, it’s pretty crazy.

Tim Ulbrich: We are, and we’ve got a topic that is connected to the theme of new year, but of course we’re going to bring it into first personal finance and that’s keeping your investment portfolio fit, fit, standing for fees, inflation, and taxes, really three things that are silent forces that can be working behind the scenes.

On the investment portfolio. You might not always see them directly, but their impact can really be big, especially over time. And Tim, that’s where you come in. That’s where our team of the only certified financial planners come in that have worked with pharmacists, clients all across the country to navigate this topic.

This is an area, right? That doesn’t really get [00:01:00] enough attention since I think it’s hard enough to focus on prioritizing saving. Let alone worrying about maintaining the integrity of those savings. Right.

Tim Baker: Yeah. And, and this, and this, if, if not paid attention to can be the, the drag right on your portfolio and your ability to build wealth over time. And, um, it’s important to, you know, especially, you know, when you’re evaluating your, your finances, which, you know, maybe a lot of us are doing at the start of the new year, um, to, to take a look at it and see, you know, Where we’re at with things.

So, um, yeah, it can be kind of one of those things that are behind the scenes, especially if you’re, if you’re struggling just to kind of get the portfolio and kind of the wealth building aspect of your, of your finances off the ground.

Tim Ulbrich: So Tim, let’s start with fees. We’ve all heard the saying, you get what you pay for, but sometimes in investing it might be the opposite, especially regarding fund fees. The may more you pay in fees, the less you actually keep in returns, potentially. We’ll, we’ll talk about that in more detail. And whether it’s from fund management fees to trading [00:02:00] commissions, there really can be many hidden costs that can add up, especially in the long term.

And it’s important that we understand what these fees are and whether or not they’re, they’re transparent, or we’re even aware of what they are. So walk us through the different types of fees that investors might encounter on their portfolios.

Tim Baker: Yeah, probably, probably the one of the most important ones, um, that, that we talk about is the expense ratio. So the expense ratio is essentially what a fund takes. Um, to manage said fund, right? So the way I explain this, Tim is, you know, let’s say I’m a, a fund manager and I’m managing billions of dollars of a large cap fund, right?

So my job is to, you know, gather information and, and really buy and sell stocks, large cap stocks inside of my funds that my investor has shares in. So for me to do that, I need. You know, a place of business. I need an [00:03:00] office space, which might be on, on wall street or thereabouts. I need analysts. I need to pay for information.

I need to, um, pay myself, pay salaries. So all of that work that’s done, you know, needs, you know, you know, revenue would essentially support that. So what the expense ratio is, is a percentage of the, the money that, that the fund manager is managing that they take out. Um, to basically pay themselves and all those things that I mentioned.

So the, the big, the hard part about this is that it’s not necessarily a line item on your, on your like, account statement. So, if you look at sometimes they’re listening to the account statement as, hey, you’re paying, you know, a half a percent, 0. 5 percent or 1 percent or, or, um, You know, 5 basis points, which is 0.

05%. So it might be listed as this is what the expense ratio is, but you can’t really draw a line from that [00:04:00] to, like, what’s actually being taken out of your account, which, which is hard. Right? So, and what we often see is that. You know, there’s a lot of people that just don’t pay attention to this at all.

Um, and if we take the example of a large cap, you know, one of the, one of the big things, which like a, which with a large cap is that, you know, you can buy a large cap where you’re paying. 0. 03, three basis points, or you’re paying way north of that 1%. And really the only thing that’s different is the fee itself.

When you actually like, you know, unwrap that fund and you look at the individual stocks that they’re in, it’s all the ones that we know, Microsoft and Amazon and things like that. So you’re kind of paying a premium for. I don’t know what a name potentially. So it’s really important when you’re looking at, when you’re selecting your investments, or if you’re working with an advisor and they’re helping you select investments that, you know, you are getting.

Bang for your buck. Right. So it, my, my thing is like, if I’m going to pay, you know, a hundred [00:05:00] basis points, you know, 1 percent versus five basis points. So that’s a 20 X difference in fee. For me, the way that I look at that, this is like, I should be getting 20 times more performance or 20 times safer. For the same amount of performance, but it’s typically not the case, right?

It’s typically not that. So, you know, I can say that, you know, where we, what we typically like to do is drive those fees, that expense ratio down as, as much as possible. And some of the other fees that we’ll talk about, um, and really let the portfolio do what, what it, what it does, what the market do, what it does.

So the expense ratio is a, is a huge, huge part of that.

Tim Ulbrich: Tim, when, when we hear, you know, five basis points or 0. 05 or three basis points, 0. 03 versus something like 1%, You know, I think we look at that with a little bit of shock and awe, but, you know, the average investor, if you’re not thinking about this, looking at these, if you don’t feel them right in your portfolio, necessarily, you know, it’s not impacting monthly cashflow per se.

You might look at those and say, [00:06:00] how, how much does that really matter? Right. So why, why does a type of difference when you look at something like five basis points or 0. 05 versus 1%, you know, over a long period of time, the question really is impact. What, what is the potential of that impact?

Tim Baker: Yeah. So, I mean, if you, if you take a, you know, for just simple math, if you take a, , 100, 000 portfolio, and you’re in a fund that is charging you 5 basis points,. That’s 50 per year for that. Um, if we stack that up, so let’s say I’m invested in the same type of large cap fund, but it’s charging me 1%.

That’s 1, 000. Per year. So like, you know, if we add zeros to this, we can kind of see where this is going. Right? So, so to me again, like, I don’t, you know, one of the, one of the positions that we, that we pay a little bit more and they’re newer, um, and more specialized is, is like the spot Bitcoin ETFs. Like, I think the, the fund that we’re in, it’s, it’s 20 basis point, but typically our, our portfolios are four or five basis points, [00:07:00] 0.

04, 0. 05. So what I tell the client, as I tell myself is like, if I’m paying more and I’m not getting that return, or it’s not safer.

It doesn’t make sense. So to me, it’s driving those down, you know, um, as much as possible. And you can see the numbers like, again, like if I look at 1%, I’m like, oh, it’s not really that much. But over time and over many years, it’s just, those are the, those are the things that erode, erode your gain and they don’t really need to be.

So, um, you know, and to back up, like if you buy an all stock portfolio, like you don’t buy a fund, you don’t have Expense ratio, because they’re not inside of a fund. You’re buying the individual stocks. The danger there is you’re potentially, you know, um, paying commission. So anytime you buy and sell you can, you, you are charged a fee and then just the, the risk that you take, you know, in terms of like, are you broadly diversified?

Are you putting too many eggs in, in one basket? So, you know, what, what I view as, you know, good investment practice is I can, I can build a well diversified Portfolio, um, for minimal cost and again, I would put minimal cost of anything less than, you know, in the 20 to, you know, 10 basis points, like, in that range, um, and feel good about, you know, the, the construction of the portfolio and the risk that I’m taking.

Um, so I, I do think that I, I’m willing to pay the toll, the expense ratio for that and not necessarily buy individual stocks and bonds and things like that.

Tim Ulbrich: So Tim, you mentioned expense ratios. Um, obviously that, that kind of becomes the top one that we think about, especially if they’re inside of a fund, you mentioned commissions, what, what other types of fees are out there that, that folks might, may not be as aware about?

Tim Baker: Yeah. So if you’re thinking about trading and transaction fees, um, you know, there, there are brokerage commission. So these are fees charged by a broker for executing trades on your behalf. So it could be something like a, a stock trade commission. Um, these are typically flat fee, so it could be anywhere from 5 to 10.

Um, a lot of these have kind of gone, there’s a lot of commission free brokers, um, that have kind of, you know, um, squashed a lot of these, but they’re still there. If you’re, if you’re option trade in, there’s option trade, uh, commission fees, there’s mutual fund, uh, transaction fees. So these can range anywhere.

You know, when I was in the broker deal world, I think it was almost like 30 per trade, right? Typically the range is, you know, 10 to 15. You know, 50 per trade. So, um, they’ll, they’ll, uh, they’ll, you know, brokerage will charge us, you know, to buy and sell, you know, mutual funds. There could be like spread costs.

So the difference, this is the difference between like the bid and the ask price of a particular trade. So they might, um, have a little bit of a spread. So they’re, so, so the, you know, the brokerage is making money. Um, one of the big things that I remember, especially being in the broker dealer world is account maintenance fees.

So these are, these are fees charged, uh, for maintaining an account. Um, such as an IRA. Um, and these, you see these more [00:10:00] Tim in like low interest rate environments. So they’re not making a whole lot of money on the float of the money that, you know, cash that they’re sitting on. So they try to find ways to make money.

Um, and these, these could be. I think when I saw them, it was like 50 an account. I see them anywhere from like 25 to a hundred dollars annually. Um, sometimes there’s foreign transaction fees. So these are applied to trades on international exchanges. There could be redemption fees. So these are fees for selling certain types of mutual funds or ETF within a specified, like holding period.

Um, so as an example, like if you, if you look at your account statement and you see, Like, uh, a mutual fund that you had that has an a, like next to it, that’s an a share mutual fund that you were probably, uh, sold that had like an upfront commission. Right. And, um, a lot of people don’t know that up going in, um, and they pay that and they’re like, what, what the heck happened?

There’s also C shares. [00:11:00] That you pay a little bit on the front end and then you pay an ongoing fee, um, which is not great. Those are typically the worst ones. And then you have a B1, which is kind of an in between that. There’s like a holding period that you can sometimes get redemption. So being, um, where we, we don’t, you know, we don’t operate in them, but I do come across a lot of clients that are like, oh, I’m not paying commissions.

And I look at their statement and there’s A’s and C’s. That’s what you typically see, excuse me, all over the place and they just don’t realize it. So. And probably the last one that I hear is kind of like robo advisor fees, right? I’m in a particular program and I’m paying, you know, a certain, certain amount.

So those are the ones that, you know, um, expense ratio, expense ratio, and then trading, trading fees, transaction fees, and kind of a slew of those that you’ll, you’ll often see.

Tim Ulbrich: Is that, is that it, that’s all you got on the list of, uh, potential fees that

Tim Baker: Yeah. And then we haven’t even gotten into the advisor fees, which we can talk about, but yeah. Yep.

Tim Ulbrich: let’s talk about that. Right. Because obviously, you know, that’s the work that we do and it [00:12:00] has to be factored in and, and full disclaimer, we’re, we’re biased in the value of the work that we bring clients. And we, we believe when you talk about advisor fees, Tim, when it’s done well, which is why we believe in the fee only model.

That’s why we have the model that we do that. Yeah, it’s a fee. Yeah. And it’s a fee that we have to factor in, but there’s a return on investment of that fee that we also have to account for. And not all financial planning services are created equal. And so it’s not just a black and white discussion of what are the advisor fees, but what’s the construct and the makeup of the advising.

And then those fees can look very different and whether they’re transparent so how do you think about the advisor fee piece?

Tim Baker: Yeah. And I, and I think, I think a big part of this is just like transparency, right? Like oftentimes, you know, when I would, I’d ask people that I’ve worked with an advisor, like, what are you paying them? They’re like, uh, I don’t know. Like, and I always tell the story, you know, of, you know, when, when, when I got into the industry and my parents were working with an advisor, you know, I asked the question, I’m like, Hey, what are you, what are you paying for that?

And it’s, you know, the answer I got was like, oh, it’s, it’s, it’s free kind of through your dad’s work. And I’m, I’m, And I’m like, uh, you know, there’s no free lunch. Right. So, and then years later, when I actually looked at it, you know, the fees were significant, like North of eight grand a year, right. Um, in the product.

So, you know, in the, in the broker dealer world, again, no shade to that, you know, where it’s more like fee based, so you can charge commissions, you can charge flat fee percentages. I think the problem is, is like. You know, what the advisor is trying to do is one help the client, but also make a living. So, so they’re, they’ll say, Hey, I can, I can get you in this investment and then I earn a commission.

Um, or I get you in this investment. I earn kind of an ongoing fee. And then maybe I sell you, you know, a life insurance product that I earn a commission or an annuity in our commission, or I charge you hourly. So it’s really just confusing. Right. So I think like. Transparency of fee and like, what you’re paying is really important.

And I think marrying that up to like the value that you’re receiving, right? So there’s some people that they view comprehensive financial planning as. Selling you an insurance product and managing your money. And that’s it. And then maybe talking to you once every couple of years, we don’t view that as comprehensive financial planning.

Like we, we view that as very light financial planning, if, if financial planning at all, maybe some investment management. So when you look at the different ways that advisors can charge, you know, fees, it could be a flat fee. It could be an AUM assets under management, which is a percentage of what they’re managing.

And it can be an. Assets under advisement, so it’s, you know, the feet, the investments that they’re managing directly at their own custodian, but also managing indirectly, say, at like, a 4 or 1 K or a 529. it could be commissions that we talked about, which could be commissions on insurance. It could be commissions on investment, which is kind of what we’re talking about here.

An hourly fee or kind of a combination of all these things. So, you know, I think I think the, the, the, the hard part for the consumer for the client is to determine a, like, what the heck are they paying? And are they getting value for that? Um, and if they’re not, then obviously, you know, reassessing it. So, you know, and there’s.

There’s pros and cons for all of these, right? Um, and there’s, there is no such thing as, um, you know, sometimes advisors, especially in the feeling where we’ll say, you know, we have, you know, we give conflict free advice that does not exist. It doesn’t in any model, there’s always a conflict of interest. And I think, you know, the advisors that that is willing to say, like, Hey, we think this is in your best interest.

However, cards on the table, it’s also going to change our fee, increase our fee. Um, and that can go the other way too. It’s also going to decrease our fee. Um, you know, I think those are the type of advisors that are my people, you know, we want what’s best for the, for the, for the client, but understanding, you know, what model you’re in and then like what you’re actually paying is going to be half the battle.

And, and, and more often than not, when I talk to prospective clients and I ask them, Hey, what are they, what are they, what are you paying? They’re like, I literally have no idea. And I think that’s problematic.

Tim Ulbrich: Yeah. And that’s what my experience tells me, Tim, is that, you know, especially the pharmacist households that we’ve worked with, even those that decided, Hey, we’re not, we’re not a good fit. Um, and that’s okay as well is transparency is what matters, right? They want to know what’s involved.

Everyone has a different definition of what, what is return on investment. What’s value that can change in different seasons of life. So, um, I think the transparency pieces is so critical. And if you’re in a relationship and you’re not sure how the advisor is making their fee. That’s a big red flag. Right.

And I think something worth exploring further.

Tim Baker: Yeah, and I think, you know, um, you know, when we talk about fees, like, you know, you’re no model is going to fit everybody. Right? So I think like, it’s just again, being comfortable understanding what you’re paying. Um, and, and, and what I was going to say was, you know, oftentimes, especially with pharmacists, type a scientific minds, they’re like, okay, if I’m going to give you, you know, X amount of dollars in fees.

What is the ROI? And I’m like, well, define ROI because the way that we look at this, the way that we look at ROI is that you, there is a quantifiable that you can count ROI, but I don’t even think it has anything to do with investment returns. I really think the best number in terms of progress with the financial plan is your net worth, right?

The assets, the things that you own minus the liabilities, things that you owe. But I think the other unspoken thing here is the, not the quantifiable things, but the qualifying things of, of what, what have we done with your plan with, with your life plan supported by the financial plan?

That’s hard to count. Whether it’s that, that family, that. Finally, you could buy the house when they didn’t think they could or had the baby or retired early or pivoted careers or got back into a passion that they had put on the sideline for a long time because of whatever reasons. Those are the things that get me fired up.

They have nothing to do with. Ones and zeros in the bank account or net worth or things like that. And I think if you’re in that type of relationship and you have that type of trust and rapport, that’s worth a lot. Um, so that’s my soapbox, Tim.

Tim Ulbrich: I agree. And, and I, you know, would be remiss if I didn’t put a plug in here for what we do and, and for those folks listening that would like to learn more about our fee only financial planning services, what our team of certified financial planners can offer, um, you Working with households all across the country, uh, virtually, you can learn more, your financial pharmacist.com. You’ll see an option at the top, right? You book a free discovery call to learn about those services. Tim, let’s shift to inflation. Um, so in addition to fees, we have to pay attention to inflation and this one feels a little bit sneaky, right? I mean, you’re making money, but inflation is quietly chipping away at your purchasing power.

Yes. Today. At the grocery store, I think we’ve all felt that recently and and perhaps five six years ago It was hey inflation what but we all have felt that more recently But not only in our expenses today might we feel that but also in the future When we think about how far our savings will go so explain to us how inflation erodes the purchasing power Of an investor’s returns over time

Tim Baker: Yeah. So when I talk about like, cause there’s a lot of people out there. That are super risk adverse. Right. So they’re like, Tim, do I really have to invest? Can I just like stuff my mattress or put money in my bank account, my high yields. And I call it a day. And the answer is like, especially if we’re aspiring to be a seven figure pharmacist, plug the book, um, answers.

No, you can’t. And the, when I talk about this, you know, um, with, with, in, in, in, in different talks, like when I look at inflation, if we take, If we take a latte that you buy at Starbucks in 2025, and let’s say it costs 4 dollars. Um, and maybe that’s just a plain coffee these days. But if you, if you, if you get that, that coffee at 4 dollars, if we use historical rates of inflation, and most advisors will use about 3%.

Now, you know, we’ve had years and spikes that, you know, some people are like, well, let’s use 3 and a half or 4%. But if we use 3 percent and we fast forward 30 years, from 2025 to 2055. That same latte that would cost 4. 00. Costs 10 30 years from now. So what that means is that your dollar just goes less far.

And this is why my dad’s in the 70s. You’d always talk about, you know, his grandparents would give him a nickel and you go to the candy store and buy half the store. It seemed right. You can’t buy anything for a nickel today, right? So the, the idea of investing and having a solid investment plan is to keep pace with the inflation monster, but then also get ahead of the tax man, which is what we’re going to talk about next.

So unfortunately we can’t bury our hands, head in the sand or, you know, and I, and I say that, Facetiously and just put money into a check into our savings account and call it a day because over time that, you know, 400, 000, you know, if we, if we look at it from an investment is going to be equivalent to 1, 000, 000 or the purchasing power of 1, 000, 000 in the future.

So. That’s why we need to invest and take appropriate risk and equities and bonds. And I would argue equities, you know, mostly through, you know, the working years of most people, or especially early on. And then as we get closer, you know, start to to add more bonds and fixed income. But that’s really what it is because, you know, every year, you know, the price of goods and services.

Goes up. Um, and it’s a systemic thing that we can’t escape. Um, you know, that we really have to adapt our financial plans to.

Tim Ulbrich: Yeah. And I think Tim, it can be easy to lose sight of historical trends when we’re in

Tim Baker: Yeah, for sure.

Tim Ulbrich: time periods. Right. So, you know, I’m thinking of this moment while we’re recording, although rates have come down, high yield savings accounts are. 4 percent ish, right. Give or take, um, we’ve had historically high inflation, you know, the last couple, a couple of years for obvious reasons we’ve talked about on the show.

And so I think sometimes people look at that and they say, oh, well, you know, 4%, that’s really good historical rate of inflation, but we can’t confuse those. Right. Because just a few years ago, what was our high yield savings account earning less than 2%? Well, I mean, for a while right down there, I mean, even lower than that.

So when we zoom out. Yeah, we get, get those emails, right? Your, your savings account has gone down, but you know, if we zoom out, we look at the historical rate of inflation. If we’re not investing and it taking some level of calculated risk and what that risk tolerance and capacity is, is different for, for everyone.

And that has to be customized, but if we’re not doing that, right. Our, our long term investments really come to be at risk and in terms of us achieving our long term goals.

Tim Baker: Yeah. And I’ll give you an example. So if we talk about the long term effects of inflation, so, um, over time, inflation compounds, meaning it’s cumulative effect on person power grows significantly. So, like, if we take 100, 000 portfolio and we invested at, um, we get a 6 percent annual return over 20 years.

Without inflation, that portfolio grows to from 100, 000 we’ll call it if we, if we then interject reality, which is about a 3 percent inflation, the real value of that investment, if we adjust for inflation would be 180, 000. So that’s, that’s the, that’s the rub here. And again, that’s, that’s why, you know, when people are like, Oh, I’m like really conservative.

I don’t want to take risk. I’m like, you kind of have to get in front of this, you know, especially in, you know, younger in your younger years, um, you know, to get in front of again, inflation and then, and then the tax man.

Tim Ulbrich: Yeah. And this is also why, when we’re doing things like retirement projections, nest egg calculations, especially for people that are maybe in that, you know, front half of their career, let’s say they look at these numbers and they’re like, is this wonky math, right? These seem like they’re huge. They’re out of reach.

Well, we’re, we’re thinking about it in today’s dollars. And obviously we have to be thinking about it. In the future as well, Tim, you alluded to retirement age a little bit. When you’re talking about asset allocation, let’s just touch on that a little bit more. So for maybe some of the pre retirees listening or people that are in the second half of their career that are thinking about retirement, it’s on, on the horizon and are concerned about the long term effects of inflation on their portfolios, ability to generate income and to sustain itself.

What are some general strategies that we’re, we’re thinking about employing? I know you’ve talked before on the show about, Hey, social security, right? It’s, it’s one of those rare vehicles that we have some inflation protection. What, what, what [00:25:00] other thoughts here?

Tim Baker: Yeah. I think as you look at your, your investment strategy, like there are things that, yeah, you mentioned. So that’s why we’re a big, you know, a big believer and really having a very purpose based strategy when it comes to a, uh, social security claim. And because once you made that decision, it’s kind of forever.

And that can really affect the amount of. Inflation protected income that you have coming in the door. Um, so the other things you can think about is there are inflate, there are inflation protected security. So there’s tips treasury inflation, protective securities that are linked, um, to they’re kind of marked to inflation.

So as you know, as, um, Inflation goes up. So does the interest payments for which you, you know, which you receive, um, they don’t necessarily, they’re not necessarily, you know, growth oriented, but it helps you kind of, you know, at least keep pace with that. What we’ve been talking about, you know, at length here is, is really having a portfolio that’s invested in growth oriented assets.

So stocks. Real estate could be commodity commodities that outpace inflation over time that kind of provides a hedge against inflation reinvest in your return. So compound and helps offset offset the negative effects of inflation over time. Another thing that, again, we believe in, um, that not everyone does, but even diversify internationally.

So invested in global markets may reduce inflation. Um, Risk retired, you know, tied to kind of the U. S. Dollar or the economy. And then probably the big thing I hear, or I see, and I actually just had a conversation with perspective client, you know, they were sitting on over 200, 000 of cash and I’m like, why?

And part of its monitor cash holdings. So cash lose unless it’s in a high yield. It’s kind of getting close to that. You know, and today 4 percent cash loses purchase and power quickly in inflationary environments. So you want to really limit the cash that you have idle. So we kind of talk about, you know, you want your emergency fund and any short and medium term goals that you need cash for.

So that might be a trip might be a project on your house, et cetera, et cetera. And that foundation is set to then get money into the market for more, you know, longer, longer term type plan. And so those would be things, you know, like, like I mentioned, you know, it could be, you know, what you invest in, whether it’s tips, you know, growth, equity type of, of stocks could be commodities, but then also some of the things that you’re doing, you know, with cash and, and how you reinvest returns and things like that can help Kind of tackle, tackle the, the, the problem, you know, the, that won’t ever go away, which is the inflation, um, associated with your, with your assets.

Tim Ulbrich: Yeah. One last thing I would add in here, Tim, and this is where I think the flexibility piece is so important. And we’ve, we’ve talked at length on previous shows about this, but if someone has some flexibility. With their retirement situation, whether that be part time work, whether that be the [00:28:00] timeline of when they retire, and we’re in a high inflationary period or a downturn in the market, right?

Things that we may not anticipate happening. Those types of levers that we can pull go a long way in terms of how we maintain the integrity of our, our investment pie as we go throughout retirement, so it’s not a set it and forget it so important when we think, you know, I think back to my early years of saving.

You know, coming out of pharmacy school and it’s like, all right, we’re going to pay it away, whatever, 20, 25 percent of our income. And we’ll kind of think about this tomorrow and that that’s good early on. But then you get to this point in time where we start to ask this question. I’ll be like, Hey, are we on track?

And you know, what is the horizon timeline? And then more nuanced questions, like some of the tax strategies, when we think about withdrawals or, Hey. You know, the markets had an unexpected downturn or we’re, we’re in a down market for a longer period of time. And maybe it’s not the best time to retire, or maybe I could retire early.

Right. There’s all these wrinkles that we have to consider as we get closer to that timeline.

Tim Baker: [00:29:00] yeah. And, and, you know, probably the timing of when you retire is going to be one of the most important things that, you know, um, You know, it’s related to your success in terms of having your assets not run out on you.

Tim Ulbrich: All right. The last piece of our, uh, keeping your investment portfolio fit fees, inflation, taxes, taxes is number three, certainly last, but not least. This is a big one, right? They could take a huge chunk out of your investment Income, particularly if you’re not strategic about it. We’ve harped on that on the show many times before about being proactive with your tax planning and how important that is to the financial plan and whether it’s not maximizing tax advantage accounts, whether it’s realizing, you know, capital gains, taxes, when you’re selling investments or taxes on interest income, if you’re not paying attention to taxes, Tim, it can really hurt your returns.

And, and I think tax is just one of those dry topics that, Hey, we’d rather not really think about.

Tim Baker: Yeah. And it’s, it’s another one, it’s another one that has major [00:30:00] implications on, you know, again, your, your ability to, um, grow your wealth and, and, and keep pace with, with lifestyle, especially in retirement and, and, and really throughout your, your, your whole life. So, you know, I, I think, I think one of the big things that I think about, so when I, when I talk about taxes and investment, I kind of lead with a little bit of a depressing, like example.

So like, if we look at a million dollars and a traditional 401k, a million dollars in a Roth IRA, a million dollars in an HSA, et cetera, then one of the questions I always ask is like, how much money do we actually have? And. Unfortunately, we don’t have 3 million or 4 million dollars, how many bucks it is because anything that is gone into a pre tax bucket, like a traditional IRA, a rollover IRA, a traditional 401k uncle Sam has yet to take his bite of the apple.

Right? [00:31:00] So the mechanics of this is like, if I put money into my 401k, let’s say I put 20 grand in, um, I make 100, 000 a year. The IRS looks at me is if I made 80, 000. So I get a deduction for that. So that 20, 000 goes into my, my 401k. It grows tax free, which is great, which means I’m escaping capital gains. I don’t have to pay capital gains.

And then when I pour that money out in retirement, that’s when it gets taxed. Right. So if I have, you know, over time, I have a million dollars there and I’m in a 25 percent tax bracket, actually 750, 000 of that is mine. And 250, 000 of that is the government. So I think what’s really important about taxes and investment is actually something called, um, asset location.

So these are different types of investment accounts that have different, uh, tax treatments. And the, and the three main buckets here, Tim, are the. Uh, The tax deferred accounts, which I just talked about. So this is kind of a traditional 401k traditional IRA. [00:32:00] So these contributions are pre tax and the investment gross tax referred and then the withdrawals are typically taxed at ordinary income levels.

We have the tax free accounts, which is a little bit misleading because you actually pay the taxes, you know, as it goes in. Um, so these are things like Roth IRA, um, Roth 401k. So the contributions are after tax. So I’ve got my paycheck. I’ve already been taxed and I put those money into a Roth. That investment grows tax free and the withdrawals are then tax free.

So when I pour out that money, so if I have a million dollars in a Roth IRA, I pour out all million dollars of that. I actually get all million, all 1 million of that. And then the last one is the. Taxable accounts. These are the brokerage accounts. So these are taxes, taxes are paid annually on interest, dividends, capital gains, typically the contributions are with after tax dollars.

So I was, I was taxed on it, um, through my paycheck. I contribute that to a taxable account. It grows, but then any capital gains, um, interest dividends, [00:33:00] I’m, I’m taxed again. Um, and that’s where we get into things like tax loss harvest. So, you know, depending on where you’re at. geographically where you’re at in life, you want to have a little bit in column a, a little bit in column B, a little bit in column C, right?

So it’s really important to be able to when we’re building, if we fast forward to retirement and we’re building a paycheck, if I’m the maestro and I’m building a retirement paycheck, I know that Maybe we’re getting in some in from consulting part time work team. Maybe we’re getting some in from, um, social security, which is also taxed, but then the gap that I’m trying to make up between those things and what we need to, you know, live in and thrive.

I’m pulling from these 3 buckets and, you know, if I have a balance of those 3 buckets, it benefits me because what I’m trying to do as a planner is fill up your tax bracket in the most efficient way [00:34:00] possible. So I might take some from the pre tax bucket to get you to, you know, to max out that 12% Um, tax bracket.

And then maybe I go to the, um, the, the Roth to then, you know, get the rest. Maybe we’re, we’re retiring at 58. So then I’m, I’m using primarily, um, a brokerage account because anything between before 59 and a half, you know, I get a penalty and pay taxes. So, excuse me, that’s the, the asset location is really important to determine how we then pull it in retirement and what makes the most Efficiency wise, um, from a tax perspective.

Tim Ulbrich: Yeah. And what you’re talking about, Tim is building a retirement paycheck, right? We talked about this on episode 275. We’ll, we’ll link to that in the show notes, but I love that visual. Cause we all, we all can relate to that, right? Throughout our career, whether we work for someone else, we’re self employed, you know, we have some semblance of a, of a paycheck, maybe it’s fixed, maybe it’s variable, you know, for time, but eventually we’re going to get to [00:35:00] this future state where maybe we’re working part time or eventually we’re not working at all, Or we have to produce our own paycheck.

And there’s going to be multiple sources that are feeding into that. You mentioned it could be social security. It could be, uh, an annuity. It could be, uh, coming from an IRA. It could be coming from real estate. It could be coming from a 401k, right? All these different pathways. And it highlights so well, the point that not all buckets and dollars are created equal as you articulated.

So, well, you could have two people that both have 4 million. And where that 4 million is going to go and how it’s going to be deployed could be very different depending on what buckets from a tax standpoint. And it’s important on the front end. So we’re talking withdrawal side with the building and the retirement paycheck, but it’s also important on the front end is we’re saving, not that we can predict everything that will happen in the future.

But if someone says, Hey, Tim, I want to retire early. And they’re serious about that. Well, we got to think about where those buckets of dollars are going to be and how do we build a plan and a way to support that? So, you know, this is where [00:36:00] online nested calculators fall short, right? Just, just punching in numbers and saying, Hey, Tim, you need 3.

4 million saved, like where, how, what’s that going to look like? What are the tax treatments? All those questions have to be answered.

Tim Baker: Yeah. And it’s, it’s so nuanced, right? Even like, we talk about our own situations. Like, we’re two Tim’s in Ohio. Our financial situation is similar, but different. But even, even with slight variation, we just, there’s, there’s certain things that we, that, that I’m doing in my plan that you’re not doing and vice versa.

Right? Like, one of the, one of the cool things about being self employed in Ohio is, you know, your first 250, 000 per year, there is no state income tax. Um, So, you know, when I moved from Maryland, I’m like, Oh, like I need to really take advantage of that. And hit my Roth harder than what I was, because I’d rather pay the tax.

Now, I just pay federal, um, and, you know, use another example. Like, if I decide [00:37:00] to retire in Florida, you know, maybe I don’t I don’t need to do that, you know, but I’m not retired. I’m not planning on doing that. But, you know, if you’re, if you’re working in a state with income tax and retirement with a state that doesn’t, again, there’s legislative risk there because, you know, things could change, but all of those things kind of play a part in this.

Journey, which is what it is. Um, and it, it’s hard to get that from a calculator and, you know, it is nuanced. And I think, um, you know, provide, you know, it requires a level of care and attention, um, especially when we’re talking about the, the nest eggs and, and the assets that were, you know, that we’re working with over time that, you know, just requires some level of love and attention, really.

Tim Ulbrich: Tim, great stuff. We covered a lot in a short period of time, fees, inflation, taxes, three really important parts as we think about our investment portfolio. And we really are just scratching the surface on all of those areas. We’ll link to some of the episodes. We’ve got more information in the show notes.

Thank you so much everyone for listening to this episode of the podcast. If you’d like [00:38:00] what you heard, do us a favor, leave us a rating and review on Apple podcasts. Or if you’re watching on YouTube, would you help other pharmacists find our show as well? And finally, an important reminder that the content in the show is provided for informational purposes only is not intended to provide and should not be relied on for investment or any other advice, information on the podcast and corresponding materials should not be construed as a solicitation or offered by ourselves, any investment or related financial products for more information on this, you can visit yourfinancialpharmacist.com forward slash disclaimer. Thanks so much for listening. Have a great rest of your week.

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YFP 391: 7 Books That Shaped My Money Mindset

Posted on by YFP Media

Tim Ulbrich shares insights from seven financial books that shaped his journey, offering key lessons on saving, spending, mindset, and building wealth.

Episode Summary

In this episode, Tim Ulbrich highlights seven impactful financial books that shaped his journey, including I Will Teach You to Be Rich by Ramit Sethi, Die with Zero by Bill Perkins, and Rich Dad, Poor Dad by Robert Kiyosaki. He shares key takeaways on topics like balancing saving and spending, adopting a wealth-building mindset, and spending for happiness.

Key Points from the Episode

[00:00] Introduction and Financial Moves Recap
[00:41] Book 1: I Will Teach You to Be Rich by Ramit Sethi
[03:25] Book 2: Die With Zero by Bill Perkins
[06:14] Book 3: Rich Dad Poor Dad by Robert Kiyosaki
[08:12] Book 4: The Millionaire Next Door by Dr. Tom Stanley
[10:12] Book 5: The Compound Effect by Darren Hardy
[14:09] Book 6: Total Money Makeover by Dave Ramsey
[15:33] Book 7: Happy Money by Elizabeth Dunn and Michael Norton
[17:47] Conclusion and Call to Action

Episode Highlights

“ It’s about intentional allocation of the dollars that we have and spending them in areas that we drive the most significance.” -Tim Ulbrich [1:35]

“The plan that got them there to work hard and to save, save, save…that mindset was going to require a shift in order to live a rich life. New behaviors need to be learned. And ideally we can build these spending muscles throughout our careers and not just wait until some day off in the future.” – Tim Ulbrich [5:54]

“I can’t think of anyone. I know. Who got rich off of buying whole life insurance policies, buying random alt coins or buying NFTs.”- Tim Ulbrich [10:59]

“Learning is one thing, but learning and taking action with accountability is really where we start to see things happen.” -Tim Ulbrich [18:21]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Welcome to this week’s episode, Tim Ulbrich here we kicked off the new year where I covered five financial moves to make, and we’ll link to that episode in the show notes.

One of those moves was to set your learning plan. So here are seven financial books that have had a profound impact on my journey, such that I often recommend these books to others, gift them, and I’ve implemented at least one, often more than one of the teachings in my own financial plan. All right. In no particular order, let’s jump in with book number one.

[00:02:00] Which is, I will teach you to be rich by Ramit Sethi.

Now I had the chance to hear Ramit speak in 2019 at the FinCon event, the FinCon conference in Washington, DC, and it was fire. He’s a fantastic speaker, a fantastic teacher. And at the time, the theme of his talk, which he talks about in the book, I will teach you to be rich is money dials, money dials, a key concept in that book.

And. Really, the concept of money dials is identifying what areas of spending have the most significance, meaning or impact for you and dialing those up and on the flip side, finding those areas of spending that perhaps are somewhat automatic and we may not even be thinking a whole lot about it. And they have the least significance or meaning or impact and dialing those down, right?

It’s about intentional allocation of the dollars that we have and spending them in areas that we drive the most significance. Now it sounds obvious, but it’s easy to fall into the [00:03:00] trap of spending money on things that you don’t really care that much about at the expense of not having money. To spend on things that mean the most to you.

And I love that he starts off the book with this, right? Because before we implement the X’s and O’s of the financial plan, as you’ve heard me say on this podcast, many times, we have to be clear on what does it mean to live a rich life? Now he’s, he uses the terminology money dials. We talk about living a rich life.

We’re talking about the same. thing, right? Now, this is not about me saying what should or shouldn’t be meaningful, right?

Everyone has different significance and meaning. It’s about getting clear. What are those things that you derive the greatest significance and meaning from? And is your financial plan, is your spending in alignment with those areas? Now, in addition to the concept of money, Dows in this book, his teachings on automation have stayed with me and are ones I’ve applied to my own plan and teach often to other pharmacists.

Now, he says in the book that automating your money will be the single most profitable system that [00:04:00] you’ll ever build. And I would whole heartedly agree with that. It takes time, a little bit of time to set up, maybe perhaps not as much as you think, but once you have a system in place where you’ve thought about and identified your goals.

We’ve accounted for them inside of the monthly spending plan. And then we are automatically funding those goals. And we see that process happening. Boom, right? That’s when we’re really humming with the financial plan in general. This book is a great personal finance one on one read. It’s an easy read.

Again, he’s a fantastic teacher. And I love the principles in this book and our principles that I often apply in my own financial plan. The second book on my list is die with zero by Bill Perkins, die with zero.

By bill Perkins. This book is going to challenge you to think differently about the value of spending and finding that balance with saving or, as we say at Y. F. P. Finding the balance between living a rich life [00:05:00] today and planning and taking care of our future selves.

Now, if you’re an aggressive saver, Guilty as charged. And you find yourself challenged to enjoy spending money today, right? To let go of the reins a little bit. This is a must read for you. Bill Perkins in the book challenges traditionally held beliefs about retirement planning and passing down generational wealth.

One of my favorite quotes from the book is when he says, quote, people who save tend to save too much for too late in their lives. They’re depriving themselves now, just to care for a much, much older future self, a future self that may never live long enough to enjoy the money.

I’ve come to appreciate and still need a lot of help guidance and reminders from my financial planner, from Jess and our own plan that spending just like saving. Is a learned habit. I was recently reminded of this after listening to an interview on Ramit Sethi’s podcast, where he was talking with a couple [00:06:00] nearing retirement age that had over 6 million in net worth.

It was quite sad to hear the husband rationalized with Ramit for almost two hours, all the reasons why he couldn’t spend and enjoy because he had to quote first, save it up. Or quote work harder to make up for what he was going to spend again, net worth of 6 million. So for all intents and purposes, they achieved their savings goals.

Plus some, right? The plan had worked. They had gotten to that point that they were planning for all along, but despite what the numbers showed, he couldn’t shift his mindset. He was stuck in the grind and the hustle of working and saving. Working and saving. And this is something we don’t talk about often enough with the financial plan that when we work hard for 30 or 40 years to save, that is a big transition.

When we get to the withdrawal phase, right? We need to be planning for that. We need to be preparing for that. And we need training wheels along the way to help us with this learned behavior of spending. And the point that was remit was trying to make and trying to get this husband to see is that in order to live a rich life, the plan that got them there can’t be the same.

As the plan going forward. The plan that got them there to work hard to save, save, save, work hard, save, save, save. That mindset was going to require a shift in order to live a rich life. New behaviors need to be learned. And ideally we can build these spending muscles throughout our careers and not just wait until some day off in the future.

That may or may not come and may or may not be what we have in mind.

Number three on the book is rich dad, poor dad by Robert Kiyosaki, rich dad, poor dad by Robert Kiyosaki. Now, Robert Kiyosaki has recently come into the spotlight and many different controversial ways. So personality aside, his teachings in this book, in my opinion, remain a classic. This book is all about mindset, not X’s and O’s like some of the other books that are on the list today.

And if you think of the financial plan as a series of decisions that need to be made, I think of this book as being [00:08:00] a philosophy that guides those decisions. It’s the thread behind the decisions that we make. And a few of the things that have stayed with me is that, you know, what we might think is an asset versus a liability. I think he challenges that mindset. Why leverage is an important tool to build wealth.

And of course there’s risk with leverage and we have to balance that. Also, what has stayed with me is why traditional W 2 income limits wealth building. And finally, why business ownership and real estate investing are key legs. Of the wealth building school.

Now this book in particular, along with tax free wealth by Tom Wheelwright, and we’ll link to all of these books in the show notes, tax free wealth by Tom Wheelwright really opened my eyes to the importance of tax as a part of the financial plan. One that is kind of always behind the scenes that probably many of us are not thinking about, and more specifically the strategies.

That can be employed to optimize our tax situation, right? We want to pay our [00:09:00] fair share, but we want to pay no more. And I think through these teachings and really digging into the form 10 40 and understanding how the different components of that form work and what are the levers that we can pull to make our, uh, tax rate as efficient as possible.

These two resources, rich dad, poor dad, and tax free wealth have really been instrumental in opening my eyes to the significance and importance of tax as a part of the financial plan. All right. Number four on my list is the millionaire next door. By Dr. Tom Stanley, the millionaire next door by Dr. Tom Stanley and the updated version, the next millionaire next door featuring Tom’s daughter, Dr.

Sarah Stanley flaw, which we had the pleasure of having on the podcast on episode number 200. This book examines the key behavioral traits. Of millionaires. One of my favorite quotes from the book is when he says, quote, one of the reasons that millionaires are economically successful is that they think differently.

They think differently. What he’s talking about is one of [00:10:00] my key takeaways from that book is that net worth, not income net worth, which is your assets, what you own minus your liabilities, that really. Is a true indicator of your overall financial health, right? Net worth, not income as the financial vitals check is really going to help us as we think about this mindset of, is our income being translated into building our assets and paying down our debt, some of my other key takeaways from this book is that, you know, we often wouldn’t know who the people are that are millionaires or multimillionaires.

When you look at the research that’s presented in the millionaire next door, as well as the updated version and the next millionaire next door, the spending behaviors and patterns would say that they probably aren’t the people that we think are millionaires that more or portray. To be millionaires, they often have a frugal mindset.

Doesn’t mean that they’re cheap. Doesn’t mean that they don’t like investing in good experiences. Doesn’t mean that they’re not a philanthropic or givers, but they often have a frugal [00:11:00] mindset. They’re they’re typically not trapped. Millionaires are not trapped by what I think of as the big rocks, right?

They’re not house poor. They’re not car poor. They do take calculated risk often in business or real estate. And most millionaires, as the research suggests in that book are self made. It’s not typically inherited money, fascinating research and concepts. I would highly recommend that the millionaire next door, the updated version.

If you haven’t already read it. Alright, number five on my list is The Compound Effect by Darren Hardy it was one of those books I, I, I remember exactly where I was when I read it, uh, at our old house up in northeast Ohio during the summer.

I read it outside and, and a couple hours I couldn’t put it down. And one of those books, you’re just constantly highlighting, taking notes. You’re like, yes, yes, yes. And this is not exclusively a personal finance book, but I love the applications here. And I was recently reflecting on those in my life that have been financially successful, because I think it’s helpful to learn and grow [00:12:00] from those who have actually done it right.

And as people came to mind that I thought of, okay, who has been a long term financially successful in building wealth, not short term success, long term financially successful. And as I thought more about that, I was like, I can’t think of anyone. I know. Who got rich off of buying whole life insurance policies, buying random alt coins or buying NFTs.

And I’m not saying that people don’t exist that have built wealth in those ways. Rather, what I’m saying is that I don’t know anyone that took this path, and I feel confident in saying the perception is much greater than the reality when it comes to these types of vehicles being a viable path to building wealth, right?

Often these are short term solutions that are band aids when we really need to look at long term consistent behaviors. Rather, when I think of those people that have built long term wealth, it was a long methodical, patient journey. One intentional step after another [00:13:00] where those decisions and good decisions, not to say there weren’t mistakes along the way, but those good decisions compounded over a long period of time.

And I think, unfortunately, we’re hearing less of these journeys, right? Because these aren’t great clickbait. These aren’t great. In terms of social media algorithms are often boring stories in the, in the literature really supports that. And the book, the millionaire next door, which I just mentioned previously, Yeah.

And several, when I thought more about who are these people, several, not all have multiple pathways of building wealth. Typically it’s traditional investments. It might be equity in a business. It might be real estate, and those aren’t always in balance, but I’ve noticed that as a theme and those that have been really long term, uh, Successful in building wealth and often being philanthropic is a part of that wealth building.

These individuals that come to mind are taking calculated risks on opportunities where they see that the upside dramatically outweighs the downside, and they have a strong financial [00:14:00] foundation in place such that if that calculated risk doesn’t work, They’re not going to be impacted in a significant or catastrophic way, right?

They’re able to take that calculated risk because they have that strong base and foundation in place. As I think of these people that come to mind, I would describe them as overall fairly conservative yet willing again, to take some level of risk if an opportunity presents itself. So they’re not risk averse, but they’re also not flashing.

In fact, they’re quite humble and they’re often very philanthropic. And they really do embody some of the teachings that have stayed with me from this book, the compound effect by Darren Hardy. He has a formula in this book that I often reference back to. And that formula is small, smart choices. Plus consistency, plus time equals radical difference, small, smart choices, plus consistency, plus time equals radical difference, right?

That is the definition of compound interest when we think about saving over a long period of time. So this is the [00:15:00] path I will follow. This is the one that I have seen work a path defined by working hard, taking calculated risk. Investing in tax efficient, appreciating assets, building equity that can be converted to other assets.

Developing a habit and priority for giving and doing this over and over over a long period of time to allow those results to compound. All right. Number six on my list is total money makeover by Dave Ramsey, the total money makeover by Dave Ramsey. Now I’m not an avid follower of Dave Ramsey and his principles and the baby steps, but I have to give credit Where credit is due, reading the total money makeover, going through financial peace university, listening to Dave Ramsey’s podcast was really like a wake up call over a decade ago that inspired the journey that Jess and I took to ultimately pay off our 200, 000 of student loan debt and really led to is the really beginning steps of the place that we are today.

And the journey that we would take to get there, that [00:16:00] book. The total money makeover, listening to the podcast really lit a fire under me to want to learn more, right? As I mentioned, it was kind of a wake up call to create our own path, our own plan. Even if we didn’t follow the path in plan that he prescribes to so many through the baby step formula.

The baby steps I will admit early in our journey, it was a grounding framework, a grounding framework for us that we needed at the time. As we were trying to balance many things, we weren’t doing any of them particularly well, and we didn’t have an intentional plan in place. And that really was the footing that we needed to get started.

That would ultimately allow us to build momentum, to build our emergency savings, to get out of debt, and then to have a prioritized approach. To achieving our goals. So that’s number six, a total money makeover by Dave Ramsey. Number seven last on my list is happy money. The science of happier spending by Elizabeth Dunn and Michael Norton.

Now I would assume many of you have heard of. All [00:17:00] perhaps the first six books that I mentioned, but maybe not the case with this one. I ran across this, uh, several years ago and I intentionally book ended my list of seven here with this one per particular, because I think that it’s an important reminder that money is a tool, right?

I mentioned that when I talked about die was zero by bill Perkins. Money is something that affords us the opportunity to pay for our basic needs. And if we’re able to live our rich life and to give to others. And next time you hold a bill of any value in your hand, remind yourself that it’s a piece of paper.

In fact, it’s a piece of paper that I recently learned is 25 percent Linden, 75 percent cotton, but this is a piece of paper that has value because number one, we all agree that it has value. Number two, it’s backed by the faith and credit. Of the U. S. Government. So what’s my point? My point is that it’s finite, right?

And if we’re not careful, we can miss the boat on a crewing while losing sight of the so what? [00:18:00] And that reminder comes, I think, strongly in the book. Happy money. The science of happier spending. By Elizabeth Dunn and Michael Norton. This book provides what the research has to say on the science of spending and the connection between money and happiness.

Now, happiness, how you define that, right? That’s an important component to consider. But my takeaways from this book were that the literature supports to no surprise, but an important reminder, the link between happiness and Monday. Typically lies in two main areas. Number one, spending money on experiences and memories that will come for those.

And number two on giving, when you look at the connection between happy and moneyness, it strongly points to giving and experiences as an important part of the financial plan. And I think if you talk to anyone who’s been at this for a while, You start to see this come out again, especially as they short up some of the basis of their financial plan.

These are the areas that you typically see people light up when they talk [00:19:00] about their financial plan. All right. So there you have it. Short and sweet. Seven personal finance books. That have had a profound impact on my journey and our books that I would recommend you read or reread . We’ll link to all of these books in the show note.

And if you have a book that you often recommend or that has had a profound impact on your journey, I want to hear about it. Shoot me an email at info at your financial pharmacist. com. Let me know what I left off the list. I’d love to read it and perhaps share it with our community. In the future. Again, you can reach us at info at your financial pharmacist.

com. Now we all know that learning, right? Reading books, listening to podcasts, learning is one thing, but learning and taking action with accountability is really where we start to see things happen. And that’s why we’re so excited about the work that our team at YFP planning is doing through our fee only certified.

Financial planning service. If you want to learn more about what it looks like to work one on one with a fee only certified financial planner from your financial pharmacist, yes, to learn and grow in your financial IQ [00:20:00] and knowledge, but also to take steps and implement those in your financial plan and be held accountable to achieve those results, you can book a free discovery call at YFP planning.com again. That’s YFP planning. com. Thanks so much for joining me on this week’s episode, and we’ll be back next week. Have a great rest of your day.

[END]

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YFP 390: YFP 390: Financial Resolutions: Top 5 Moves for Pharmacists in 2025

Posted on by YFP Media

Tim Ulbrich, YFP Co-Founder, shares 5 key financial moves to align your goals, enjoy life now, and build a secure future.

Episode Summary

In the first episode of the year, Tim Ulbrich, YFP Co-Founder, dives into strategies for aligning your personal and professional goals to make 2025 your best year yet. He shares five essential financial moves to help you strike the perfect balance between enjoying life today and building a secure future.

Learn actionable tips for setting meaningful financial goals, optimizing your tax planning, organizing your financial documents, automating your savings, and crafting a plan for continuous learning.

Key Points from the Episode

[00:00] Welcome to the YFP Podcast
[00:50] Balancing Financial Goals for Today and Tomorrow
[03:11] Elevate Your Tax Strategy
[08:29] Organize Your Financial Documents
[12:40] Automate Your Financial Plan
[21:42] Commit to Continuous Financial Learning

Episode Highlights

“ So no matter where your experience or goals live, there is no right or wrong. Each of us is on our own journey.” – Tim Ulbrich [2:09]

“Let’s make this year the year that we move the needle on both: those long term savings and investment goals saving for our future selves, while also prioritizing living a rich life today.” – Tim Ulbrich [2:56]

“ Think of automation as the mechanism by which your income is working for you, and it’s automatically funding the priorities that you’ve already set.” – Tim Ulbrich [12:57]

“ We know that we have a system and a list that is prioritized, that if that income comes in, we know exactly what to do. Where we’re going to allocate that, and that is the power of automation.” – Tim Ulbrich [19:06]

“ One of the greatest advantages of that we have of living in the 21st century is that we have access to learning just about anything that we want. And often we can do it at a low or no cost, right? Thank you very much to our local public library.” – Tim Ulbrich [22:06]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: [00:00:00] Hi there. Tim Ulbrich here and happy new year. I’m so excited to be kicking off 2025 with you here on the YFP podcast. Thank you so much for listening and for joining the show.

I get excited With the turning of the page into the new year, not as a complete reset, but as an opportunity to really look more closely at the priorities that I’ve determined to be most important to me personally and professionally, and to make sure that the schedule and activities align accordingly.

And I hope the same is true for you. And as we talk about. That turned into the new year as it relates to the financial plan. I’m going to cover five financial moves that I think you should consider implementing as well as why I think about each of these five areas.

So let’s kick things off with number one, which is making sure that our financial goals strike the balance between living a rich life today, as well as. Planning and saving for the future, right? We need to be thinking about tomorrow. We have to be planning and saving for retirement, making sure that we’re focused on moving our net worth in a positive direction, net [00:01:00] worth being our assets minus our liabilities, making sure that we’re taking care of our future selves, saving for retirement, filling those investment buckets.

All of those things are a priority. But let’s not lose sight of those goals that. Help keep us focused on living a rich life today while we’re planning and saving for the future while we’re planning for tomorrow. So perhaps for some of you listening, you’ve long dreamed about a certain experience that has taken a backseat to the busyness of life.

Maybe that’s a small as a weekend getaway for those that have young kids. I know how difficult that can be, or perhaps for some of you, this is a big stretch goal, maybe something as big as a year off traveling the world, having those Lifetime types of experiences, those bucket list type of experiences that are most important to you.

You know, I think back to Matt and Nikki Javid that we featured on the podcast that traveled the world. Nick Ornella that took a year off from his job as a community pharmacist to travel the world. We’ll share both of those episodes in the show notes. So no matter where your experience or goals live, [00:02:00] there is no right or wrong.

Each of us are on our own journey. Perhaps it’s something that’s experienced focus that hasn’t been a priority that you’d like to make a priority those interests or hobbies that we used to long for and prioritize that have gotten lost again in that busyness of life and work.

One of the activities I wanted to pursue was getting back into playing volleyball, something I had done competitively throughout high school, something that the busyness of life. Other priorities and work just fell by the wayside.

And I did that through a local rec league and that brought incredible joy to me throughout the winter. Or what about that side hustle business or project that you’ve been dragging your feet to take the first step on, or perhaps volunteering or giving opportunities that have gotten lost. And the shuffle, the other priorities of the financial plan.

So let’s make this year, the year that we move the needle on both. Yes, those long term savings and investment goals saving for our future selves, while also prioritizing living a rich life today.

So that’s number one on our list of five financial moves that you can make in the new year, all right. [00:03:00] Number two is taking your tax strategy to the next level, taking your tax strategy to the next level.

Now, tax, in my opinion, is one of the most underappreciated and overlooked parts of the financial plan. And I want you to think about tax as a thread. That runs across your financial plan, perhaps one that maybe you’re not thinking enough about that. Ideally we are proactively considering and evaluating when we are making our financial moves.

Now, this sounds so obvious, but I previously have viewed tax very much in the rear view mirror, right? We have to file by April 15th or thereabouts each year to meet the IRS requirements. We don’t want the IRS coming knocking at our doors. And when we do that, we are accounting for. What happened in the previous year now, thankfully, because of our attention and focus on this topic, I’ve become much more proactive in my tax planning as a part of the financial plan, but in years gone by, we would file our taxes and then we’d hold [00:04:00] our breath, right?

Are we going to get a refund? Are we going to have taxes that are due? Did we, withholdings correctly based on differences in charitable giving from one year to the next, right? All of these factors, I didn’t have a great. Picture on come that time of tax filing, what was going to happen, right? And that is less than ideal when it comes to optimizing this part of the financial plan.

And so again, we need to shift our attention from tax preparation to tax planning. One is proactive. One is reactive, right? Again, when we go to file and we complete that paperwork, whether you do that yourself, whether you hire a professional, that is looking backwards. If we start to think more proactive, hopefully at the point of filing, yes, we’re going to do that work.

We have to do that, but we’re then looking ahead to say, Hey, based on that information, based on the rest of our financial plan, based on our personal situation, based on changes that we know are coming or goals that we have. Okay. Bye. What can we be doing strategically in advance throughout the rest of the year to make sure that we’re paying [00:05:00] our fair share of taxes, but no more.

So if you don’t already know your key tax numbers, I’m referring to things like marginal tax rate, effective tax rate, adjusted gross income. Let’s make a commitment this year. We’re going to do it. To get started and to learn more. Now I would love if you would get out the IRS form 10 40, we’ll link to it in the show notes and just spend 10 to 15 minutes to make sure that you understand the terminology and the flow of dollars.

I get it. It’s nerdy, right? And whether you like this subject or you don’t, you do it yourself, you hire someone else, understanding these numbers and understanding the flow of dollars and what those terms mean and how it, ultimately affects your marginal and your effective tax rate is going to be really important as you think about the strategies and you’ll be able to directly see how certain strategies you can implement in the financial plan are going to have an impact on the overall taxes that you pay.

So as one example, AGI adjusted gross income [00:06:00] has huge implications for those that are going through student loan repayment, right? Income driven repayment calculations, especially for those that are pursuing a public service loan forgiveness strategy. Your adjusted gross income is directly tied to the monthly payment that you’re going to make on your student loan.

So if we understand that, we can then start to think about how Well, Hey, are there strategies I can use that can perhaps reduce or lower my AGI adjusted gross income? Not by making less, we don’t want to do that, but by making contributions to things like traditional 401k or traditional 403b accounts, or how about health savings accounts?

Right. These are types of things that can reduce our taxable income, therefore reduce our monthly student loan payment, which is a great thing, especially for those that are pursuing tax free loan forgiveness all the while we’re accruing tax deferred savings into the future, just one example of how.

Important. The proactive planning can be now on episode 309 of the podcast. We’ll link to that in the show notes, CPA Sean [00:07:00] Richards covered the top 10 tax blunders that pharmacists make.

Some of those things, including having a surprise bill.

Or refund due at filing, probably the most common thing that we see and so what we want to be doing ideally is we’re shooting for zero. We don’t want to have an interest free loan that we have out to the government. And we also don’t want to have a surprise bill that’s due that we’re not ready for.

Another common mistake he discussed was pharmacists not employing a bunching strategy for charitable giving. So for those that are giving, especially giving at a significant level, uh, and aren’t following the standardized deduction, is there perhaps some strategy in the, in the bunching of charitable contributions that can reduce.

Once tax rate, he also talked about a common mistake. You saw a new side hustlers and business owners not planning for taxes. So earning income and being surprised, uh, by not paying estimated taxes along the way, we talked about underestimating the power of the HSA, the health savings account, and an oldie, but a goodie not factoring in public service loan forgiveness when choosing tax [00:08:00] filing status as married.

filing separately or married filing jointly. So make sure to check out that episode, episode 309 and easy to see as you hear some of those common examples, why having a proactive tax plan is worth its weight in gold.

So that’s number two on our list of five financial moves to make in the new year. Number three is button up your financial documents, button up your financial documents.

Now getting organized with your financial records. I believe plays a significant role, not necessarily in terms of moving the needle on your net worth, but in making sure that you and others have access to all of the information that you need to make informed decisions with the financial plan. So think for a minute about all the financial accounts that you have out there, all the different documents.

Insurance policies that touch a certain part of your financial plan. The list quickly grows to one that is overwhelming and the more you operate in your own system, the longer time goes by where you’re operating in [00:09:00] your own system, the easier it is for you to navigate, but perhaps harder for others to navigate and unravel should they need to do so in the future.

And that’s where this concept of buttoning up your financial documents comes in. That’s where this concept of a legacy folder comes in. I first heard of that idea of a legacy folder when I took Dave Ramsey’s financial peace university, probably 10, 12 years ago at this point at our local church. And I remember walking away thinking, wow, that is so simple, so obvious.

Why haven’t I done that yet? Why haven’t Jess and I done that yet as a part of our own plan? So essentially the idea of a legacy folder, if that’s a new concept to you, whether it’s a physical folder, an electronic folder, or a combination of both, it’s a place where you have all of your financial related documents.

So in the event of an emergency, others would be able to quickly access your financial situation. And they’re not just access, but be able to pick up and understand what’s going on and to be able to make key decisions. In your absence.

[00:10:00] So here’s how we have organized it. Certainly not the only way to do it, but here’s how we have organized it in a combination of Google drive. And a safe at home that has a passwords, all of our passwords stored in a one password account. So we have nine different sections. I’ll describe them briefly.

This sounds overwhelming. It did take a commitment of time to get started. It takes a commitment of time to update, but I will say there’s an incredible feeling of peace. Momentum that comes from having this done. So section one for us is what we refer to as important documents Okay, birth certificates for us for our kids social security cards marriage certificates passports all of these We have in a fireproof safe at home and we have them just referenced Uh, as being there in the electronic version that we share with the financial planning team, as well as share with those that would take care of the boys in the event of our absence.

So that’s section one important document. Section two is all of our insurance policies and information, auto insurance, homeowner’s insurance, umbrella insurance. Health [00:11:00] insurance, long term disability, term life and term life insurance policies for myself, for Jess, for the business, et cetera. Section three is a state planning documents.

So we have a hard copy of these in the safe that have been notarized and electronic version that’s uploaded in the Google drive. So these are things like the revocable trust agreements, healthcare, power of attorney, living will last will. And testament section four is the car titles. Section five is our home ownership documents. So this is the deed to the home, our home equity line of credit, our HELOC information. We have another copy of homeowners insurance policy here, just so it’s all contained in one section. Section six is a summary of our financial accounts, our net worth tracking sheet.

As well as our social security statements. Section seven is our tax returns for personal and business tax returns. Section eight is all of the records related to the business. So a summary of the different entities, legal documents, operating agreements, buy, sell agreements, et cetera. And then section nine is just a miscellaneous.

So [00:12:00] information about utilities and other accounts that don’t fit. In the previous sections again, it takes time to get that started, but it’s something that you can act upon pretty quickly in the new year. And I encourage you to set a, an annual recurring reminder, whether that’s the turn of the new year, perhaps it’s daylight savings time or something else that you just remember to update those documents as needed.

Periodically. All right. So that’s number three in our five financial moves to make in 2024 button up your financial documents. Number four is my favorite. This is the area that I think has moved the needle the most for Jess and I in our financial plan over the last decade or so. And that is automation, making sure that you have a system and ideally a system that is working.

So think of automation as the mechanism by which your income is working for you, and it’s automatically funding the priorities that you’ve already set.

And determined to be most important in advance. Now, I know I’m not alone when [00:13:00] I say that I was feeling for some time that there are multiple financial priorities that are occurring at once that are swirling around in my head. And it can be overwhelming to think about what are those priorities in what order.

And how do we allocate the limited resource of limited income that we have to those? Should we focus on one? Should we focus on two? Should we focus on three? And so much of the stress around the financial plan, I believe is from all of that unknown and anxiety swirling in our heads, right? If we can get that down onto paper.

And if we can start to put some numbers and a plan to it and prioritize it, we may not always like the outcome of how fast we may or may not be able to achieve those goals. But once we have a plan, once we articulate it, once we know we thought about it, we prioritize it. I think there’s a lot of clarity and momentum that can come from that.

So automation helps put those goals into action. It takes the stress out of wondering whether or not they’re going to happen. So whether it’s saving for an emergency fund, whether it’s saving for a vacation, paying down [00:14:00] debt. Whether it’s student loan debt, consumer debt, auto loan debt, mortgage debt, whatever type of debt, whether it’s saving for retirement, saving for a home, saving for investment property, automation helps identify and prioritize these goals and assign your income accordingly.

Yes, it takes a bit of time to set up, perhaps not as much as you may think as you hear about it, but once it’s set up, it provides a long term Return on time benefit, but also better yet, as I mentioned, peace of mind and feeling of momentum, knowing that you’ve thought about prioritize and have a plan in place, working itself to fund your goals.

Now, Ramit said, he talks about this in his book. I will teach you to be rich. He does an incredible job of teaching automation credit to him. And he says that automating your financial plan will be the single most profitable system that you’ll ever build. And I remember hearing that and thinking, man, that’s a big, big promise, right?

But it is a hundred percent true. [00:15:00] Automating your financial plan will be the single most profitable system that you’ll ever build. So if you’re not already doing this, I want you to imagine a future state. Imagine a future state where your financial goals and priorities are clearly defined. You’ve determined how much of your monthly budget is available for these goals, and you have a system in place to automatically fund these goals every month.

So you get paid and your money is being distributed automatically. Paycheck comes in, dollars are being funded to the goals that you’ve already determined and prioritized to be most important. Okay. So what does this look like? Here’s how Jess and I. Are currently implementing this now, previously we adhered to a zero based budget, which I think really did help us.

Laser in and focus on our expenses and account for every single dollar that we earn. That’s the premise of a zero based budget. I think that method works out really well, especially when you’re getting started or feel like you need to get back on track. But over time, we’ve loosened [00:16:00] this up knowing that once we account for all of our monthly commitments, right?

Our monthly commitments being mortgage insurance, property taxes, giving grocery subscriptions, utilities, et cetera. Once we account for those, and those are largely fixed. outside of some variation in utility payments. We have a certain amount of funds after we account for those things that we know can be allocated in two general buckets.

With several options within those two general buckets. So what are those two general buckets? General bucket number one is what we call everything else. So this includes things like gas, miscellaneous trips to the store, family experiences, family entertainment, eating out, et cetera. And we track this, Jess and I track this in a shared Google sheet.

That just helps us make sure we don’t overspend this category. The second general bucket is what we think of as our sinking funds. It’s the second bucket of funds that we want to predefine, prioritize, set allocation amounts, and then set up auto [00:17:00] contribution of funds.

The areas that we’re focused on our funding and HSA saving for a summer vacation, our Roth IRAs funding, the next, the next car purchase, and then thinking more about the boys five to nine funds for college savings.

So as we sat down and thought about. What is the greatest priority? Those are the things that rose to the top that we wanted to fund with these bucket two funds that I’m referring to, right? These sinking funds. So in this scenario, and within our discussion of automation, we would look to estimate the available pool of funds per month or per year divided by 12.

We would then prioritize the list. Determine the allocation order in the amounts. And then, as I mentioned, we would automatically fund those and set up an, a recurring contribution.

Now you can see the system and process that we worked through, right? We identified the total estimated annual amount. You can do the same thing to buy that by 12 for monthly.

We listed out the goals and we matched those up [00:18:00] to prioritize accordingly. Now here’s the disappointing part, or perhaps. Depending on you look at it, maybe exciting as I do in this example, we have fully funded several goals, right? , but we had several things that I mentioned that were left unfunded. Okay. The kids five to nine accounts as well as the next car fund. So we have a couple options here. We can go back to the drawing board and redistribute, right?

Lower some of the other ones and partially fund some, and then have others that we are able to partially fund, or we can stay as is knowing that if additional funds become available, right? Whether that’s in the form of for us, additional income, it could be tax refunds, although hopefully we’re doing a good job planning and that’s not the it could be sizable income for some of you.

It could be picking up extra hours. It could be gifts that you receive, whatever might be the additional income. We know that we have a system and a list that is prioritized, that if that income comes in, we [00:19:00] know exactly Where we’re going to allocate that, and that is the power of automation.

That is the power of having a system. So one step further, what does this practically look like for us in terms of implementation, so we use ally for all of our online banking. Now, this is not a commercial for ally.

Uh, we really like them. We’ve used them for several years. I like the capability they have with saving buckets and other features, but you can build a system like this and many different types of savings accounts. So for us, direct deposit from work income goes into ally, goes into a checking account. And since we know the amount required per month to allocate to the goals we decided upon, there is then a bucket.

Labeled for each of these goals inside of ally. So the transfer of funds goes from checking account where the direct deposit comes in to savings account. And then within the savings account, we have a predefined bucket. So essentially what this looks like is you’ve got a certain amount of dollars, let’s say [00:20:00] 30 or 40 in a savings account.

But once you click into that, you see all of these different sub buckets for things like vacation and again, you can do a multitude of things. Of different buckets. I think you can do up to 30 or so inside of ally. And in the case of for us, the IRA, HSA savings, you know, we could put those in the bucket as well inside the savings account, but we’re going to set those up to be an auto contribution directly into the investment account, right?

We want those dollars working for us as quickly as possible. So again, imagine that flow, you get paid. Right. We’ve identified the buckets. They auto contribute into the buckets because we know we’ve already accounted for inside the budget, and then that’s working for us once we have the system set up now, depending on when you get paid for us, it’s the first of the month, but for you, it might be two times a month.

But regardless, once you know when you get paid and once that consistent, we know that any time after the first, so we get paid around the first of the month as well as the 15th, but we use the first is our metric for when we’re going to auto fund these goals. So anytime [00:21:00] after the first, it could be the third, it could be the fourth.

I think I have most of them set up on the fourth. We can have that auto transfer established to go from checking to savings to the bucket, leaving. Only in checking what is left to pay off the credit card each month. And so that all other dollars, they have a purpose, right? They’re being defined and allocated towards a goal.

That is the system of automation. I think the one probably that can move the needle, the most automate your financial plan, have a system in place.

And finally, number five is set your learning plan. Now, when it comes to personal finance, I believe strongly that there is no arrived with the financial plan. Right? This is constantly evolving. It’s constantly changing and a commitment to ongoing learning and having the humility to understand that there’s much to learn and that mistakes are inevitable is really key to long term success.

One of the greatest advantages of that we have of living in the 21st century is that we have access to learning just about [00:22:00] anything that we want. And often we can do it at a low or no cost, right? Thank you very much to our local public library. So whether it’s reading books, great. Have at it. If it’s podcasts, blogs, videos, there’s many options out there.

Find the learning path that means the most to you and has the significance. And really engages you in the learning process. And I’m going to encourage you. Learn learning is one thing, right? But learning plus action plus accountability is really where things start to happen. So that’s number five of our five financial moves to make set an intentional plan around what you want to learn in this new year.

And then determine what are those resources? What are the blogs? What are the books? What are the podcasts that are going to help you get there? And I hope YFP will be an important part of that journey. Cheers to a great new year. Have a great rest of your day.

[END]

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Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
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YFP 389: 2024 in Review: Milestones, Highlights, & Giveaway!

Posted on by YFP Media

Tim Ulbrich, YFP CEO, celebrates over 2 million downloads of the YFP Podcast by sharing some of his favorite episodes and listener stories. He also previews exciting projects ahead in 2025 for YFP.

Episode Summary

In this special year-end episode, host Tim Ulbrich reflects on a milestone year, celebrating over 2 million downloads of the YFP Podcast. He shares powerful listener stories, recaps his top three episodes of 2024—featuring topics like achieving financial success, landing scholarships, and entrepreneurial journeys in pharmacy—and offers a glimpse into what’s ahead for 2025.

Plus, don’t miss your chance to win a $100 Amazon gift card by submitting your show ideas to [email protected] by January 1st, 2025.

Celebrate with us, and gear up for an inspiring year of growth and success!

Key Points from the Episode

[00:00] Welcome and Year-End Reflections
[00:19] Listener Appreciation and Milestones
[01:09] Inspiring Listener Stories
[02:20] Favorite Episodes of 2024
[06:44] Looking Ahead to 2025
[08:28] Exciting Giveaway Announcement
[09:36] Closing Remarks and New Year Wishes

Episode Highlights

“ It’s about designing and living that rich life today while we take care of ourselves and the future.” – Tim Ulbrich [2:01]

”Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars?” – Tim Ulbrich [4:02]

“The financial plan has to focus on taking care of ourselves in the future while also living and prioritizing a rich life today.” – Tim Ulbrich [7:25]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: [00:00:00] Hey everybody, Tim Ulbrich here. And thank you for listening to the YFP podcast, where each week we strive to inspire and encourage you. On your path towards achieving financial freedom this week. I’m flying solo as we wrap up and celebrate another year of the YFP podcast. It’s a busy time of year. So let’s keep this one short and sweet.

First and foremost, thank you to you, our listeners that tune into the show. Some of you that tune in a loyally every week, since we started the show back in 2017, thank you so much. And some of you that maybe check in periodically as you’re able to, I get it. Time’s limited. You have a lot of options. So whether you listen while you’re working out, whether you listen while you’re driving to work, whatever it may be.

Thank you so much for the support of the show, the energy that you all provide, the encouragement that you provide helps keep us going each and every week. And I mean that sincerely. And today marks a really cool milestone for us. As we wrap up 2024, we recently passed [00:01:00] 2 million downloads of the show. Wow. Wow. Wow. And that number is really cool. 2 million downloads. But to be honest. It’s the impact and hearing from you guys that gets me fired up each and every week. I heard from Jordan this year who said, Hey, great news, officially net worth positive catching up on budgeting and realize that I just cross the threshold.Appreciate your tips and insight thus far. How cool is that? Getting to net worth positive and beginning to build wealth.

I also heard from a Kayla who said your podcast on how pharmacists utilize creative entrepreneur opportunities are truly inspiring. And personally inspired me to create my own clinical pharmacist, consulting firm and Taylor said, your content really helped us buckle down and pay off our loans. It’s allowing us to be more flexible in considering a career transition within pharmacy. That gets me fired up, right? We often talk about money is a tool. Money is a tool. It’s about designing and living that rich life today while we take care of ourselves and the future. And when I hear comments like that from Taylor that says, Hey, we got focused on our student loans so that we could be more flexible so that we could pursue this other thing that was really important to us.

That’s what it’s all about. . Some of the highlights in my favorite moments from 2024, we’ve had a lot of great episodes throughout the year. I just pulled three of my favorites. The first one is episode 365, and we’ll link to all of these in the show notes, you know how to find them.

This episode featuring pharmacist, Mike Byers was titled millionaire theme hour from 0 to 1.

And his story was so inspiring of how he essentially started at a net worth of zero and was pretty quickly able to get to a net worth North of 1 million and has continued to build wealth since then, such [00:03:00] that in his early forties, He was able to step away from his full time work in community pharmacy to spend more time with his young family and to pursue other opportunities, most notably those that he’s been building in real estate.

Mike’s story reminded us, reminded me that building wealth, that defining and living the rich life legacy that we talk about, it has ups and downs. It requires perseverance and it requires hard work. And that’s one of the things I loved about Mike story is it wasn’t just all rainbows and butterflies, right?

He had highs and lows. He had a divorce that he struggled through. He had a real estate investment deal or two that didn’t go as planned. He made his fair share of financial mistakes along the way, but he kept a long term picture in mind. He learned from those mistakes and he persevered. One of my favorite quotes from that episode is when he said, quote, what I’m looking at.

Is that I have this money saved because I was diligent in being able to save. [00:04:00] What does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars? That’s a great episode from this year. And I hope no matter what stage of the career that you’re in, I hope you’ll check out episode three 65 with Mike.

of my other favorite episodes of the year was episode 372 titled rising stars. Meet the YFP give scholarship winners. And when I had the opportunity to interview these young pharmacists, it just gave me so much energy. There’s a lot of skepticism out there in our profession right now. And, and much of that for good reason.

But when I thought about these individuals as the future of the Innovators and leaders within our profession, man, did this episode energize me? We had the opportunity to start or nonprofit this year called YFB gives. And as a part of that, we gave out five scholarships in our first year.

And I interviewed all five of these individuals and hearing their stories, hearing the impact that this scholarship was going to have, hearing [00:05:00] the ideas that they had for the future, for their careers, the energy and the motivation that they had. Was so inspiring. I hope you’ll check that out. One of my favorite moments from that show is when I had chance to interview Ruth, one of the winners, when she said, quote, the scholarship really lessened a burden that I’ve been carrying for months.

And we look forward to giving more scholarships here in the spring of 2025. So stay tuned. You can learn more at yfpgives. org. My third episode of the year that I want to highlight was one that we recently published episode three 88. In fact, we just. Released this episode last week. And, and this episode titled entrepreneur journeys in pharmacy lessons on growth and success.

I had the pleasure of serving as a moderator for a panel of four pharmacists, entrepreneurs that I very much admire the work that they’re doing. Dr. Jimmy Pruitt, Dr. Natalie Park, , Dr. Brooke Griffin and Dr. Kelley Carlstrom, all of them working in different ways and finding creative ways. To monetize their various areas of expertise and to do so in a way that it’s contributing value and not only adding value to the individual and solving a problem in which they’re growing the business, but also a way that they are creatively growing and expanding and their own financial plan as well. And in this discussion, we talked about. How did they go from idea to getting started? What are some of the challenges that they have faced along the way in both building the business, as well as developing themselves as an individual.

This episode, I think you’re going to want to watch it on YouTube. So you have a chance to see all of these individuals and the passion in which they show and demonstrate. That’s just three of the episodes that we published this last year.

As always, you can find these on our website, yourfinancialpharmacist.com.

So what can you expect from us in 2025?

Well, more stories. To inspire, motivate, and educate

that include not only the success stories, but also some of the challenges that people had to overcome. So these will [00:07:00] feature stories of pharmacists that are working through paying off debt, through building wealth, through making big life planning decisions and family decisions through giving as well.

So more stories as we continue to build a community where we learn from one another and are inspired and motivated by one another. We’re going to focus more and more on a theme that you have heard me talking about. Which I believe in so deeply, which is that the financial plan has to focus on taking care of ourselves in the future while also living and prioritizing a rich life today, right?

If we squirrel all this money away for the future, at the expense of living this life today, I think we have missed the point and there is a balance here and this is hard, but we have to find that balance and make sure that our financial plan is supporting. The vision that we have for our life. So we’ll talk more about that and we’ll continue to share more stories on that.

And finally, what to expect in 2025 is we are [00:08:00] making a heavy shift towards more video content. We’ve done this periodically, but we recognize this topic really comes to life when you can engage, see, and interact with. The guests that we have on the show, whether that’s our own team, such as my partner, Tim Baker at YFP, or one of our certified financial planners, or it’s a guest that we’re featuring and sharing the story.

You’re going to see that content published on YouTube. And of course you can find the podcast just like you always have on whatever channel you’re listening to. One last thing I want to mention before we wrap up for this week is that we have an exciting giveaway as we wrap up this year and head into 2025.

And I want to really use this as an opportunity to hear more from you, whether it’s a question that you have that you’d like to have answered. And that can be anonymous. That’s okay. Just let us know, or maybe you have an idea. For a show that you would like us a topic that you would like us to talk about, or a guest that you would like us to consider or an author that you would like us to interview.

And by the way, that guest could be you, if you have [00:09:00] a really cool story that you want to share as well, don’t be shy. So we’re going to give away a hundred dollar Amazon gift card, and here’s how you can be eligible for that giveaway. Simply send us an email at info at your financial pharmacist. com again, info at your financial pharmacist.

com by January 1st. And just let us know an idea that you have for the show in 2025. Again, that could be a question that you want, I want answered, or it could be an idea that you have for an episode in the new year. So send us an email info at your financial pharmacist. com. And that email will make you eligible.

As we wrap up this episode, I want to wish you and your family and your loved ones, a happy new year. Again, thank you so much for taking the time to listen to the show for your support and encouragement along the way. It means so much to myself and the team at your financial pharmacist, cheers to a great end of 2024 and looking forward to being alongside you as we look towards 2025, have a great rest of your day.

[END]

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YFP 384: Beyond Salary: Negotiating Your Value in the Workplace

Posted on by YFP Media

YFP Co-Founders Tim Baker and Tim Ulbrich discuss essential negotiation skills inspired by Chris Voss’s book, Never Split The Difference, covering key strategies to boost your financial plan, mindset, and confidence.

Episode Summary

In this episode, YFP Co-Founders Tim Baker and Tim Ulbrich have a valuable conversation on negotiation—an essential skill that impacts not only finances but also mindset and confidence. Inspired by Chris Voss’s book, Never Split The Difference, Tim and Tim explore negotiation techniques drawn from Voss’s experience as a former FBI hostage negotiator and break down why negotiation is vital for your financial plan, key goals, and practical strategies for navigating each step.

About Today’s Guests

Tim Baker is the Co-Founder and Director of Financial Planning at Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 12,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements.

Tim attended the United States Military Academy majoring in International Relations and branching Armor. After his military career, he worked as a logistician with a major retailer and a construction company. After much deliberation, Tim decided to make a pivot in his career and joined a small independent financial planning firm in 2012. In 2016, he launched his own financial planning firm Script Financial and in 2019 merged with Your Financial Pharmacist. Tim now lives in Columbus, Ohio with his wife (Shay), three kids (Olivia, Liam and Zoe), and dog (Benji).

Tim Ulbrich is the Co-Founder and CEO of Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 15,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements. To date, YFP has partnered with 75+ organizations to provide personal finance education.

Tim received his Doctor of Pharmacy degree from Ohio Northern University and completed postgraduate residency training at The Ohio State University. He spent 9 years on faculty at Northeast Ohio Medical University prior to joining Ohio State University College of Pharmacy in 2019 as Clinical Professor and Director of the Master’s in Health-System Pharmacy Administration Program.

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Importance of Negotiation in Financial Planning [0:00]
Introduction to Negotiation and Its Role in Financial Planning [1:23]
The Process and Importance of Negotiation [6:45]
Employer Expectations and Employee Responsibilities in Negotiation [13:07]
Strategies for Effective Negotiation [17:09]
Counteroffers and Leveraging Non-Salary Terms [32:18]
Tools and Techniques for Negotiation [37:19]
Applying Negotiation Strategies in Financial Planning [46:54]
Conclusion and Final Thoughts [47:08]

Episode Highlights

“Negotiation is really a process of discovery. It really shouldn’t be viewed as a battle. It’s really a process of discovery.” – Tim Baker [5:58]

“I think there is often a sentiment and I know I’ve felt it myself, where, you know what, I’m glad to have a position. I’m glad to be making a good income. But that can be true, and you still can be a good person, and you still can negotiate and advocate for yourself and the value you bring to the organization.” – Tim Ulbrich [6:20]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the Yfp Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. Negotiation. That’s what we’re talking about today, an important skill that many of us were not taught, and one that can move the needle significantly, yes, financially, but also in terms of mindset and confidence. One of my favorite resources on this topic is the book never split the difference by Chris Voss. I first heard this book on a podcast interview several years ago where Chris was demonstrating his quote late night DJ voice, which is one of the fun techniques he describes in that book. Now, if you haven’t read the book before. In addition to listening to today’s episode, check it out and make sure to do the audio version. It’s fantastic and really drives home the examples used throughout. Chris is a former FBI international hostage negotiator who took what he learned from high stakes negotiation and brought it to us for everyday use. Now, considering that effective negotiation can have a big impact on your financial plan. This week, we’re hitting replay on an episode that Tim and I recorded back in August of 2020 during the show, we discussed why negotiation is important your financial plan, the goals of negotiation and tips and strategies for different parts of the negotiation process that you can implement in your own negotiation. Make sure to listen all the way through as I’m confident in saying, there will be a positive return on your time investment. One last thing, unlike traditional financial planning firms, our team of certified financial planners at Yfp is experience in helping our clients through negotiations, whether that be negotiating within an organization for a new position or to increase salary or for someone looking for a new job, if we can help with your negotiation, head on over your financial pharmacist.com click on book a discovery call so that we can learn more about your situation and see whether or not our services are the right fit for You. All right, let’s jump into our conversation on effective negotiation. Tim Baker, welcome back to the show.

Tim Baker 02:08

Yeah, happy to be here. How’s it going?

Tim Ulbrich 02:09

Tim, it’s going excited to talk negotiation something we discuss a lot, a lot in presentations, a lot. I know that you discuss with clients as a part of the financial plan, but we haven’t addressed it directly on the show before. So I’m excited that we get a chance to dig into this topic. And we know that negotiation can carry a lot of power, and can be used across the board, really, in life, right? Could be negotiating terms for a new or existing job, position, buying a car, buying a house, negotiating with your kids or spouse, kidding, not not kidding, as we’ll talk about here in a little bit, so we’re going to focus predominantly on salary negotiation, but really, these techniques can be applied to many areas of the financial plan and really life as a whole. So Tim, I know that for you, negotiation is a key piece of the financial plan, and you and our CFPs over at Yfp talk about negotiation in the context of financial planning, which I would say is probably not the norm of the financial planning industry and services. So let’s start with this. Why is negotiation such an important piece of the financial plan?

Tim Baker 03:14

Yeah, so I think you know, if we, if we look at why, if peace mission, you know why? If he’s mission is to empower pharmacists to achieve financial freedom. So I think the building blocks of that really is kind of what we do day in and day out with with clients at Yfp plan. And what I what I typically, or the way that we typically approach a financial plan, is we really want to help the client grow and protect their income, which is the lifeblood of the financial plan. Without income, nothing moves. But we know that probably more importantly than that is grow and protect the balance sheet, the net worth, which means increase in assets efficiently and decrease in liabilities efficiently and ultimately moving the net worth number in the right direction. So those are, you know, both quantitative things, but then qualitatively, we want to make sure that we’re keeping all the goals in mind. So grow and protect income and net worth while keep the goals in mind. So to me, that’s, that’s our jam, you know. So you know when I when I say, you know, when somebody asked me a question, like we do the ask a wife, pcfp, and I’m like, I always say, Well, it depends. A lot of it depends, really, on those, those foundational like, where are we at with the balance sheet, and where do we want to go? Meaning, what? What are our goals? What’s our why? What’s a, what’s the life plan? You know, what’s a wealthy life for you? And how can we support that with the financial plan? So to go back to your question, you know, my belief is that the income is a is a big part of that. And you know, what I found with working with many, many pharmacists is sometimes, and sometimes pharmacists are not just, you know, not great at advocating for themselves. You know, most of the people that I talk to, you know, when we talk about salary negotiation, they’re like, um. You know, I just thankful I have a job, and I’m in agreement with that. But, you know, sometimes a little bit of negotiation and having some of the skills that we’ll talk about today to better advocate for yourself is is important, and it’s in a lot of this stuff is not necessarily just for salary. It can be for a lot of different things. But to me, what I what I saw as a need here. You know, same thing, like most financial planners don’t walk, walk you through kind of home purchase and what that looks like, because most financial planners are working with people in their 50s, 60s and 70s. So a lot that was a need for a lot of our clients were like, Hey, Tim, I’m buying this house. I don’t really know where to start. So we, we, you know, provide some education and some recommendations and advice around that. So same thing with salary. It’s like I kept seeing like, well, maybe, you know, maybe I, you know, I took the job too quickly, or, you know, I didn’t advocate for myself. So that’s really where we want to provide some education and advice, again, to have a better, better position from it, from an income, income perspective, yeah.

Tim Ulbrich 05:58

I think it’s a great tool to have in your tool bag, you know? And I think, as we’ll talk about here, you know, the goal is not to be an expert negotiator. There’s lots of resources that are out there that can help with this and make it tangible and practical, one of which will draw a lot of the information today. I know that you talk with clients, a resource I love, never split the difference by Chris Voss, but I’m glad you mentioned. You know, I think there is often a sentiment. I know I felt it myself, where, you know what, I’m glad to have a position. I’m glad to be making a good income. But that can be true, and you still can be a good person, and you still can negotiate and advocate for yourself and the value you bring to the organization. Yeah, so I hope folks will hear that and not, not necessarily think that negotiation is bad, and as we’ll talk about here in a moment, I think really can have a significant impact when you think about it as it relates to earnings over your career and what those additional earnings could mean. So Tim, break it down for us. What is negotiation? And really thinking further, why is it important?

Tim Baker 06:57

Yeah, so, so negotiation, you know, it’s really a process of discovery. You know, it really shouldn’t be viewed as as a battle. It’s really a process of discovery. It’s kind of that awkward conversation that you’re you should be obligated to have, because, you know, if you, you know, if you don’t want to advocate for yourself professionally, who will, and maybe you have a good mentor or something like that. But to me, the the negotiation again, is really to discover, you know, what, what you want, and kind of what you’re the counterpart you know, which might be a boss or a hiring manager or something like that. And it’s an it’s really important, because, you know, settling for a lower salary can have really major financial consequences, both both immediately and down the road. And you know, you you typically raises that you receive are typically based on a percentage of their salary. So we’re, hey, we’re going to give you a, you know, 3% raises here, a 5% raise if you start off with a salary that you’re not happy with. You know that then obviously, that’s, that’s a problem. Accrue less in retirement savings. So that TSP, that 401, K, 403, B, again, you typically are going to get some type of match in a lot of cases, and then you’re going to put a percent in. So again, that could potentially be lower, but it’s, it is. It’s not just about salary. It can be, you know, I think another mistake that sometimes people make is that they’ll say, oh, wow, I was making, you know, 125 and, you know, I’m taking a job that’s paying me 135 and they take a major step back on some of the non salary, things like benefits and flex scheduling and time off and things like that. But you know, you really want to make sure that the compensation package that you have, you know you’re happy with, because being overpaid, being underpaid, really can make you feel resentful over the long run. So you want to make sure that you’re, you know, again, you know, right now, we’re filming this in the midst of a pandemic, and you know the economy and the job market is tough, but you know, you still want to, you still want to advocate for yourself and make sure you’re getting the, you know, the best compensation package that that you can.

Tim Ulbrich 08:56

As we’ll talk about here in a little bit, I think If we frame this differently than maybe our understanding or preconceived beliefs. You know, you mentioned it’s not a battle, you know. I think the goal is that you’re trying to come to an agreement or an understanding. And as we’ll talk about here, many employers are likely expecting this, and that number, in terms of those that are expecting versus those that are actually engaging in the conversation, from an employee standpoint, is very different. So I think that might help give us confidence to be able to initiate some of those. And we’ll talk about strategies to do that. I do want to give one example, though. Tim, real quick, you mentioned, you know, obviously, if somebody earns less and they receive smaller raises, or they accrue less in retirement savings, that can have a significant impact. And and I went down the rabbit hole, prepping for this episode of just looking at a quick example of this, where you have two folks that, let’s say they both start working at the age of 28 they retire at their 65 so same starting point, same retirement age. Let’s assume they get a 3% cost of living adjustment every year for their career. Just to keep it simple, you. The only difference here is that one starts at 100k and one starts at 105k so because of either you know what, what they asked for negotiations, whatever be the case, one starts $5,000 greater than the other. And if you play this out, same starting age, same ending age, same cost of living adjustments, one starts at a higher point when it’s all said and done, one individual has about $300,000 more of earnings than the other. And this, of course, does not include differences that you’d also have, because a higher salary, if you have a match, that would increase, that would compound, that would grow, if you were to switch jobs, you’re at a better point of now negotiating from a higher salary. All other benefits that aren’t included. But the significance of the starting point, I think, is something to really look at those numbers that often where you start can inform where you’re going, not only from cost of living adjustments, but also future employment, right? So we know that where you start, if you get a 3% raise, it’s of course, gonna be based off that number. You decide to leave that employer and you go to another one, what do they ask you? How much did you make? You’re using that number. So that starting point is so critical, and I hope that new practitioners might even find some confidence in that, to be able to engage in discussions knowing how significant those numbers can be over a career. So in that one example, that starting point is a difference of about $300,000 Crazy, right?

Tim Baker 11:24

When you look at over a long time period, yeah, it’s not, it’s nuts. And I’d pay the devil’s advocate, you know, on the other side of that is that, you know, again, so much, just like everything else with with the financial plan, you can’t look at it, you know, in a vacuum, we’ve had clients, yeah, take a lot less money, and really was because of the the student loans, and how that would affect their strategy in terms of forgiveness and things like that. So, yeah, it is multifactorial. It’s definitely something that it should really be examined. And I think again, when you look at the overall context of the financial plan, but it to your point, Tim, that that start in salary, and really you know how you negotiate throughout the course of your career is going to be utterly important. And you know, again, what we say is, with, you know, we, we kind of downplay the income, because I think, you know, so much of what’s kind of taught us, like, oh, six figure salary, you’re you’ll be okay. And that’s not true. But then, you know it is true that it is the lifeblood of the financial plan. So I think if you have a plan and you’re intentional with what you’re doing, that’s where you can really start, you know, making moves with regard to your financial outlook,

Tim Ulbrich 12:26

yeah, and I’m glad you know you said that about salary shouldn’t be looked at in a silo. I mean, just to further that point, you you’ve alluded to it already, these numbers don’t matter. If there’s other variables that are non monetary that matter more, right? Whether that be time off or satisfaction in the workplace, opportunities that you have feelings that will come. I mean, the whole list of things that you can’t necessarily put a number to. I mean, I would argue if, if those are really important, you’ve got to weigh those against, you know, whatever this number would be, and there’s a certain point where the difference in money is it worth it? You know, if there’s other variables that are involved, which, which, usually there are, hopefully we can get both right salary and and non salary items. Yes. So interesting stats about negotiation. I’ve heard you present before on this topic, but I’d like you to share with our audience in terms of managers that are expecting hires to negotiate, versus those that do talk us through some of those as I think it will help us frame and maybe change our perception on employers expecting it and our willingness to engage in these conversations.

Tim Baker 13:34

Yeah, and I really need to cite, to cite this one. And I believe, I believe this first stat comes from Sherm, which is the Society for Human Resource Management. So I think this is, like the biggest association for, like HR and human resource personnel in the country. And the stat that that I use is that, you know, 99% of hiring managers expect prospective hires to negotiate. So if you think about that, you know, and you know, the overwhelming majority expect, you know, you the perspective hire to negotiate, and they build their initial offers as such. So, you know, the example, you know, I did the clients, is like, hey, you know, we have, you know, we have a position that we could pay, you anywhere from you know, 110,000 to 130,000 knowing that you know, Tim, if I’m offering this job to you, knowing that you’re probably going to negotiate with me, I’m going to offer it to you for 110 knowing that I have a little bit of wiggle room if you kind of come back with a counter offer. But what a lot of a lot of my clients, you know, or people do that I talk with is they’ll just say, Yes, I found a job. Crappy, crappy job market, you know, happy to get started, ready to get started. And there’s and they’re, they’re either, you know, overly enthusiastic to accept a job, or they’re just afraid that a little bit of negotiation would would, you know, hurt their, yeah, you know, hurt their outlook. So. So with that in mind is that you, you know the the offers, I think, are built in a way that you know you should, you should be negotiating and trying to, again, advocate for yourself.

Tim Ulbrich 15:09

Yeah, and so if people are presenting positions often, you know, with with a range and salary, expecting negotiation, I hope that gives folks, you know, some confidence and okay, that’s probably expected, and maybe shift some of the perception away from this whole thing could fall apart, which it could right at any given point in time, especially depending on the way you conduct yourself in that negotiation, which I think is really, really important to consider. But I think what we want to try to avoid, Tim, back to a comment you made earlier, is any resentment, right as well. I mean, if we think about this from a relationship standpoint. We want the employee to feel valued, and we want the employer to have a shot at retaining this individual long term, right? So it’s a two way, two way relationship,

Tim Baker 15:50

And it kind of, it kind of comes up to where, you know, we were talking about, what is, you know, what is the goal of negotiation? And really, the goal of negotiation is, is to come to some type of agreement. Yeah, the problem, the problem with that is, is that people are involved in this, and we as people are emotional beings. So if we feel like that, we’re being, you know, we’re treated unfairly, or we don’t feel safe and secure, or if we’re not in control of the conversation, you know, our emotions can get the best of us. So that’s that’s that’s important. So there again, there’s some techniques that you can, you know, utilize to kind of mitigate that. But you know, to allude to your point about, you know, negotiating the fear to kind of, you know, potentially mess up the deal. You know, there’s a stat that says 32% don’t negotiate because they’re too worried about losing the job offer. Yeah, I know Tim, like we can attest to this, because, you know, with our growth at Yfp, we’ve, we’ve definitely done some, some human resource in use that as a verb, and hiring and things like that of late. And I gotta say that, you know, the I think that some of this can be unfounded, just because there’s, there’s just so much, you know, blood, sweat and tears that goes into fire, you know, to fight finding the right people, to kind of surround, you know, yourself with, and bring into an organization that, to me, a little bit of back and forth is not going to ultimately lose the job. So typically, most, most jobs, there’s, you know, interview, you know, obviously there’s, there’s an application process, there’s interviews, there’s second interviews, there’s maybe on site visits, there’s kind of, you know, looking at all the candidates and then extending offers. If you get to that, that offer stage, you’re, you’re you’re pretty, you know, they’ve identified you as they’re the, you’re the person that they want. So, you know, sometimes a little bit of back and forth is not going to, you know, derail any such deal. So that’s, it’s really, really important to understand that, yeah, and

Tim Ulbrich 17:45

As the employer, I mean, we’ve all heard about the costs and statistics around retention. So as an employer, when I find that person, I want to retain them. That’s my that’s my goal. Right now, I want to find good talent on a retain good talent. So I certainly don’t want somebody being resentful about, you know, the work that they’re doing, the pay that they have. And so I think if we can work some of that out before beginning and come to an agreement, it’s a good fit for us, good fit for them, I think it’s also going to help the benefit of the, hopefully the long term relationship of that engagement. So it’s one thing to say, we should be doing it. It’s another thing to say, Well, how do we actually do this? Well, you know, what are some tips and tricks for negotiation? So I thought it’d be helpful if we could walk through some of the stages of negotiation, and through those stages we can talk as well as beyond that, what are some actual strategies to negotiation? Again, another shout out to never split the difference by Chris Voss. I think he does an awesome job of teaching these strategies in a way that really helped them come alive and are in our memorable Yeah. So, Tim, let’s talk about the the first stage, the interview stage, and what are some strategies that that those listening can take when it comes to negotiation in this stage.

Tim Baker 18:56

Yeah? So, so I kind of, when I, when I present, you know, these concepts to a client. I kind of said that the, you know, the four stages of the of negotiation are fairly, are fairly vanilla, you know. And the first one is the, you know, that interview. So when you get that interview, you know, what I say is, you know, typically you want to talk, talk less, listen more and learn more. Typically, the person that is talking the most is, is, is not in control. The conversation, the one that’s listening and answering, asking good questions, is in control. And I kind of, I kind of think back to, you know, some of our recent hires, and, you know, the people that we identify as, like, top candidates, I’m like, Man, their interviews went really well. And when I actually think, think back and slow down, it’s, it’s really, I think that they went really well, because there’s, it’s really that person asking good questions, and then, and then me just talking, and and, and that’s, and that’s like the perception, so in that, in that case, like the, you know, the candidate was asking us good questions, and we’re like, yeah, these, this was a great interview, because I’d like to hear myself talk, or I just get really excited. About, you know, what we’re doing at Yfp. So I think if you can really, you know, focus on your counterpart, focus on the organization, you know, whether it’s the hospital or whatever, whatever it is, and learn, and then the, you know, and then really pivot to the value that you bring. I think that’s going to be important, you know, most important. So, you know, understanding, you know, what, what some of their maybe pain points are, whether it’s retention or, you know, maybe some type of, you know, care issue, or whatever that may be, you know, you can kind of use that to your advantage as you’re as you’re kind of going through the different, you know, stages of negotiation, but the more that the other person talks, you know, the better. I would say, you know, in the interview stage, you know, one of the things that often comes up, you know, that can come off fairly soon, is the question about salary. And, you know, sometimes that is, you know, it’s kind of like a time saving. So it’s a Hey, Tim, you know, what are you looking for in salary? If you throw out a number that’s way too high, like, I’m not even gonna, you know, waste my time. And what I tell clients is, like you typically, you want to, and we’ll talk about anchoring. You really want to, do? You really want to avoid, you know, throwing, throwing a number out and for a variety of reasons. So one of the deflections you could use is, hey, I appreciate the question, but I’m really trying to figure out if I’d be a good fit for your organization. You know, we let’s talk about, you know, negotiate, or let’s talk about salary when the time comes. Or the other, the other piece of it is, it’s just, you are not, you’re not in the business of offering yourself a job. And what I mean by that is it’s, it’s their job to basically provide an offer. So, you know, hey, my current employer, you know, doesn’t really allow me to kind of reveal that kind of information. What did you have in mind? Or we know that pharmacy is a small business, and I’m sure your budget is, you know, is reasonable. What did you have in mind? So at the end of the day, it’s, it’s their job to extend the offer, not you, to kind of negotiate your against yourself, which can happen, you know, I had a, I had a, we signed on a client here at Yfp planning yesterday, and we were talking about negotiation. I think it was kind of had to do with that tax issue. And, you know, he he basically said this is what he was looking for. And then when he got into the organization, I think he saw the number that was budgeted for, and it was a lot more so. Again, if you can deflect that, and I tell a story, when I first got out of the army, I kind of knew this. But when I first got out of the army, I was interviewing for jobs, you know, I was in an interview, and I deflect it. And I think the guy asked me again, and I deflect it. I think he asked me for, like, maybe that asked me for like, four times, and I just wound up giving him a range that was, like, obnoxious, 100 to 200,000 or something like that. But to me, you know, that in the interview didn’t go, go well after that. But to me, it was, like, it was more about, you know, clearing the slate instead of actually learning more about me and seeing if I was a good fit. So you never want to lie about your current style. If they ask about your current style, you never want to lie, but you definitely want to deflect and move to things of like, okay, can I potentially be a good fit for your organization? And then go from there? Yeah. And

Tim Ulbrich 22:55

I think deflection takes practice, right? I don’t think that comes down to many of us. Totally, yeah. Yeah, this, this reminds me. So, you know, talk less, listen more for for any Hamilton folks we have out there, which is playing 24/7 in my house these days, the soundtrack, I’m not gonna, I’m not gonna sing right now, but talk less. Smile, smile more. Don’t let them know what you’re against or what you’re for. So I think that’s a good, good connection there to the interview stage. So next, hopefully comes the good news. Company wants to hire you makes an offer. So Tim, talk us through this stage. What? What should we be remembering when we actually have an offer on the table? Yeah, so

Tim Baker 23:30

I think you definitely want to be appreciative and thankful again when, when a company gets to a point where they’re extending you an offer, that’s, that’s, that’s huge. I remember when I got, again, my first offer out of out of the Army, because, again, you don’t really have a choice when you’re in the army. Well, I guess you do have a choice, but you know, they’re not like, here’s a here’s a written offer for your employment in this platoon somewhere in Iraq. But I remember getting the first offer. I’m like, Man, this is awesome. Shows your salary and the benefits and things like that. So you want to be appreciable and thankful you don’t appreciative and thankful. You don’t want to be you want to be excited, but not too over excited. So you don’t want to appear to be desperate. What I tell clients, I think the biggest piece here is make sure you get it in, write in, yes, and I have a, you know, a story that I tell him, because if it’s not in writing and what essentially says it didn’t, didn’t happen. So again, using some personal experience here, you know, first job out of the army, I had negotiated, you know, basically an extra week of vacation because I didn’t want to take a step back in that regard. And I got the offer, and the extra week wasn’t there. So I talked to my, my, you know, my future boss, about it, and he said, You know what, I don’t want to go back to headquarters and, you know, in ruffle some feathers. So why don’t we just take care of that on site here, and this was the job I had in Columbus, Ohio. And I said, Yeah, okay, I don’t really want to, you know, ruffle feathers either. The problem with that was when he got replaced, when he was terminated, eight months later, that currency burned up fairly quickly. Be so I didn’t have that, you know, that that extra week of vacation. So, you know, if it’s not written down, it never happens. So you want to make sure that, you know, you get it in, right in, and really go over that written offer extensively. So some employers, they’ll, they’ll extend an offer, and they want to, you know, a decision right away. I would walk away from that, you know, to me, a job change, or, you know, something of that magnitude, you know, I think warrants a 24 if not a 48 probably a minimum of 48 hour, you know, time frame for for you to kind of mold over and this is typically where I kind of, I come in and help clients, because they’ll say, Hey, Tim, I got this offer. What do you think? And we go through it, and we look at benefits, and we look at, you know, the total compensation package and things like that. But, you know, you want to, you know, ask for, you know, ask for a time, you know, some time to review everything and then agreed, you know, definitely adhere to the agree, agreed upon deadline to basically provide, you know, an answer or counteroffer, or, you know, whatever, whatever the next step is for you.

Tim Ulbrich 26:01

Yeah, and I think too, the advice to get it in writing helps buy you time. You know, I think you asked for it anyways. And I think the way you approach this conversation, you’re setting up the counter offer, right? So the tone that you’re using, it’s not about being arrogant here. It’s not about, you know, acting like you’re not excited at all. I think you can strike that balance between you’re appreciative, you’re thankful. You know, you’re continuing to assess if it’s a good fit for you and the organization you want. Some time you want it in writing, and you’re beginning to set the stage. And I think human behavior, right? Says if, if, if something is either on the table or pulled away slightly, the other party wants it a little bit more, right? So yes, if I’m the employer, and I really want someone, and I’m all excited about the offer, and I’m hoping they’re gonna say yes, and they say, Hey, I’m really, really thankful for the offer. I’m excited about what you guys are doing. I need some time to think about X, Y and Z, or, you know, I’m really thinking through X, Y or Z, like, all of a sudden, that makes me want them more, you know. So I think there’s, there’s value in in setting up, what is that, that counter offer? So talk to us about the counteroffer. Tim, break it down in some strategies to think about in this portion. Yeah.

Tim Baker 27:10

So, you know, the the counter offer is, I would say, you know, the majority of the time you should counter in some way. I think you’re expected to make a counter. And again, we kind of back that up with some stats. But you also, you need to know when, you know when not to kind of continue to go back to negotiating table, or when, when you’re asking or over asking. So, you know, I think research is going to be a good, you know, part of that, and I, what I tell clients is like, I can give them a very nice, non scientific I’ve worked with so many pharmacists that I can kind of say, oh, that sounds low, you know, in this for community pharmacy or industry, or whatever, you know, hospital in this area. So, you know, it’s, it’s, it’s your network, which could be someone like me, it could be a call, you know, colleagues. But it could also be things like Glassdoor, indeed, salary.com, so you want to make sure that your, you know, your offer, your counter offer, it is backed up in some type of, you know, fact, and really, you know knowing how to maximize your leverage. So if you are you know if you do receive more than one substantial offer, you know, you know from multiple employers, negotiating may be appropriate if the two positions are comparable and then, or if you have tangible evidence that the salary is too low, you know you have a strong position to negotiate. So I had a client that knew that new, newly hired pharmacists were being paid more than than she was, and she, you know, she had the evidence to show that. And basically they went back and did a nice adjustment. So, but again, I think as you go through the way that we kind of do this, you know, with clients, is we kind of go through the the entire letter, and, you know, the benefits and and I basically just highlight things and have questions about, you know, match or vacation time or salary and things like that. And then we start constructing it from there. So if you look at again, the thing where most people will start a salary is, you know, you really want to give. When you counter, you really want to give a salary range, rather than, like a number. So what I say is, if, a if, if, if, if you say, Hey, Tim, I really want to make $100,000 I kind of said it’s almost like the big bad wolf that blows the house down like all those zeros is, it’s not, it’s there’s no substance to that. But if you said, Hey, I really want to make $105,985 the the Journal of experimental social psychology says that using a precise number instead of a rounded number gives it a more potent anchor. So your homework, right? Yeah, you know, you know what you what, you know, what you’re worth, you know, what the positions worth? It’s given the appearance of research. So I kind of like, you know, it’s kind of like the gap the Zach Galifianakis, me, that has all the equations that are flowing. It’s kind of like that. But the the $100,000 you can just blow that house over. So, and I think so. So once you figure out that number, then you kind of want to. Change it so, you know, they say, if you give a range of, you know, you know, of a salary, then it opens up room for discussion, and shows the employer that you have flexibility, and it gives you some cushion. In case, you know, you think that you’re asking for a little bit too high so that’s, that’s going to be, that’s going to be really, really important is, is that to provide kind of precise numbers in in a range, and, oh, by the way, I want to be kind of paid at the upper, upper echelon of that. So

Tim Ulbrich 30:28

real quick on that you mentioned before, the concept of anchoring. I want to spend some time here as you’re talking about a range. So dig into that further. What that means in terms of, if I’m given a range, how does anchoring fit into that. Yeah.

Tim Baker 30:41

So, you know, we kind of talk about this more more when we kind of talk some about the tools and the behavior of negotiation, but the rain. So when we talk about, like anchoring, so anchoring is actually it’s a bias. So anchor and bias describes the common tendency to give too much weight to the first number. So again, if we’re, if we if we can, if I can, if can, have invite the listener to imagine an equation, and the equation is five times four times three times two times one, and that’s in your mind’s eye. And then you clear the slate, and now you imagine this equation one times two times three times four times five. Now, if I show the average person, and I just flash that number up, the first number that start, you know the first equation that starts with five and the second equation that starts with one, we know that those things equal, the same thing, but in the first equation, we see the five first. So it creates this anchor, creates this belief in us that that number is actually higher. Yeah. So, so the the idea of anchoring is typically that that number that we see really is a has a major influence. That first number is a major influence of where the negotiation goes. So you can kind of get into the whole idea of you know, factor in your knowledge of the zone of possible agreement, which is often called Zopa. So that’s the range of options that should be acceptable for both sides, and then kind of assessing, you know, your side of that, and then your your other parties anchor on that. So there’s, there’s lots of things that kind of going into anchoring, but you know, we, you know, we did this recently with a with a client, where I think they were offered somewhere in like the 110 112 area. And she’s like, you know, I really want to get paid closer to, like 117 118 so we, we basically in the counter offer. We said, hey, you know that, thanks for the offer. And we did something called an accusation on it, which we can talk about in a second. But thanks for the counter offer. But, you know, I’m really looking to make between, you know, I think we said something like 116 five, you know, 98 to, you know, all the way up into the 120s and it actually brought her up to, I think she was just 117 change actually brought her up closer to that 18. So using that range and kind of that, that range as an as a good anchoring position to help, help the negotiation. So there’s lots of different things that kind of go into anchor, in terms of extreme anchoring, and a lot of that stuff that they talk about in the book. But again, that’s kind of goes back to that first number being thrown out there can be really, really integral. And again, when you couple that on top of, hey, it’s, it’s their job to make you an offer, not the, not the other way around. You have to really learn how to deflect that and and know you know how to position, you know, position yourself in those negotiations. But that’s really the counteroffer. And what I would say to kind of just wrap up the counter offer is embrace the silence. Yeah, so Tim, there’s silence there. And I’m like, I want to, I want to feel the voice. And I do this with with clients, when we talk about, like mirroring and things like that, like people are uncomfortable with silence. And you know what he talks about in the book, which I would 100% this is really kind of a tip of the cat to Chris Voss in his book, which I love, I read probably at least once a year, where he talks about embracing the silence. We as people are conditioned to feel silences. So you know, he talks about sometimes people will, you know, negotiate against themselves. If you just sit there and you say, Uh huh, that’s interesting. And then in the in the counters, just be pleasantly persistent on the non salary terms, which can be both subjective and objective in terms of what you’re looking for in that position, yeah. And I

Tim Ulbrich 34:19

want to make sure we don’t lose that. You know, we’re talking a lot about salary. But again, as we mentioned at the beginning, really try to not only understand but but fit what’s the value of those non salary terms. So this could be everything from, you know, paid time off to, obviously, other benefits, whether that be health or retirement. This, of course, could be called culture of the organization, whether it’s that specific site, the broader organization, opportunities for mentorship.

Tim Baker 34:48

Yep, mentorship, yes, yes, all that.

Tim Ulbrich 34:51

I think what you hear from folks, I know I felt in my own personal career, with each year that goes on, I value salary, but salary means less than those other. Things mean more. And so as you’re looking at, let’s just say two offers is one example. Let’s say they’re 5000 apart. Like, I’m not saying you give on salary, but how do you factor in these other variables?

Tim Baker 35:10

Yeah, well, and I think too, and I’ll this is kind of, you know, kind of next level with this. And I’ll give you some examples to cite it. I think another, thing to potentially do when you when you are countering and when you’re shifting to some of the maybe the non salary stuff is really took a hard look at your potential employer, or even your current employer, if this is a you know, if you’re an incumbent and you’re and you’re being reviewed and you’re just advocated for a better compensation package, is look at the company’s mission and values. Yeah. So the example I give is like, when we, when we, when Shay and I got pregnant with Liam, you know, she didn’t, she didn’t have a, you know, a maternity leave benefit, and when she was being reviewed, we kind of, you know, invoked the company. And I think it’s like work life balance and things like that. And we’re like, Well, how can you say that and not back that up? And again, we do it. We did it tactfully. And because you’re almost like, you’re almost like, negotiating against yourself, right? So I present this to clients like the Spider Man meme, whether you know, two spider mans are pointing at each other, and she was able to negotiate a better you know, I’m attorney, and it actually, and you we look at us, you know? And I, you know, I give these, one of our values is encourage growth and development, you know. So if an employee says, Hey, and they make a case that I really want to do this, and, you know, it’s almost like we’re negotiating against ourselves. So I think, if you can one, I think it shows, again, the the research and that you’re really interested and plugged into what the organization is doing. But then I think you, you’re, you’re leveraging the the company against itself in some ways, because you’re almost, you know, negotiating against, well, yeah, we put these on the wall as something that we believe in, but we’re not going to support it. Or, you know, so or, you know, at the very least, it plants a seed, right? And that’s what I that’s what I say sometimes with clients, you know, we do strike out. We don’t, you know, it’s like, it’s, it is hard to move the needle and sometimes, but at least one, we’ve got an iteration under our belts where we are negotiation. And two, we’ve planted a seed with that employer, you know, assuming that they took the job anyway, that says, Okay, these are things that are kind of important to me that we’re going to talk about again when we get and things like that. So I think that’s huge.

Tim Ulbrich 37:18

Good stuff. So let’s talk about some tools that we can use for negotiation, and again, many of these are covered in more detail in the book and other resources, which we’ll link to in the show notes. I just want to hit on a few of these. Let’s talk about mirroring accusation audits and the importance of getting a that’s right while you’re in these conversations. And we’ll leave our listeners to dig deeper in some of the other areas. So talk to us about mirroring. What is it? And kind of give us the example and strategies of mirroring.

Tim Baker 37:49

Yeah. And I would actually, Tim, what I would do is I would actually back up, because I think one of the, I think probably one of the most important tools that that are there, I think, is, is the calibrated questions. That’s one of the first things that he talked Yeah. And the reason so, what is a calibrated question? So a calibrated question is a question with really no fixed answer that gives the illusion of control. So the answer, however, is kind of constrained by that question, and you, the person that’s asking the question, has control of the conversation. So I give the example. You know, when we, when we moved into our our house after we renovated it. So brand new house, I walk into my daughter’s room. I think it was four. She was four at the time, and she’s coloring on the the wall in red, red, red crown. And I’m from, I’m from Jersey. So I say crown, not crayon. So she’s, and I, and I look at her, and I say, Olivia, why are, why are you doing that? And she sees how, like, upset I am and mad, or, you know, and she just starts crying. And there’s no there’s no negotiation from there. There’s negotiation over if, there’s no exchange of information. So in an alternate reality, in an alternate reality, what I should have done instead. Olivia, what? What caused you to do that? So you’re basically blasting instead of why is, why is very accusatory. You’re like, you know, the how and the what questions are good so, and of course, she would say, well, Daddy, I ran out of paper, so the walls the next best thing. So the use of, the use of, and having these calibrated questions in your back pocket, I think, again, buys you some time. And really, I think, frames the conversation with your counterpart well. So using words like how and what, and avoiding things like why, when, who, so you know, what about this works. Doesn’t work for you. How can we make this better for us? How you know? How do you want to proceed? How can we solve this problem? What’s the biggest challenge you face? These are all how does this look to you? These are all calibrated questions that again, as you’re kind of going back and forth, you can kind of lean on so have good how and what questions to kind of answer the question about mirroring. As you’re asking these questions, you’re mirroring. Counterpart. So what mirror in the scientific term is called ISO praxism, but he defines this as the Real Life Jedi mind trick. This causes vomiting of information, is what he says. So you know, these are not the droids you’re looking for. So what, what you essentially do is you, you repeat back the last one to three words, or the critical words of your counterpart sentence, your counterpart sentence. So this is me mirroring myself. Yeah. Well, you want to repeat back because you want to, you want them to reveal more information, and you want to build rapport and have that curiosity of kind of what is, what is the other person thinking? So you can again, come to come to an agreement, come to an agreement. Yeah. So you at the end of the day, the purpose. So this is mirror, and so I’ll show you a funny story. The you know, I do. I practice this on my wife, sometimes who does not have a problem speaking, but sometimes with counterpoint listening, by the way. Yeah, yeah, exactly. So I’ll probably be in trouble. But so I basically just, you know, for the you know, for conversation, just just mirror back exactly what she’s saying. And you can do this physically. You can cross your legs or your arms, or, you know, whatever that looks like, but, but when he talks about more is with words, and, you know, I’ll basically just mirror back my wife and she, at the end of the conversation, she’ll say something like, Man, I feel like you really, like, listen to me. And I laugh about that, because I’m just really repeating back. But if you think about it, I did, because for you to be able to do that, you really do have to listen so, so mirroring again, if you’re just repeating back, you really start to uncover more of what your counterpart is thinking. Because often, like, what comes out of our mouth, you know, the first or even second time is just smoke, you know, so really uncovering that one of the things he talks about is, you know, is labeling where, you know, this is kind of described as the method of validating one’s emotion by acknowledging it. So it’s, it seems like you’re really concerned about patient care. It seems like you’re really concerned about the organization’s retention of talent. So what you’re doing is that you’re using neutral statements that don’t involve the use of I or we, so it’s not necessarily accusatory, and then you are, you know, same with the same with the mirror. You really want to not step on your mirror. You want to not step on your label and really invite the other person to say, Yeah, I’m just really frustrated by this or that. So labeling is really important to basically diffuse the power then the negative emotion and really allow you to remain neutral and kind of find out more about that. So that’s super important, yeah.

Tim Ulbrich 42:39

And I think with both of those, Tim, as you’re talking, it connects well back to what we, we mentioned earlier, of of talk less, listen more like you’re Yeah, you’re really getting more information out, right from from a situation that can be guarded. You know, people are trying to be guarded. And I think more information could lead, hopefully, to a more fruitful negotiation. What about the accusation audit?

Tim Baker 42:59

Yeah. So the accusation audit is, um, is it’s one of my favorites. Kind of same, same with calibrated questions. I typically will tell clients, I’m like, Hey, if you don’t, you know, if you don’t learn anything from this, I would say, have some calibrated questions in your back pocket and have a good accusation audit at the Reddit at the ready. And we typically would, typically will use the accusation audit to kind of frame up a counter offer. So, you know, it kind of, it kind of, so, so what? Before I give you the example, the accusation audit is a technique that’s used to identify and labor label, probably like, the worst thing that your counterpart could say about it. So these, this is all the, like, the head trash that’s kind of going on, yes, what of why? I don’t want, don’t want to negotiate. It’s like, Ah, they’re gonna think that, you know, I’m over asking, or I’m greedy, like all those things are that you’re, you’re thinking, so you’re really, you’re really just pointing to the elephant in the room, and you’re just trying to take this thing out and really let the air out of the room, you know, where a lot of people just get so nervous about this. So a good accusation audit is, Hey, Tim, I really appreciate the offer of, you know, $100,000 you know, to work, you know to work with your you know, with your organization. You’re probably gonna think that I’m the greediest person on planet Earth, but I was really looking for this to that, or great line, great. Or you’re, or you’re probably thinking that I’m gonna, I’m asking way too much, or you’re probably thinking that I’m way under qualified for this position, but here’s what I’m thinking. So you’re so again, like, no. Tim, right, right? So when someone says that to me, I’m like, No, I don’t think that. And what often happens, and again, this, this, clients have told me this, what often happens is that the person you know, the counterpart that they’re working with, like, they’re they, they’re recruited as, like, you know, one person said one client was like, Oh, we’re gonna find you more money. We’re gonna figure it out. So they like, you know. So when someone says that to you, you know, just think about how you would feel, you know, I don’t think that at all. And then it just kind of lets the the air out of the room. So you basically preface your counter offer with like, the. The worst things that they could say about about you, and then they typically say that’s not, that’s not true at all. So I love the accusation on it’s so simple, it’s kind of easy to remember. And I think it’s just, it just lays, I think, the groundwork for just great conversation and hopefully resolution.

Tim Ulbrich 45:16

That’s awesome. And then let’s wrap up with a goal of getting to a, that’s right. I remember when I was listening to interview with Chris Voss, this is a part that I heard, and I thought, Wow, that’s so powerful. If you can get in the midst of this negotiation, if we can get to a, yeah, that’s right, the impact that that could happen in the outcome.

Tim Baker 45:33

So, so he kind of talks about it like, you know, kind of put in all of these different tools together, so it’s, um, you know, mirroring and labeling and kind of, you know, using, I think, what he calls minimal encouragements of, uh huh, I see, kind of paraphrasing back what you hear from your from your counterpart, and then really wait for it’s like, Hey, did I get that? Did I get that right? Or am I tracking and what you’re really looking for is that that’s right. And he said, that’s even better than than a yes. So, like, one of the examples I give is, you know, when, when I speak with prospective clients, you know, we’re talking about, like my student loans and my investment portfolio and my, you know, I’m not doing real budgeting, and, you know, I got sold a life insurance policy that I think isn’t great for me. And so we go through all these different parts of the financial plan, and I basically am summarizing back what, you know, what they’re saying, and I say, you know, at the end of it. So I’m summarizing, you know, 30 minutes of conversation, and, you know, I’m saying that, did I? Did I get that right? And they’re like, Yeah, that’s right. You’re, you know, a great listener, which I have to record for my wife sometimes because she doesn’t agree with me. So that’s what you what you what you’re looking for is, is, yeah, that’s right. This person has heard, you know, message sent, heard, understands me. He says, if you get a, if you if you get a, you’re right. So sometimes, again, I keep talking about my wife. I’m like, Hey, Shay, we have to do a better job of saving for retirement. She’s like, you’re right. That’s really code for Shut up and go away. So it’s a, it’s a That’s right, is what, what really what we’re what we’re looking for. So that’s, that’s, yeah, very powerful.

Tim Ulbrich 47:08

That’s great stuff. And really just a great overall summary of some tips within the negotiation process, the steps of the negotiation process, how it fits into the financial plan. We hope folks walk away with that and just a good reminder of our comprehensive financial planning services that we do at yp planning. This is a great example of when we say comprehensive, we mean it so it’s not just investments, it’s not just student loans, it’s really every part of the financial plan, anything that has $1 sign on it. We want our clients to be in conversation and working with our financial planners to make sure we’re optimizing that and looking at all parts of one’s financial planning here, negotiation is a good example of that. So we reference lots of resources. Main one we talked about here today was never split the difference by Chris Voss. We will link to that in our show notes, and as a reminder to access the show notes, you can go to yourfinancialpharmacist.com/podcast, find this week’s episode. Click on that, you’ll be able to access a transcription of the episode as well as as the show notes and the resources. And last but not least, if you like what you heard on this week’s episode of the podcast, please leave us a rating and review on Apple podcasts, wherever you listen to the show. Each and every week, have a great rest of your day.

[DISCLAIMER]

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products, we urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of your financial pharmacists, unless otherwise noted, and constitute judgments as of the dates published such information may contain forward looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit your financial pharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

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YFP 383: 5 Overlooked & Undervalued Areas of the Financial Plan

Posted on by YFP Media

Tim Ulbrich, YFP CEO explores five often-overlooked areas of financial planning from credit, tax planning, emergency funds, insurance, and estate planning.

Episode Summary

Tim Ulbrich, YFP CEO, dives into five critical—but often overlooked—areas of financial planning that deserve more attention. While these topics might not be as thrilling as investing, making big purchases, or debt reduction, they’re essential for a strong financial foundation. Tim covers the importance of: building and maintaining credit; proactive tax planning; establishing an emergency fund; reviewing health, life and disability insurance policies; and estate planning.

Learn how to give these areas the attention they deserve, helping you create a more resilient and well-rounded financial plan.

About Today’s Guest

Tim Ulbrich is the Co-Founder and CEO of Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 15,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements. To date, YFP has partnered with 75+ organizations to provide personal finance education.

Key Points from the Episode

Importance of credit in the financial plan [0:00]
Shifting mindset from tax preparation to tax planning [3:30]
Setting up an emergency fund [9:51]
Reviewing insurance coverage [13:31]
Estate planning [19:51]
Invitation to consider YFP’s financial planning services [24:57]

Episode Highlights

“[Life insurance] is especially important for those that have a spouse, a partner, a significant other, or dependents that are reliant upon your income or partially reliant upon your income.When we think about the purpose of a life insurance policy, one of the main purposes is income protection.” – Tim Ulbrich [13:31]

“I really want you to shift your mindset to think proactively and strategically about your tax situation. And I recognize that sounds obvious, but I used to view, as perhaps some of you may, tax very much to be as something in the rear view mirror.” – Tim Ulbrich [6:30]

“According to a 2023 caring.com survey, two out of three Americans do not have any type of estate planning documents in place, and that makes sense, right? It’s not super fun to be thinking about, but the whole purpose of the estate plan is that we want to have a process to arrange the management of our assets.” – Tim Ulbrich [22:57]

“What we should also be doing practically here is making sure that we check our beneficiaries on our various accounts, and as we have talked about before on the show, updating or implementing a legacy folder, which is an important one stop shop where you have all of our financial documents and information.” – Tim Ulbrich [24:00]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP podcast, where, each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, on flying solo, to talk about five areas of the financial plan that are often overlooked and undervalued. Now, to be fair, none of these areas are very exciting to think about, especially if you’re focused on more inspiring goals, like investing, making a large purchase, giving or paying down debt, where you can feel the progress, or in the case of something like giving, you can see the impact that that may be having in the area that you’re giving or in your community. But with these five areas, what I’m referring to here are estate planning, the emergency fund, insurance coverage, tax planning and credit that isn’t necessarily the case. And there are instances where, when we are doing well in these individual areas, we might be able to see or reap the benefits of that. But for the most part, this is some of the boring work of the financial plan that we’re really playing defense in several of these cases and making sure that we’ve got that strong base and foundation in place.

Tim Ulbrich 01:04

So let’s take a closer look at each one of these areas, starting off with number one, which is credit. Now we just talked about credit on the Yfp podcast not too long ago, episode 380 we’ll link to that episode in the show notes, understanding and improving your credit score. And as we said on that show at the time, credit is one of those threads that touches many parts of the financial plan, and having good credit puts you in a position to take calculated risks in the form of leverage that could be buying a home, that could be buying a second property, that could be starting a business and doing so at the lowest cost possible. And fair or not, our financial system rewards those who can take on and pay off credit. And I know many of us were told at one time or another, probably by a parent or a family member, to build your credit. Right? Build your credit. But how much does building your credit and improving your credit actually matter? Well, let’s take it look at one example, if we assume that we have two home buyers, let’s assume one has a credit score that is considered excellent at a 10, and another home buyer has a credit score that’s considered fair score of 640 well that might end up being the difference of a 6% interest rate on a 30 year mortgage, thinking of the excellent credit versus a 7% interest rate on a 30 year mortgage, that would be for the person with the Fair Credit Score. Now, what does that actually mean per month and over the life of the loan? Well, the individual who got the lower interest rate because the better credit would have a monthly payment of about $2,400 per month, principal and interest only, and the individual had fair credit would have a higher monthly payment of a little over 2660 per month, again, principal and interest only. Now, over the course of the life of the loan, over 30 years, that ends up being a total cost of loan of 958,000 approximately principal and interest for the individual with fair credit, versus 863,000 for the individual that had excellent credit, same house, same situation, but two people with different credit scores, which shows a difference of about $260 a month, or $94,000 over the life of the loan.

Now if you start to apply this concept is securing other debt, right? Credit card, car purchase, investment property, starting a business, taking on a loan, et cetera. That cost of credit adds up in the form of less favorable lending terms. And since your credit score is a key metric that will be used by lenders to determine how favorable or not the lending terms are, it’s really important that we understand what goes in to the credit score, because the more we understand about those factors, the more levers we can pull to improve our score. And as we talked about on Episode 380, the top factors that impact your credit include payment history, so making sure we’re making on time payments and credit utilization, so the amount of credit that we’re using each month alongside the maximum amount that we’re given. Those two alone make up about two thirds of their credit score other factors, and would be age of credit history, total number of accounts and the number of hard inquiries on your credit. So again, check out Episode 380 and this is something we encourage you to be looking at your credit score on a regular basis as well as polling your credit report, not the same thing as your credit score, to make sure that there’s no negative marks, derogatory marks on your credit report that you’re not aware of, and so that you can clean those up and evaluate those further if need be. So that’s number one on our list of five overlooked and undervalued areas of the financial plan, all right.

Number two on our list is tax planning, with the October 15 extension, filing extension deadline officially behind us. The 2023 tax season is over. I know our tax team is excited about that. There’s a couple outliers because of. Some taxpayers in disaster areas are impacted by the hurricanes that are getting additional time for good reason. Now on that note, did you know that with an extension you have until October 15, right? We typically think mid April, but with an extension you have until October 15 to file your individual taxes, and for those that do that, October 15 extension, which is actually very common for many of our clients at wifey tax, we believe in right over rushed. Extending the deadline does not mean that you are not responsible for payments on any tax due. Incredibly important, right? The IRS expects you will make payments on time, and if not, penalties and interest will be assessed. So the October 15 extension is a beautiful thing. If you’re doing good tax planning throughout the year and don’t have a big balance due, as that would occur, incur a penalty and interest if we don’t pay it on time, or the other side of the equation, if you have a big refund coming, while many of us think big refund equals good, in that case, we just delayed now the time of getting that refund and putting those dollars to work. All right, enough about that. But when we think about tax as one of the overlooked and undervalued areas of the financial plan, similar to credit, right? This is a thread that runs throughout many areas of our financial plan, and I really want you to be shifting your mindset to be thinking proactively and strategically about your tax situation. And I recognize that sounds obvious, but I used to view as perhaps some of you may as well tax very much to be as something in the rear view mirror. Right? We file each year by the mid April, or as you learn here, the mid October deadline to meet the IRS requirements and to account for what happened the previous year. And I remember early on, you know, whether you’re using TurboTax or some software to do yourself, you’re working with an accountant, you kind of hold your breath and wait for the news, right? Am I going to get a refund? Am I going to have a certain amount of due? But we probably didn’t pay too much attention throughout the year, and ultimately, what that led to was either several refunds. That was the case for us early on, that we could have been putting those dollars to use elsewhere throughout the year. So when you go to File each year and we’re finally what happened in the previous year, that’s retroactive, right? And want us to shift our thinking, to be more proactive, and so to move our mindset from tax preparation, that’s important. It’s necessary. The IRS says we have to do it. We have to file our taxes, but to think more in the mindset of tax planning, right? A very important distinction of mindset shift so that we can think proactively and how we can optimize our tax strategy. Now I want to challenge you that if you don’t already know your key numbers, things like your effective tax rate, your adjusted gross income, it’s time to get out the IRS Form 1040 we’ll link to a copy in the show notes, and take 10 or 15 minutes to make sure that you understand the terminology and the flow of dollars. Because when we start to understand how the 1040 flows, we understand these terms, we can really begin to have this concept of tax planning come to life adjusted gross income, just as one example, has very important implications on things like student loan payments for those that are doing an income driven repayment plan, as well as certain phase outs on things like child and child care credits, Ira contribution, student loan interest deduction and so much more. Now on Episode 309 of the podcast, our CPA and director of tax, Sean Richards, cover the top 10 tax blunders that pharmacists have made, as we’ve seen through the filing process. So whether someone has a negative net worth or a net worth of several million dollars, I think you’re gonna find some value in that episode if you didn’t already listen to that. These are mistakes like having a surprise bill or refund at filing. And what are the common causes pharmacists that potentially could be employing something like a bunching strategy for their giving and just not aware of that strategy, those that should be thinking about estimated taxes throughout the year and are caught by a surprise after that, not not optimizing things like the HSA or traditional retirement contributions to reduce our taxable income, and an oldie but a goodie, not factoring in public service loan forgiveness when choosing married filing separately or married filing jointly. So again, make sure to check out that episode. Episode 309. Great time of year to be thinking about that as we’re heading into the 2024, tax season. That’s number two on our list of five overlooked and undervalues areas of the financial plan, tax planning.

Number three on our list is the emergency fund. Now, if you’ve been listening to the podcast for a while, you hear me harping on the emergency fund every once in a while, and because it’s that important, right? Saving for a rainy day, saving for an emergency it’s not easy. It’s not fun. It takes discipline, it takes patience, it takes trust to save for something you can’t yet, see, feel or experience. In the moment, but we all know that it’s not a matter of if, but it’s a matter of when. And so as we’re putting in other key parts of the financial plan, we don’t want something that is likely to happen, although we don’t know exactly what it will be, right, whether it’s a cut in Job hours, whether it’s a health emergency, whatever it might be, we don’t want that to derail our progress in other parts of the financial plan, as I’ve shared before in the show in the not too distant past, Jess and I have had to dip into the emergency fund for an unexpected knee surgery that we had to pay 100% out of pocket because of our health insurance. We had a dislocated elbow for our youngest, a trip to the ER for our oldest, for the busted lip, right? The list can go on. And so life happens. That’s the point, and we want to be ready to be able to incur those expenses. And when it comes to things like health care expenses and unexpected health care expenses, everyone’s insurance is different, right? So we got to look at what is a deductible, what’s the out of pocket Max, and know that we have to have a backstop of our emergency fund at a minimum to cover those things, as well as other emergencies that will come along the way. So this area of the plan is all about peace of mind, as I mentioned, it’s about making sure we’re not derailing other parts of the financial plan. And my experience tells me that when you have an emergency come up, and you have an unexpected expense come up, and we’ve got the funds that are there to handle it, a really important mindset shift happens. It’s not fun to write those checks, but when we’re able to do that, because we plan for it, we go from playing defense to playing offense. We’ve got breathing room, we’ve got margin, and perhaps we can even take some calculated risk in other areas of our financial plan that might have been unthinkable just knowing that we’ve got this backstop, we’ve got this foundation in place. So we’ve talked about the emergency fund at length on the show before. I’m not going to bore you further on this, but we want to be making sure that we’re answering important questions like, Is it adequately funded? Generally speaking, that’s three to six months worth of essential expenses. Everyone’s situation, of course, is different. We need to be answering questions like, do we have too much saved in an emergency fund? Right? There’s value in having a cushion, but having too much of a cushion comes with an opportunity cost, and so have we grown that to a point that we might be able to use some of that for other parts of the financial plan? We need to answer questions like, Are we optimizing our emergency fund? This is not the place that we’re going to take risk necessarily. We want this money to be liquid and accessible and available when we need it, but we also don’t want this sitting in our checking account earning next to nothing, right? So this, this could be in a high yield savings account, money market account, US Treasuries, something that the money is working for us, or at least coming as close as possible to keeping up with inflation. And as I mentioned, you know, with other parts of the financial plan, we want to make sure this isn’t a set it and forget it. So life changes as we progress. Our expenses change over time. And so each year, I would challenge you to look at this once a year to see what is that amount, what’s that target goal when it comes to the emergency fund, and is there a potential boost that is needed to the emergency fund?

Number four on our list is insurance coverage. And there is lots to think about when it comes to insurance, but I want to narrow in on two policies in particular, which would be life insurance and Long Term Disability Insurance. Now life insurance, for obvious reasons, is not fun to think about. Right? Nobody wants to consider what a premature death may look like and how the impact of that would be on their family and on the financial plan.

This is especially important for those that have a spouse, a partner, a significant other, or dependents that are reliant upon your income or partially reliant upon your income. Right? When we think about the purpose of a life insurance policy, one of the main purposes is income protection. So in order to determine how much of a policy we may need, we need to ultimately determine what would be the need if you were to prematurely pass away, and what part of your income that is no longer coming in from work do we need to replace in the form of an insurance policy to be able to achieve various goals that could be paying down a mortgage, that could be investing for the future, that could be saving for kids college, right? What are the things that we would need for this policy to fund lots of work to be done there, and why generic calculations shouldn’t be applied when it comes to things like life insurance. Now there are two main buckets of life insurance. There’s a category of life insurance called permanent insurance. These would be things like whole life insurance policies, universal life insurance policies, variable life insurance policies, variable, universal life insurance policies, right? The alphabet soup of whole whole life and permanent insurance, and then the second bucket is term life insurance. And for the sake of this episode and our time together, I’m going to spend our time there, because I believe that for a majority of folks listening, a term life insurance policy is going to be the way to go. That’s not an absolute. That’s not a. Ice that’s not for everyone, but for many folks, that’s going to be the area of focus. And we’ve got a great resource on this, if you want to nerd out. It’s called the life insurance for pharmacists, our ultimate guide to free resource. We’ll link to that in the show notes. But essentially, with a term life insurance policy, what differs it from a permanent insurance policy it is, is that it is insurance alone. It is not paired with an investment product.

Another important difference is that with a term life insurance policy, as the name suggests, it lasts for a term or a period that could be 15 years, 2025, or 30 years, and you’re going to pay a monthly premium. And for that monthly premium you’re gonna have a set amount that that policy would pay out could be a half million dollars, $1,000,000.02 million dollars, whatever you decide is the need in the event of your death, and once that policy is period is complete, once that term is over, if you’re no longer needing that policy, meaning that you’ve survived or outlived that policy, which is good news, right? There’s no dollars that are coming back to you. So the premiums you’ve been paying each and every month, let’s say you pay 40 bucks a month for a million dollar term life policy over a 20 year period. At the end of 20 years, if we don’t have to enact or use the policy, that’s it. The policy is over. None of those premium dollars are coming back to you, which is the point that is typically used when folks are selling permanent insurance policies that are like, why would you want that money just to go down the drain again? Check out our article life insurance pharmacist, The Ultimate Guide for a more in depth discussion of the different aspects of these policies. This, in my opinion, for most folks listening, why term life insurance coverage is the focus is because this is really meant to be catastrophic coverage, keeping our costs low, so we can use those dollars elsewhere in the financial plan, typically permanent and child policies are much more expensive, typically carry some fees on the investments may not necessarily perform as well as we could invest the dollars on our own, or we’re in working with a professional so with term life insurance, assuming someone is healthy, very much dependent on medical conditions and age of that individual in terms of how much that policy will be, as well as the term or length, but relatively inexpensive for most folks, and is going to allow us to put our cash and dollars to use elsewhere in the financial plan. That’s just a couple key nuggets when it comes to something like life insurance. Now, with long term Disability insurance, one of the greatest assets that you have as a pharmacist is your ability to generate an income. Right?

Think about how long it took you to be able to get that point of becoming licensed, to be able to earn that six figure plus income. And so the focus of long term disability is what would happen in the event that you were unable to earn that income. Now we address the death scenario in something like a term life policy. Here we’re talking about could be a disability, like a chronic medical condition, rheumatoid arthritis, some other condition that would prevent someone from working or working in their position, or it could be something like a car accident, right? Not likely, but these are things that we need to protect if that were to happen, what is the plan to be able to replace your income that you’re earning while you’re able to work as a pharmacist? That’s the purpose of disability insurance. Again, we’ve got a great resource here, disability insurance for pharmacists, The Ultimate Guide. We’ll link to that in the show notes. Lots to think about in terms of how much coverage you might need, the different terms like elimination periods of time, what’s the length of the policy, the potential costs, these are typically more expensive than term life insurance policy.

So make sure to check out that resource from Yfp that we published disability insurance for pharmacists, The Ultimate Guide. We’ll link to both of those in the short show notes. Now, when it comes to purchasing term life insurance and disability insurance, there are a lot of factors to consider. This is one of the reasons why our planning team spends time with our clients individually, going through these policies to make sure they’re customized to the individual. Things like, what’s the goal or the purpose? What are we trying to accomplish with these policies? What employer coverage Do you already have in place, and do we need additional coverage? What are the tax differences between an employer policy that pays out versus a policy on your own? And then, of course, everyone’s situation is different, right? What’s your household income? Is there one income two incomes in the household? What are their goals? What reserves do you have? What expenses are we trying to replace? All these things are going to help us determine what policy is needed, and then from there, we can look to make a purchasing decision that aligns. So that’s number four on our list when it comes to insurance.

Number five, our final of our five overlooked and undervalued areas of the financial plan is the estate plan. Now if you’re listening and you realize that you’ve got some work to do in getting your estate planning documents in place. Know that you aren’t alone. According to a 2023 caring.com survey, we’ll link to that in the show notes, two out of three Americans do not have any type of estate planning documents in place, and that makes sense, right? Just like we’ve been talking about some of these other areas. Nine. Not super fun to be thinking about, but the whole purpose of the estate plan is that we want to have a process to arrange the management of our assets. The management of our property decisions around dependents could be decisions around child care or assets that are going to dependents or others, and in the case of our health, if we were to become, let’s say, incapacitated. Who’s making healthcare decisions? What are those decisions that we want to have made, and making those from a viewpoint in which we’re able to think about those with a clear mind? So that’s the estate planning process in a nutshell, and especially for those that have dependents and have beneficiaries, these are documents that we want to have in place, and just like we talked about with the emergency fund, this is not a set it and forget it. So yes, there’s some upfront work to be done here, from some upfront costs, typically, as well, to do these documents and do them well with a consultation from an estate planning attorney as well as hopefully working with a financial planner. But things change right? Things evolve over time, and we want to make sure that we have a process to update these documents along the way. So the objective with estate planning, yes, it’s peace of mind, right, knowing that we’ve got plans in place for our family, for our assets, for the stuff, for our health care and the decisions that are being made, but as folks accrue assets over time, there are also some tax planning considerations when we think about the transfer of assets that are really important to be considering along the way as well. So practically speaking, what do we need to do here? Well, check out Episode 310, of the podcast, if you didn’t already catch it, where Tim and I talked about dusting off your estate plan. We’ll link to that in the show notes. These are important documents, like wills and living trusts, advanced medical directives, durable powers of attorney.

And at YFP, our financial planning team is are working with clients, one on one to put a framework in place for what are the estate planning needs, and then working with a solution that relies on estate planning attorneys and legal advice to make sure that those are being executed appropriately for the state in which that individual lives. What we should also be doing practically here is making sure that we check our beneficiaries on our various accounts, and as we have talked about before on the show, updating or implementing if you don’t already have one, a legacy folder, right, which is an important one stop shop where we have all of our financial documents and information in place at our house. We call this the blue folder. Much of it is electronic now, but the original version was a hard copy blue folder. Some of it resides electronically. Some of it resides in our safe but it’s the one stop shop that we know that if Jess and I were in a situation where we weren’t able to access that information or communicate that that our family knows where that information is, like our state planning documents, important insurance policies, tax returns, our various investment accounts, all the information that would be needed to make some decisions along the way. We’ve got a checklist resource here if you want to develop your own legacy folder, you can go to your financial pharmacist.com, forward slash legacy and begin to implement that in your own financial plan. Well, there you have it. Those are five overlooked and undervalued areas of the financial plan. A lot of information and things to be thinking about. These are all areas of the financial plan that our team of certified financial planners are working one on one with our financial planning clients as well as our tax planning clients at Yfp tax and so if you’re interested in learning more about what those comprehensive financial planning and tax planning services look like, we’d love to have an opportunity to talk with you further to learn more about your situation. You can learn more about our services and determine, ultimately, whether or not there’s a good fit there, you can book a free discovery call by going to your financial pharmacist.com, you’ll see at the top of the home page an option to book that call. Thanks so much for listening. Hope you enjoyed this week’s episode. Have a great rest of your week.

[DISCLAIMER]

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only, and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of your financial pharmacists, unless otherwise noted, and constitute judgments as of the dates published such information may contain forward looking statements which are not intended to be guarantees of future events, actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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YFP 382: Living & Leaving a Legacy with Joe Baker

Posted on by YFP Media

Joe Baker, personal finance instructor, returns for inspiring conversation about purposeful living, the power of mentorship, and the enduring impact of a life well-lived.

Episode Summary

In this episode, we welcome back Joe Baker, MBA for his third appearance on the show. Joe first joined us in 2019 with his former student Blake Johnson, where they shared the inspiring story of their debt-free journey, highlighting the pivotal role Joe played in Blake’s success. In 2020, Joe returned to discuss his book, Baker’s Dirty Dozen Principles for Financial Independence, sharing his expert insights on achieving financial freedom.

This time, we’re shifting focus to explore the themes of living and leaving a legacy. Joe opens up about the lasting impact he hopes to make through his teaching, his book co-authored with his daughter, Lindsey, and his dedication to giving back. He shares the story behind his two endowed scholarships, demonstrating his commitment to supporting and uplifting his community.

Join us for an inspiring conversation about purposeful living, the power of mentorship, and the enduring impact of a life well-lived.

About Today’s Guest

Joe Baker is an instructor at the University of Arkansas for Medical Sciences College of Pharmacy, where he has been teaching personal finance for over twenty-five years. He holds a Bachelor of Business Administration from Southern Arkansas University and a Master of Business Administration from the University of Central Arkansas. Joe retired in 2019 from Pharmacists Mutual Company, where he spent twenty-eight years providing insurance and financial services to pharmacists across Arkansas.

As part of his commitment to giving back to the community, Joe has endowed two scholarships. The first supports students from his hometown of Emerson, Arkansas, who are enrolled at Southern Arkansas University. The second scholarship benefits students at the University of Arkansas for Medical Sciences College of Pharmacy who attended Southern Arkansas University.

Joe has been a guest speaker for academic and corporate groups nationwide, promoting financial literacy. Most recently, he co-authored a book on personal finance with his daughter, Lindsey Baker, titled Baker’s Dirty Dozen Principles for Financial Independence. Published in December 2020, the book is filled with humor and stories from contributors, offering a lively and engaging introduction to personal finance. It was ranked the #1 book by “Financial Education For Everybody,” a partner of Amazon, in their Financial Literature Category, and was also recognized by GoBankingRates.com as one of the “10 Financial Books That Will Change Your Life (and Finances).”

Joe and his wife Brenda reside in Little Rock, Arkansas.

Key Points from the Episode

Joe Baker’s Introduction and Background [0:00]
Joe’s Career in Pharmacy and Teaching [5:23]
Impact of Financial Education and Personal Stories [9:03]
Teaching Methods and Student Engagement [21:33]
Writing and Publishing “Baker’s Dirty Dozen Principles for Financial Independence” [30:10]
Philanthropic Giving and Endowed Scholarships [37:44]
Final Thoughts and Encouragement [46:10]

Episode Highlights

“I didn’t even make six figures until I was 47 years old, and became debt free by age 50. And it’s amazing the money you can accumulate when you’re debt free. Then I became a millionaire, and then doubled that in just a few short years. And I don’t say that to brag. I just tell people I got a late start.” Joe Baker [4:06]

“It’s not how much you make, it’s how much you keep, but then I added to it, it’s not how much you keep, but it’s how much you give away.” Joe Baker [42:01]

“Giving back does not have to be a monetary situation. It could be being the best father, being the best husband, giving in those respects. It could be at your place of worship, giving of your time, your efforts, your leadership, your mentors. It doesn’t have to be financial. It can be any of those ways. It will make you feel good and it’ll be a win-win.” Joe Baker [45:41]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I welcome Joe Baker for his third appearance on the show. Joe first joined us in 2019 alongside his former student, Blake Johnson, where they shared an inspiring, Debt Free Journey that highlighted the incredible impact Joe had on Blake’s journey. Then, in 2020 Joe returned to discuss his book, Baker’s Dirty Dozen principles for Financial Independence. In this episode, we’re taking a new direction, focusing on the themes of living and leaving a legacy. Specifically, we discussed the profound legacy Joe is creating through his teaching, his book written alongside his daughter, Lindsey, and his philanthropic efforts, including endowing two scholarships that give back to his community. All right, let’s jump into my interview on living and leaving a legacy with Joe Baker. Joe, welcome to the show.

Joe Baker 00:54

Thank you, Tim.

Tim Ulbrich 00:56

This episode, I don’t know if you know this, this episode of officially makes you a three time guest on the YFP podcast. So we’re so glad to have you back.

Joe Baker 01:04

Nice. Great to be back.

Tim Ulbrich 01:06

So we’ll give our listeners some quick history. We had you first on back in 2019 along with a former student of yours, and you may remember Blake Johnson. This was on episode 82 Blake shared his Debt Free Journey and the impact that you had on his journey, which I think fits nicely into the topic of living and leaving a legacy today, and how you have taught and helped others. And then we had you back on Episode 177 when you launched your book Baker’s Dirty Dozen: Principles for Financial Independence. We’ll link to both of those episodes in the show notes. But Joe, for those that maybe didn’t catch those episodes and don’t know who Joe is. Give us a brief introduction.

Joe Baker 01:42

Okay, well, sounds good. I was actually raised in a very low class family down on the Arkansas, Louisiana line. And for those that don’t know me, I’ve told the story many times. We didn’t even have an indoor toilet till I was nine years old. So a lot of people just can’t even imagine that. So my financial journey had not really started then and I tell everyone, my financial journey didn’t really start until I was 30 years old. That’s when I got married and ended up marrying a math teacher who exposed me to the time value of money, and it was just like a light bulb went off. I said, Wow, I was even, even though I was a business major. I said, I did not know this.

Tim Ulbrich 02:31

How’s that for a wedding gift, by the way?

Joe Baker 02:33

You know, I came into the situation kind of like in the movie, Oh Brother, Where Art Thou? You know, I didn’t have much to offer, but she saw that I was bonafide and I had something to give. I had a TV and a VCR. You can Google that, Tim, and a bed without a headboard. So I came in and with a little credit card debt. So I was quite a catch financially, but there, there was potential there, and I was bonafide, and by knowing or seeing the time value of money, it was just like a light bulb went off, as I said earlier, and I said, I’m already starting in my 30s, and that’s why, when I’m teaching or speaking to groups, I said, don’t worry if you’re in your 30s or even in your 40s. Yes, you have to catch up, but you can make a difference financially. You know, I’ve outlined this in my book, and I’m pretty much an open book when I tell my story, I didn’t even make six figures until I was 47 years old, and became debt free by age 50. And it’s amazing, the money you can accumulate when you’re debt free and and obviously became a millionaire, and then doubled that in just a few short years. And I don’t say that to brag. I just tell people I’ve got, I got a late start. And I to my pharmacy audience, the students especially, I say, you know, you’re, you’re starting off making six figures, whereas I was at 47 so you know, it’s a great story to tell because of my background from day one, when I was born. So but that’s my financial journey and and everything that I’ve lived since birth is is been able to relate to people out there about, yes, you can do this. You know, if I could do it, is even though it was a little later than I wanted to but you can as well.

Joe Baker 04:13

You shared with me once before, Joe, I don’t know if you remember this, but you said to me, quote, my biggest financial accomplishment came from marrying a high school math teacher.

Joe Baker 04:57

I did not know I told you that, but that. Is the truth. It’s amazing. I think that’s chapter two in my book. Make sure you and your significant other are on the same financial page. And that is so true. You know, of all the financial decisions out there, you know, marrying someone that that makes a world of difference.

Tim Ulbrich 05:23

So you have a strong connection to the profession. Not not a pharmacist yourself, but you’ve been involved in the profession for many years. Tell our listeners more about your background and career that’s connected you to the profession of pharmacy.

Joe Baker 05:35

I really got introduced to pharmacy in 1991 when I went to work for Pharmacist Mutual Insurance, and I worked for them for 28 years as the Arkansas rep, and I tell you, the Arkansas pharmacist and pharmacists across the country that I’ve gotten to know the best class of people, I have just enjoyed it. I miss the day to day being with them, and I can’t imagine my life right now not being involved some way with pharmacy or or pharmacy students. So did that for 28 years, retired in 2019 but I have been teaching at University of Arkansas, College of Pharmacy for 25 years, a personal finance elective, and started that in the fall of 99 and that’s another thing I say each semester. I said, I don’t know if I can keep doing this. And that first day, if not, the first thing, second day, I said, this is great. I love it. And you’ve talked you know what it’s like? You get that immediate feedback. They’re like sponges, and that is part of my I know the topic today is giving back. Giving back is so easy for me in this respect, because it’s for selfish reasons. I feel good. I feel sometimes like I’m an entertainer on a cruise ship, because you never know what’s coming up. You’re interacting with the audience and, and I like to tell stories and and they laugh a lot, not because of the grade, but because we’re having a good time in there. And and try to make it fun So, and that’s what I tell the students. I said, you know, there’s no reason why we can’t make this fun. It is about money. But been doing that, and I did do for about four years at Harding, College of Pharmacy. That’s the other university in the state, but, but the drive was pretty tough to go back and forth there. But also speak to groups across the country and and I have two presentations. One is with Pharmacist Mutual. They still contract with me, or in a contract with them, to do risk management talks. Whenever I do a risk management talk, I try to talk the school into it. Let me do a financial talk as well. Dovetail it in together. And sometimes I go and just do the financial talk, and sometimes I do the just risk management talk, but I always try to give, if it’s a risk management only, some financial information, and by the way, I always ask two questions whenever I’m before any audience. One, have you ever heard of Pharmacist Mutual Insurance. And two, have you ever heard ofYour Financial Pharmacist? And I do that because there’s no other organization that I know that does what you guys do, and it makes my job a little bit easier for to bring home some points about finances, and that’s what I’ve been doing since retirement. I don’t I’m not making a whole lot of money, if any, in retirement, but I sure am having a blast. It has been fun to get with the pharmacy students on the road and teaching them in class. They’re just, they’re just a hoot.

Tim Ulbrich 08:59

Yeah, yeah, having a blast and having a massive impact. You know, you mentioned Hey for selfish reasons, and I know what you’re referring to, that feeling when you’re with a group and you see some of the light bulbs go off, the connections start to be made. People start to make some pivots and decisions, and momentum is built. And, you know, look, look no further than episode 82 where you and Blake were talking about his journey becoming debt free, the impact you had on his journey. And look at the great things Blake is doing in his own financial plan that allowed him, not not only through getting debt free, but allowed him to propel into real estate investing and be on a path towards financial independence and giving, I mean, talk about generational impact, and obviously his continuation of that with his family as well. So that’s one example. I know you’ve had a profound impact on Blair Thielemeyer. We’ve had her on the show several times, and hundreds and hundreds of others that I’ve never had the opportunity to interact with. So we’re going to get more into that in a little bit. I want to ask you, though, Joe, you may remember this moment back in 2019. You and I were sitting next to each other at FinCon, which is a conference for basically, financial nerds, right, bloggers and podcasters and authors, and you and I were sitting at a keynote next to each other, and the keynote was being delivered by Ramit Sethi. And Ramit Sethi, for those that know is as the author of the book, I Will Teach You To Be Rich. And at the time you you had your book, I think, in an early draft form, if I remember right. And from that keynote, you’re like, wait a minute, I need to pivot and rewrite chapter one. What jumped out to during that keynote that shifted your thinking, especially given that you had been down this road before, like there was something that really jumped off the page here in that moment.

Joe Baker 10:43

Oh, it was. As they say, it was an aha moment. And it was because I was, I had the early draft going of my book, and it was going to be, I don’t say, pretty typical of other financial books or personal finance books, but it was along the line of, don’t do this, don’t do this, don’t do this. You know, if you, if you buy a Starbucks latte every day, instead of putting up money, you’re gonna this is gonna cost you that. Don’t do that, don’t do this. And it was pretty negative. And when, when Sethi said, you know, if you want to go out there, and I’m paraphrasing, but it’s pretty close, if you want to go out there and have a latte, have a latte.And a light bulb just went off, and I don’t know if you remember, I turned to you and I said, I have just changed the focus of several chapters in my book. I went from telling people don’t do this, don’t do that, but do what you want, but they are opportunity costs. Consequences for it. Whatever you do is like my Pappy used to always say, he says, Whatever floats your boat. He would say that all the time, and that’s what it is here. If you want to buy a new vehicle, that’s fine, but let’s look at the opportunity cost. Go in it with an open eye, because his brother, Dave Ramsey says, there, you know, the depreciation all that. But don’t be so focused on the negative. I can’t do this, I can’t do this, can’t do that. But I love Paula Pants said one time, says you can afford anything, you just can’t afford everything. And I love that quote, and I have used it from time to time, and that is so true, because you’re out there and you’re focused on things to buy and not buy, and that’s what I did in my book. And also in class, I’m I’m telling them, actually, I show them, I say, Well, if you don’t spend your money here, let’s look at the opportunity cost, and let’s go over here and see what that money can be spent for somewhere else. I’m not telling you what to spend the money on. It’s like my sister and brother in law, and hopefully they won’t hear this podcast, but they in 34 years, they’ve owned 31 new vehicles purchased, and there’s an opportunity cost there. Now they make plenty of money, and that’s there’s no problem, and they’re happy. They enjoy it, as my pappy says, Whatever floats your boat. So they’re okay with that, and I’m okay with it too, but there is an opportunity cost by buying new vehicles all the time, and they understand that. But who am I to tell someone they can or cannot buy something. I just want to point out the ramifications if you’re if you’re doing that and and it has been so ingrained in my mind I can afford just about anything, not everything, but just about anything. But I am so, still so stingy with money. It irks me when I spend any money, and that’s just because many years of being dogmatic and the way we spend money, but, but that’s okay,

Tim Ulbrich 14:12

And the concept of that keynote, which has stuck with me forever since we heard it as well, was, was what he was referring to there, he calls in his book money dials. You know, so find the things that actually matter to you in the financial plan. Not other people, but matter to you, and dial those up. Make make them a priority, but for the things that you don’t really care about, like, stop spending money on those things, right? His example that he gives is, for him, it’s convenience. Like he’s all about convenience and technology and investing in those but, you know, he lives in an apartment in New York City. He’s not focused on a car. Cars don’t really matter to him. Like, to your point, everyone’s out there to define what what those are, but there’s an opportunity cost, and there’s an opportunity cost on both sides. You know, this is something that. Has stayed with me since reading Die with Zero by Bill Perkins, that you know, there also is an opportunity cost of potentially over saving. Now, what does that mean? And what does that exactly look like? Obviously, that’s where we start to get in the details. But there’s a balance between today and tomorrow, and I think that’s what he was really getting at in that keynote. And as you articulated well so many books, it’s cut this. Cut that if you don’t go by the latte, and you compound it over 35 years, it could have been X 1000s of dollars. Well, of course, right? But the point he’s making is that for some people, they really enjoy the experience of the latte. So be it. For other people, they could care less. So stop sending money on the latte and direct it elsewhere. So yeah, that was a great moment. And I remember you revising the manuscript and then sending it to me, by the way, in a paper copy in a manila folder?

Joe Baker 15:47

Old school.

Tim Ulbrich 15:51

All right, so I want to talk about three areas around living and leaving a legacy that I think you just have role modeled incredibly well. And are three areas that I desire to follow in your path as well. And those three areas relate to living and leaving a legacy and teaching others. We’ll talk about that a little bit more. In the book that you wrote that will continue to endure and help others into the future, and then also through some of the philanthropic giving that you’ve done through some scholarships and other parts. So let’s take each one of those, one by one when it comes to teaching. You mentioned this a little bit in your introduction. You’ve been teaching personal finance since 1999 so going on 25 years now, which is incredible. What got you started in that journey when you began to teach? And obviously that would grow and evolve over time, but what was the initial step into saying, Hey, I feel like I’m at a place where not only can I implement this in my own financial plan, but I really feel like I can help others, especially others that are just getting started.

Joe Baker 16:52

That’s a good question. You know, I was once a high school teacher, and I enjoyed it so much for the same reasons, and I would have been in an education even as of today if one of Chris, a friend of mine, who was Secretary of State of Arkansas, ran for Congress, and he asked me to work in his campaign. So I quit that job and and as strange as it goes, we lost in the runoff by two percentage points. So it changed everything, because I’d have been in Washington and all that, who knows, political junkie but, but because of the loss, gravitated out of that. But working at Pharmacist Mutual, I said, you know, there’s still something that I’d like to do, education wise, because when I was with with them, when I’d go out and work with pharmacists, I was always trying to teach. That was my idea of sales. You know, let me just teach you what some of the exposures are, and we’ll see if we can work out a solution for that. And then one time, I was at a registration at the University of Arkansas, College of Pharmacy, and I was just speaking with the dean, and the assistant dean told them about my love of teaching. And I don’t know who came up with it first, but someone said our students are making a lot of money when they get out back then, and, you know, late 90s, it was like 45,000 and they said, you know, they’re they really need some financial guidance. And I said, Well, let me see if I can put together something and, and that’s where we are today, after 25 years. And I will say it is the most popular elective, and I won’t say that’s because of me, but because of the material, because most people are not exposed to some of these tenants that we know in financial terms, like time, value, money, opportunity costs, Roth IRA, mutual funds, ETFs and all those things. And it has, it has just been a blessing to be able to teach the students. You mentioned Blake Johnson. You know, you never know this is almost like an evangelical feel to it. When you’re teaching about personal finance, you don’t know whose life you’re touching, you know, I didn’t even know you mentioned Blair earlier. I didn’t even know that I had any influence at all. Believe it or not, she was pretty quiet in class. But with Blake, you know, today, he’s not only highly financially successful in his own right, and I think he’s 36 maybe, but he is doing basically the same thing as being a facilitator at his church with Dave Ramsey’s course. So I look at that and say, you know, I like to think that I had something to do with that. And. So I see that and I and it gives me the feedback. You know, at least, I think I’m doing something good. And so forgot the actual question there, but, but that is part of my giving back is teaching. Obviously, I wouldn’t do it if, if it didn’t make me feel good, and, and a lot of this giving, and I’ll just say it right up front, Doctor House on the TV show House MD, I don’t know if you remember, he was pretty cynical. He made a statement one time. And I’ll paraphrase all this giving and and helping others is just selfish in nature, or something like that. And I said, Well, that’s probably true, and it is true that it does make me feel good. If I set up a scholarship or teach or hand out a Starbucks card to somebody that’s doing great work that, you know, just some recognition, it does make me feel good. But why can’t there be a 50/50, win-win. You’re helping someone else. You’re helping yourself by feeling good. So, you know, what’s the downside here?

Tim Ulbrich 21:07

Yeah, I think both things can be true. I feel the same way, right? There can be an intrinsic value, you know? I think that’s probably a part of how we were wired and designed. But that can also have a benefit and impact on others that continue on to others as well. And I think that’s one of the cool things. As you share your story, when someone like Blair reaches out and references you as having an impact, you’re like, I had no idea, right, right? And you know, how many other students, how many students do you think you’ve reached and taught across those courses?

Joe Baker 21:36

Well, most years I’ve been teaching both semesters, and I kept up with it for a while. My classes are anywhere from 40 to 70 students. Most years were two semesters, and then you have hard I have no idea. But you know, if I only had three in a class, I would still teach the class, because I would feel that those three really want to be there. And if I can impact one person, whether it’s teaching a class or speaking at a conference, or just going on just any, any type of program, or just sitting down showing someone some of the numbers that I think it’s a job well done. Joe,

Tim Ulbrich 22:32

do you have a favorite activity within the course that you feel like really helps the students make a connection to a particular topic?

Joe Baker 22:39

Good question, and I use this when I’m speaking on their so called final exam. I don’t really give exams. I say, you know, attendance is crucial. That’s your grade, but your your lifetime, is your final exam. And and I don’t have to worry about you know, students being absent, because I say, any day that you’re missing could be worth a million dollars, and that usually has their attention. But on their official or unofficial final exam, I have them do one project. I say, Okay, you’re you’re p3 you’re graduating next year, in little over a year, you’re going to do what I’m about to tell you on this final exam. I give them a scenario. I say you’re making 120,000 a year with certain parameters. And it’s a a 401K practicum, okay? And I say, let’s go through this. You pick out how much you’re going to put into your 401 K, your contributions, the typical matching from your employer. Then you pick out whatever funds you want. I give them a selection, just like you would if you had a 401 K, enrollment at your employer. And then I say, okay, get that amount. We’re going to determine what your rate return would be. And I give them a little chart here. If you’re 75% stocks, you’re probably going to make eight to 9% but then I get all that information, and then I show I have them a financial calculator website, which I think you’ve seen. And I say, Okay, go through here and you tell me what you put in all this information, your age, how much you’re contributing, your rate of return, hypothetically you’re matching, and tell me what you’re going to have at age 60. And it is, it is an eye opener for them. And then I say, it’s, I said, this is open book, open neighbor. You talk to your neighbors, because if you’re doing an actual enrollment, you’re going to be asking for your co workers opinion, yeah, and they, I had one student said, yes, if I could just started one year earlier, I’d have an extra $2 million Dollars. And I said, mission accomplished, because all those are contributing factors as far as what you’re going to have one day. But I will say this, I have changed that somewhat. This last semester, I instituted something a little different. I say, Okay, you say, I can’t envision being at 60 or 65 and retiring. Why do I need to save all this money for something that I may not live to see, I may not be physically able to enjoy it? I said, Okay, well, fair enough that is, that’s a very fair question, because I am 69 as I stated earlier, half of my friends, relatives and acquaintances, I would say, are either gone or they’re not physically able to travel or do anything else. Now I said, I understand that, so let’s use time value of money and do something a little different. And this is probably off the subject today, but, but I think it’s significant. I said, Okay, we’re thinking that. Let’s just see if we can’t what would happen if we maxed out on your 401, K for just say, 10 years, 26 to 36 just like, kind of like what we did an example before, and then at age 36 after 10 years, then turn around and only contribute equal to your employer, match and see what it comes up to. And it’s still millions of dollars. And I said, you know, you’ve got all that extra money now, if you just sacrifice a little bit for 10 years. And then, yeah, I mean, it is, and we do that, I’m going to do that exercise now, because I know in a lot of their minds, it says, I don’t know if I just want to sacrifice my whole life. Yeah, and that is fair enough. And now that I’m at this age, I am seeing it where people have stayed up their whole life and what do they have it’s not able to enjoy it. So let’s, let’s use the time value of money and do something a little different. So anyway, that’s I’ve changed my MO a little bit, even in my talks, I’m using that as an example. I say, okay, you know, if you don’t want to do that your whole life, let’s, let’s do something else.

Tim Ulbrich 27:31

I think what you’re doing there, and I’m sure you’ve made this connection, is it’s an actual representation of what you shifted in your book with chapter one that we just talked about, right? It’s this balance we talk about so often on the show, between, hey, yes, we’ve got to save for the future. We want to be ready and prepared. We don’t want to be caught off guard, right? But we also got to figure out a way to enjoy and live a rich life today. Both things can be true and but both can be done if we’re planning advance. And Joe, there’s actually a name for this now called Coast fi. Coast FI, standing for financial independence. It’s a sub, it’s a subset of the FIRE movement. And the idea, the idea is aggressive savings early for a defined period of time, and then you’re coasting

Joe Baker 28:16

Just when I thought I’d come up with something new. I know.

Tim Ulbrich 28:19

I did this unintentionally, actually, where I don’t know if I shared this with you before, but early in my academic career, just by nature of academic positions, you’re typically forced a large contribution in. So like when I was at my first university, I think we had to put in. It was like 13 or 14% it was a forced contribution, because we didn’t pay into Social Security and we were part of the state retirement plan, but they matched something crazy, 11 and a half, 12% so my hand was forced at a time where, admittedly, when I had other priorities, goals just getting started, like I don’t think I would have probably contributed At that same value, and then come 15 years later, when I left that work to work on the business. And obviously then that kind of shifts cash flow and everything is we’re getting started with the business. I kind of did that Coast fi without realizing and so I can attest it. It works. I mean, the math works out, and it’s early savings, and it’s time value of money. And so I think there is different models out there in which we can achieve this balance. Right? Balance. So I love that you’re you’re reframing that activity, and I think for your students, I’m guessing maybe one of the things that comes up is, hey, Joe, this is great. We’re going to make a good income. I get that, but Dot. Dot. Dot. We’re going to have $170,000 in student loans. Have you looked at home prices recently and interest rates? Right? There’s all these competing pressures that are out there. But I think the point that you’re highlighting so well and helping them see the numbers come to life is this isn’t massive savings rates we’re talking about, especially if you’re doing it consistently throughout your career. We’re not talking about living off of rice and beans for the rest of your career. Yeah. I mean, it really even at a 10 to 15 to 20% contribution rate consistently over your career, like the math is going to work out time, value of money. So great stuff that you’re doing there. Let’s shift gears and talk about the book. So the legacy and impact that you’ve had in writing your book, Baker’s Dirty Dozen Principles for Financial Independence. We’ll link it to that in the show notes, people can pick up a copy at bakersdirtydozen.com, or on Amazon. You wrote this book with your daughter, Lindsay Jordan Baker, talk to us about the reason for writing the book. You’ve been teaching for a period of time now, almost 20 years, and you finally get this point say, You know what, I think I’m gonna write a book. What was the reason for wanting to put the book together?

Joe Baker 30:41

For those 20 years, I’d had students and former students says, you know, because I tell a lot of stories in class, it’s kind of like Jesus, you know, used to tell stories that way you could remember them. Jesus and I’m, I’m referencing him. We’re just like that. But, but my stories aren’t in parables. I like to think that they know exactly what I’m saying, but I like to tell stories, and whenever I have former students that come back, they’ll say a couple of things. They’ll say, Yeah, I remember that story you told about golfing and hitting somebody, and made the financial point with that, then they’ll say something, or a lot of them would say, you should write a book, put that in there. And I, you know, I thought about, you know, that is just as a lot of work. I didn’t really explore it. And I remember where I was, and it involved you. I was, I was at the physical therapist, and she was working on my knee. I had fallen on Masada in Israel, and read my patella tendon. And it was after surgery, and she was working on my knee, and I got this text, and I don’t even know why I had my phone. I looked at I said, Hey, look at this Tim for Your Financial Pharmacist and you don’t know is wanting me to write a book. And I said, Okay, I might just do that. And, and that was because of you. So thank you for that.

Tim Ulbrich 32:17

Sounds like it was planned for a while.

Joe Baker 32:18

It was, it was, and so I did that, but it was a long process. And how Lindsay, my daughter, got involved. She is, I mean, she’s off the creative chart. She knows how to write. She was my chat GPT before Chat GPT, I mean, I’d run everything by her and and so one particular Christmas she was home, she’s been an educator for most of her young adult life. And she said, Dad, why don’t you let me read your manuscript? Because it was about ready to go to the publisher. And I said, Yeah, okay, you can help me out. And she’s and and I said, Well, honey, why do you want to do it? Just to help? She says, No, I know you’re putting a lot of stories in there, and I want to make sure they’re, they’re politically correct. And she would go through them, and she’d she would laugh a lot, but she said, that’s funny, dad, but you can’t use it, so it’s out of here. And then she would say, okay, you know, I don’t understand this particular section, like, if it Roth IRA or whatever. And I said, Well, you know, I’m writing this for your your age group – you don’t understand it? She Says, I’m sorry. I don’t understand it. So we would go back and forth. I would explain it to her, then she explained it back to me, until we got it right and literally. And I don’t use literally too often, but we went paragraph by paragraph, and she went through the whole book with me and and she just, she changed so much that I had to list her as a co author, and it was just, it was an amazing transformation. And I will say, because of that, she had a mostly educational background, and I probably didn’t do a good enough job teaching about money and plus, parents have trouble or student, not students, but children have trouble really digesting anything from parents. It’s hard for that to work, but by her reading and understanding all that, it changed her financial life. I’d love you know, I can’t even keep up with how much she accumulated on her Roth IRA with her 403 B through work, through the years. She told me just yesterday, it was just crazy how much money she has accumulated and and I think it has, well, I don’t think I know it has a lot to do with the book and how she edited it, and she learned a lot. I. Because of that. So back to your question, the book is, I use the book a couple of ways, obviously, in class, but I also use it as a gift. I probably give away more books than I than I sell, I don’t know, but whenever I’m speaking, I use this door prizes, and it’s very well received, and it is. It’s opened a lot of doors. It gives somewhat of credibility. Someone they told me, once that’s what books will do, and it has been a good conversation piece. And like, one of the things I like to do is my my alma mater is sponsor, like a table for some students. And whenever I do that, like I’m going to be doing in a couple of weeks, I always bring a copy of my book and give it to each of them, and with a little inscription in there. So, you know, I don’t know how many lives it’s touched, but if it’s touched one life, it’s been worth it.

Tim Ulbrich 36:07

Yeah, absolutely. And one thing I love about the book is that the stories really make the content come to life, right? Makes it memorable, helps it stick throughout the book, you’ve got sections where it’s this is the short and sweet, your takeaway, or the nitty gritty on the topic, or your certain choice or recommendation in a given area. So I think it’s written in a way that really is engaging. Helps the material come to life. It sticks. I hope people pick up a copy again, Amazon or bakersdirtydozen.com It was ranked number one book on financial education for everybody by a partner from Amazon and their financial literature category also recognized by gobankingrates.com, is one of the 10 financial books that will change your life. So, great work, Joe.

Joe Baker 36:49

And it was a joy, because a little bit plug for the contributors, I have, think 33 contributors, I just, you know, send out text or email. Say if you’ve got a financial story to tell, especially if it’s funny, send it to me, because, like I said about stories, they resonate with people. If you can tell a story with a financial principle, you remember that and and so I do have a lot of contributors there that have helped me with the stories in the book and and it was fun to compile it. I didn’t want it to be just a book of principles. I wanted a story to go with it as well.

Tim Ulbrich 37:38

So we talked about living and leaving a legacy through your teaching, through the book, both both you and I need neither one of those. The motivation is money. And the third area that I want to talk about is really giving of money and how that has become a part of your financial plan, why that’s become a part of your financial plan? So tell us about your philanthropic giving. I know you’ve endowed a couple scholarships, which is a big deal. I presume you’ve been involved locally as well, in your community, in your church. Tell us more about your giving strategy and how you’ve landed on the areas that you’ve made giving a priority.

Joe Baker 38:13

Okay, it was another aha moment, but back, I think it was in 2016 2016 it was about five years before I retired from Pharmacist Mutual. I was coming back from a different Israel trip, and I’m sitting at the airport. You know, when you get back into a country, you’re catching up all your work emails and all that. And I had an email from my employer, Pharmacist Mutual, That stated, or said, we are no longer going to give arbitrarily, just a scholarships, $1,000 scholarship, to every pharmacy school in the country. We’re going to do something different. I was devastated. I said, Oh my gosh. Because you know, when you take away from something or an institution, it is a negative fact. And the guy sitting next to me, he’s a travel buddy, and I’ve known him through church, and he’s 25 years my junior, and he’s sitting there, and he’s and I read it to him, he knew I was distraught, and he says, Why don’t you do your own scholarship? And I said, Hmm, I hadn’t even thought about that. Why? Why can’t it be a Joe Baker/pharmacy scholarship? So that’s what I did. I established my own scholarship for the one for the University of Arkansas, College of Pharmacy that awards a scholarship to students that have graduated from my alma mater, and the other one is a scholarship from my alma mater. So. So it was kind of like a light bulb went off, and by him just saying, you know, why don’t you do your own so it is amazing. I’ve learned his name is Shane Lester. Put a plug in for him, but he’s been kind of my mentor, even though he’s 25 years younger than I am, because he goes around, he’s a mortgage broker in a Little Rock and he goes around with stacks of Starbucks cards, Starbucks gift cards. And when I don’t know a stewardess does something nice, or you see a janitor or some whatever, he’ll hand out that gift card. And I’ve incorporated that, and I don’t even know how many gift cards I’ve handed out one time at the cleaners, this lady always did, you know, treated me with the kindness and stuff I gave her a gift card one time. I thought she was gonna come, well she did, she came around the counter and gave me a hug. And I will say I’ve gotten a lot of discounts since then, but I wasn’t doing it to get anything in return. But see the joy on her face. But I’ll see maybe a janitor or especially at the school, the college. I’m on the Board of Governors for the foundation. And you know these students, or young people that are helping out and they do special things, you know, I like to hand them a gift card just to say, hey, you know, some we recognize what you’re doing and we appreciate it, or I appreciate it, and you’d be amazed. I’ve got a little quote in there. I’ve kind of hijacked to saying, you It’s not how much you make, it’s how much you keep, but then I added to it, it’s not how much you keep, but it’s how much you give away. So, you know, so I’ve been blessed with that, but I learned it from someone else. It didn’t, didn’t come from me, but, but it makes an impact. Yeah,

Tim Ulbrich 42:01

And for those that aren’t familiar with for how endowments work, if those are folks aren’t familiar with how endowment works, it’s a big deal because you know, essentially what you’re doing there is you’re giving a large lump sum of money upfront to then allow for an annual gift that will live on forever.

Joe Baker 42:19

And you’re and I tell people, I say, Hey, if you endow a scholarship your name, even though they don’t really know you, your name will go down in time. And I know we’re running out of time. Can I say how I funded that? Because somebody might use this. One of the assignments I have in class, and I’ve been doing this since 2010 is I have the students pick out a stock for me to buy in class. I’ll say, I want a blue chip stock. I want a high dividend payer. I want a good PE right, you know, just all the things, and it gives them a little time to research and all that. And then I’ll take those and I say, Okay, I like this, and I’ll buy one or two each semester in class. And at one time, that portfolio got up to over $265,000 and I said, I should have started doing this in 99 because it was just riding the wave. And I know individual stocks has its, you know, owned risk.

Tim Ulbrich 43:19

So you’re just doing this in like, a brokerage account, right?

Joe Baker 43:21

Yes, a brokerage account. It wasn’t through an IRA and but some of those individual stocks accumulate so much so this sounds like I’m cheating, but it but it wasn’t. Like on the University of Arkansas, College of Pharmacy, I donated three stocks that had appreciated so much that actually my cost basis was $6,000 and when I donated, the stocks were worth $26,500. So I got the blessings of 26,500 and the recognition of an endowed scholarship. But my cost basis was $6,000 plus I wasn’t faced with the capital gains increase. I did the same thing with with the other with my the other endowment, and each year now there’s a fundraiser at our school, the my alma mater, that you buy a table for $25 so I just pick out a stock and get however many shares I need and and donate it and, and whatever’s left over goes to my my scholarship. Now that doesn’t make me sound as great as as I once did, but reason I’m saying this somebody knows may not have thought about this, but if you ever want to make a contribution to an area, think about charitable when you’re doing charitable giving, maybe donating a stock. Yeah, but, but it was, it was, is pretty good, using the leverage. And I did, sure didn’t want to sell the stock. Pay capital gains, then donate the money.

Tim Ulbrich 45:00

I was gonna say, What a great example of a win, win, win. I think it highlights so well what we’ve been talking about, right? It’s it obviously led to an endowed scholarship that has a benefit to the person receiving it. It allowed for, you know, a tax efficient way of giving. And it all happened through an exercise in which you were teaching the students something all along the way. That’s pretty cool.

Joe Baker 45:22

And they got an A too!

Tim Ulbrich 45:24

That’s right, that’s right! Awesome. This is great, Joe. I just love your heart for teaching, for giving. I think that is a thread of everything that you do. I know you’ve inspired me in my own journey and the work that we do at YFP as well. So thank you so much for taking time to come on the show.

Joe Baker 45:41

Can I say one other thing?

Tim Ulbrich 45:43

Yeah, absolutely.

Joe Baker 45:45

Giving back does not have to be a monetary situation. It could be being the best father, being the best husband, giving in those respects. It could be at your place of worship, giving of your time, your efforts, your leadership, your mentors. So it doesn’t have to be financial. It can be any of those ways. And once again, it will make you feel good, and it’ll be a win/win.

Tim Ulbrich 46:19

Yeah, I think the posture that you’re sharing there is one, one of a giving heart, right? That can be done in many different areas. So I love that. And thanks again, Joe for coming on the show. We appreciate it.

Joe Baker 46:28

Yes, thank you, Tim.

Tim Ulbrich 46:32

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events, actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer, Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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YFP 378: 10 Questions for Early Retirement

Posted on by YFP Media

Tim Baker, CFP® tackles 10 questions for those considering early retirement from sources of income, handling market volatility, health insurance options and more.

Episode Summary

This week, Tim Baker, CFP®, RLP®, RICP® and Tim Ulbrich, PharmD tackle 10 questions for those considering early retirement. They discuss sources of income in retirement, handling market volatility when no longer working, health insurance coverage options, timing to draw on Social Security, and much more.

About Today’s Guest

Tim Baker is the Co-Founder and Director of Financial Planning at Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 12,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements.

Key Points from the Episode

Early Retirement Goals and Challenges [0:00]
Defining Early Retirement [6:02]
Questions to Consider for Early Retirement [8:42]
Replacing Pharmacist Paychecks [17:41]
Health Insurance Coverage [24:17]
Dependents and Social Security Timing [31:08]
Inflation and Tax Planning [34:57]
Partner and Spouse Alignment [37:20]
Long-Term Care Planning [39:56]
Conclusion and Resources [44:58]

Episode Highlights

“I think there’s this misconception, or this illusion of control that we have over our retirement age. I think around 40% of people retire earlier than expected. It’s usually due to a medical issue with themselves or a family member, or could be something like a layoff. There is this illusion of control. Now, there are things that you can do to help with that. But a lot of the time we don’t have that.” – Tim Baker [4:59]

“Define retirement. I think for a variety of reasons this question is important, because for a lot of people, we think that retirement is the destination, but it’s really just the next chapter in the journey, right?” -Tim Baker [10:32]

“I think it is really important when we talk about this question: are we accounting for inflation? I think the best way to do that in a retirement setting is, as much of your dollars can come from Social Security as possible is great. But then also taking intelligent risk in the market, where the market is kind of performing in a way that kind of keeps pace or outpaces inflation is what we want.” – Tim Baker [36:25]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Tim Baker and I are tackling 10 questions regarding early retirement. We discuss sources of income in retirement, handling market volatility when no longer working, health insurance coverage options, timing to draw on Social Security and much more. And to supplement this week’s episode, we have a free resource for you to download: Retirement Roadblocks: Identifying and Managing 10 Common Risks. Because here’s the reality, when planning for retirement or early retirement, as we’ll discuss on today’s show, so so much attention is given to the accumulation phase, growing your assets. But what doesn’t get a lot of press is how to turn those assets into a retirement paycheck. And when building a plan to deploy your assets during retirement, it’s important to consider various risks to either mitigate or avoid altogether, and that’s what this free resource and guide is all about. It’s available for you to download at yourfinancialpharmacist.com/retirement risks. Again, yourfinancialpharmacist.com/retirementrisks.

Tim Ulbrich 01:11

Now, before we get started with the show, I want to let you know about our next YFP webinar coming up on October 7, at 9pm Eastern: Aliquot Investing: Small investments in Big Real Estate Investing. This free webinar led by YFP Real Estate Investing podcast co-hosts Nate Hedrick and David Bright explores how syndications fit into a well rounded real estate investment strategy, especially for busy pharmacists who don’t have time to source, vet and manage real estate investments. In this webinar, David and Nate will be joined by Alex Cartwright, PhD, and economist who has also led syndication projects, including one in which both David and Nate have invested themselves. You learn more about this webinar and register at yourfinancialpharmacist.com/syndication. Again, yourfinancialpharmacist.com/syndication.

Tim Ulbrich 01:59

All right, let’s get started with today’s show. Tim Baker, welcome back to the show.

Tim Baker 02:06

Yeah, good to be back. How’s it going, Tim?

Tim Ulbrich 02:07

It is going well. I’m excited. This week we’re talking about early retirement, which is something that I keep hearing more and more pharmacists expressing as a goal. And so Tim, I’m curious to hear from you before we get into the details of our discussion, is that something you’re hearing a lot of as you talk with pharmacists that are engaging with us to learn more about our services? Is early retirement coming up as a frequent goal? And what do you suppose might be driving some of that?

Tim Baker 02:37

Yeah, I think, I think for a lot of people, there’s a there’s this notion of, like, I’ll never be able to retire, you know, and a lot of it’s because of the student debt burden. I do hear on, you know, refrain of, I want to get to a point where I work because I want to, not because I need to. I only, I hear that almost verbatim a couple times a month from a prospective client. So the the notion of early retirement, I don’t, I don’t want to say it’s kind of in the forefront. Obviously, we do, you know, work with a lot of people that are interested in kind of the FIRE movement and what that looks like. But I think that there’s this shroud, maybe, of student debt, that it’s like, how do I even overcome this? And, you know, in a way that puts me in a place to retire, let alone retire early. So I think those that don’t have that, or have kind of navigated a plan for the loans. I think there’s a little bit more of like, sunny skies, but I wouldn’t say there’s a lot of people that are saying, like, I need to retire by, you know, this age. I think that that’s kind of few and far between.

Tim Ulbrich 03:50

And for those that aren’t familiar with the FIRE term, we’ve talked about it on the show before, financial independence, retire early. Lots of resources out there that folks can learn more more about that. But I’m glad you mentioned, Tim the work because I want to not have to. That’s something I hear a lot as well. And, you know, I think for some people, they love the work that they do, and it brings them a ton of value. It brings them a sense of purpose and meaning. Perhaps others, you know, maybe early retirement is, hey, I want to get out of the stressful environment that I’m working in, and I don’t necessarily love the work that I do, but regardless of those desires, that work because I want to not have to is a thread that I think often comes out and within that I typically will hear, hey, I want to have flexibility. I want to have options. So, you know, maybe I get to a point that, hey, I’d like to work part time, or maybe something happens, you know, health wise, or with a family member, or something unexpected, or pursuing a passion project or hobby, whatever would be, the reason that their financial plan is in a position that, whether it’s something they can see or not see at this moment, that they have options if they need those options in the future.

Tim Baker 04:59

Yeah, I think there’s this, this misconception, or, like, this illusion of control that we have over our retirement age, which is, and I think it’s something like 40% I don’t have that stat in front of me, but I think it’s like 40% of people retire earlier than expected. It’s usually due to a medical issue with themselves or a family member, or could be something like a layoff, that type of thing. So there is this illusion of, like, I have control now, there are things that you can do to help with that, and to, you know, to build, you know, whether there’s something like really to consult in that you have that flexibility, or things like that that gives you a little bit more control. But a lot of the time we don’t have that. And that’s kind of an illusion that we think we have.

Tim Ulbrich 05:44

Since we’re going to use the term early retirement throughout the episode that that implies that there’s an accepted norm, maybe, of what retirement means. So when you hear early retirement, that term and throughout the discussion today, what? What are we referring to? What assumptions are we making? What defines early retirement?

Tim Baker 06:01

Yeah, to your point, Tim, I don’t know if there is an accepted, like, when we say early retirement, this is the age that we’re talking about. Yeah, if you look at it from like, Social Security, early retirement, as defined by Social Security as 62. So there’s really, there’s really a couple ages related to Social Security. It’s your early retirements at 62, your full retirement age, which is different for a lot of people. Most people, it’s going to be 67 and then you have delayed retirement a that’s typically 70. So early retirement in the Social Security system is 62 and you can’t collect the benefit before that. The age that I think of like if you were to say, hey, I want to retire early. The age that I think of is 59 and a half years old. So why do I think of 59 and a half years old? The reason for that is all those retirement accounts, a 401K, an IRA or Roth IRA, they they’ll have basically guidelines to say if you take money out before 59 and a half years old, you’ll be, you know, penalized. Unless there’s, there’s exceptions to that, but you’ll be penalized by 10%. So that’s typically the the age that I’ll use. So like, if you were to say, Hey Tim, I want, you know, I want to retire early, and I would say, Well, what is that? If you say 55 then between 55 and 59 and a half years old, we have to figure out an income stream that’s probably not going to come out of your 401K or, you know your other retirement accounts. So that’s what I typically will use in my brain. I think you know, if you talk to people in the fire community and you say 50-59 and a half? That’s probably not early retirement for them. So those are kind of the few, the few dates, or the few ages that jump out to me when we have this discussion. But I think for all intents and purposes, it’s 59 and a half for me.

Tim Ulbrich 07:55

I think the same thing. And I agree. I think some of the FIRE enthusiasts, although there’s many different flavors of FIRE, right? But the FIRE enthusiasts, a lot of people might think a early retirement, you know, late 30s, early 40s, right? Type of ages that you typically see. But I think 59 and a half, for the reason you mentioned is, is what often comes up. The other one 62. You mentioned social security. When could I draw Social Security? 65 Medicare, that often comes up. You know, we’ll talk about health insurance. So the point being is, as we say all the time on the show, we’ve got to have intentionality on like, what’s the goal? What’s the purpose? Why is this a goal? If it’s a goal for you, and then we can start to plan around that, like, what does that mean to you? You know, is it 59? Is it 54 and for what reason? And then what does that mean in terms of various savings accounts? So let’s jump in. We’re going to talk about 10 questions that we think are important questions to consider for folks that are thinking about early retirement. And that could be someone listening and says, Hey, I know I want to early retire and I’ve set that date. Or it could be folks that are just thinking about this as something that they’re they’re curious about and want to learn more. As we go through these 10 questions, the intent is not that we’re going to cover each one of these areas in a significant amount of depth. We’ll reference other resources that we have on each one of these topics as we go throughout but really to introduce the question and get you thinking about these different areas as it relates to early retirement. So Tim, the first question that I think is important for folks to consider is, Will I work at all during retirement? Right? And as obvious as that sounds, I think if, if people are thinking of very traditional retirement, it’s, hey, we work for 30, 40, years, and then we don’t work at all. But for others, it may be that we work part time. And pharmacists, I think, are in a unique position where they have more of the opportunity to work part time, work as a contractor, versus other professions out there. So why is this question, will I work at all during retirement so important?

Tim Baker 09:52

And I think, like, if we’re defining early retirement, I think you can even define like retirement. I think so many people, in a traditional sense, they. Think of retirement as, you know, you punch the clock the last time, and then the next day, you’re sitting on a beach or you’re up somewhere, and that’s it, right? And, you know, a lot of people, especially in the fire movement, when they talk about, you know, financially independent, retire early, I think the retire, I think that’s what rubs people the wrong way, is because they overlay that traditional picture of retirement into that paradigm. And a lot of people are saying like, Well, we are still working, we’re just working our on our own terms, right? So I think for, I think for a variety of reasons, like this question is important, because I think for a lot of people, we think that retirement is the destination, but it’s really just the next chapter in the journey, right? And so much of our, for a lot of people, so much of our identity is wrapped up into our role as a pharmacist or whatever we’re doing, and once that like is gone, that can be jarring for a lot of people. So it’s not just a monetary thing. So to me, I think this is where some life planning really gets in, gets you know, it would be really important is, you know, okay, if we don’t have to work, we truly don’t have to work. What are we doing? You know, are we volunteering? Are we taking care of grandkids? Are we getting into hobbies? Are we traveling? You know, there’s a lot of stats that say, if you work, the longer that you work, the more you know, the better your retirement will be. In terms of, like, the financial planning part of it, because you’re just delaying a lot of the things that work, you know, for you, whether that’s health insurance or whether that’s income, things like that. But it’s also like, you know, your social circles are often connected to your work in a lot of ways, like if that goes away. So to me, this is really important to kind of, I think, look at it both from a dollars and cents perspective, Tim, but also like the social aspect of who are you post, you know, full time pharmacist, you know, and looking in the mirror and doing some deep digging of, like, what does what does this actually look like? So I think it’s an important question to ask.

Tim Ulbrich 12:14

I agree, and I’m glad you mentioned, you know, what does this look like? But how I be spending my time? It’s actually not one of the other questions we had. So we’ll kind of knock both of those out, knock both of those out together. But this is one of those things that we, myself included, we have this idea of what retirement might look like. That could be how our parents have gone through that phase, or grandparents, maybe what we see on commercials, whatever. But taking it to the next step of, what does a day look like? I’ve heard people go through this exercise. You mentioned the life plan, which I thought was great, and having some clarity there, but going through the exercise of actually, like mapping out for a month, like, what would I be doing on a Monday at 11 o’clock, right? On a Tuesday at four o’clock? And you know, not that you have to get that granular per se, but the idea is a good one, that right now you think about the percentage of your schedule that is occupied by work, and especially, I think about folks, Tim, in our phase of life where it’s work, and young kids like, that’s a big chunk of our time, right? And if you fast forward to a date and time where we’re not working, and the kids out of the house, Whoa, that is a big gap of time. So what are we doing with that time? What are the goals you mentioned? You know, is it travel? Is it volunteering? Is it spending time with with the grandkids? Like, what does that rich life look like in retirement? And the second layer I would add to that, Tim, is, if there’s a partner, spouse, significant other involved, like, what does that look like for the individual and then for the we. You know, Jess and I were joking recently that, like we love spending time together, but we also have individual things that we love to do. And I very much see in retirement that we’ll have things that we want to do together, whether that be volunteering or traveling or other things, and then we’ll have other things where it’s like, she’s doing her thing, I’m doing my thing. So, yeah, I think that discussion of, what does this look like for I and what does this look like for we as well?

Tim Baker 14:06

Well, especially in retirement, as you age, like, one of the things that you know, often doesn’t get talked about, and it’s a risk in retirement is loss of spouse, and a lot of it’s it comes from the perspective of, like, loss of a social security check and things like that. But what about like, you know, I look at my parents, love my parents, but my dad doesn’t have his own interest, like, he just kind of does what my mom wants to do. So like, if he were to lose my mom, like, like, what happens, you know? And so I think, like, that’s, that’s a big thing. And, yeah, in the, in the life planning, we go through an exercise called ideal schedule. So you go through and you say, Okay, what’s the ideal day, from the moment you wake up, from the moment that you, you know, put your head on the pillow, then what’s the ideal week? So Monday through Sunday, like, what are we doing? And then it goes out to the ideal year. Like, are you spending, you know, the summertime up North, or are you, you know, are you visiting family, those types of things? And I think that for a lot of people, you know, they realize how much of their day is tied into work, and then once, once that’s gone, like, what happens? So, yeah, those are the exercises. I mean, we’ve talked about, like, the three questions, and I think those are all, you know, important things to kind of reference back to and revisit, especially as you’re going through the next, like, phase of your life. But I think really put pen to paper and I’ve talked about this, I think with you. I don’t know if I’ve ever talked about on the podcast, but like, when I did my sabbatical, I had a month off where I did not touch work, and I kind of had a little bit of like, what am I doing? Like, like, how am I gonna, like, fill the day, which sounds crazy, but like it was a struggle for me, and like I wanted to make the best use of the time, but I also felt like I had some constraints here and there, but like that, that little window was, like, important for me to kind of put myself in someone’s shoes who’s kind of going through that transition. And it sounds silly, but it’s it’s not.

Tim Ulbrich 14:34

That’s a good point, though. I’ve actually heard people talk about, I’m thinking back to the interview that I did on episode 291 with Dave Zgarrick, who is has made that transition in retirement. And he talked about redefining retirement, really thinking about as like a half time to kind of reassess where are we going. Why are we going here? What does this look like? But I think some of those break periods, you know, you mentioned the sabbatical, other people talk about mini retirements. I think it’d be really helpful to having some of these experiences where we get a feel for what this might look like. And you know what? What are some of the ahas of how I do want to spend my time, or what the gaps are in time? I mean, joking aside, we’re just in a phase of life, both of us right now, we’re really sun up to sundown. You know, it’s work, kids, that’s the schedule.

Tim Baker 16:08

I made the comment like, hey, we haven’t, like, Shay and our kids haven’t really hung out with you and Jess and your boys in a while. And I think I would just look at our schedule and it’s like, soccer, football, swim, soccer, football, swim. Like, it’s just, it’s just so many things that are going on, but eventually that’s going to go away, right to your point, like, that’s, that’s going to be in our rearview mirror. And that’s why, I think, like, even, even couples, sometimes, because they’re so in their, you know, in their kids, you know, activities in their lives that they almost forget about each other. You know, spouses and that can be, you know, I think there is a pretty high level of, you know, divorce and things like that as you, as you age, because you kind of lose that connection with your spouse. And I think that’s important to make sure that you’re continuing to kindle so all these things kind of play into it.

Tim Ulbrich 17:38

So that’s our first two questions, will I work at all during retirement? How I be spending my time? The third question, Tim is, how will I replace my pharmacist paycheck? Again, seems like an obvious question, but for decades, we have a an employer that’s paying us on a monthly basis. And if we were to stop work altogether, again, that may or may not happen, but if we’re to stop working, we’ve got to make our own paycheck at this point. So we’ve talked about this on the show show before. We’ll link to that in the show notes. But thoughts on this question of, how will I replace my pharmacist paycheck?

Tim Baker 18:10

Yeah, I don’t really think, I don’t really think a lot changes here. I think what, what is, what does change in terms of, like, the sources, I think what does change is kind of like, where in early retirement? Where do they come like, where does the money come from? So, you know, if we’re retiring at 55 the the sources of your income is probably going to be from part time employment. It could be from your traditional portfolio, but from, like, a brokerage account that doesn’t have the 59 and a half, you know, 10% penalty, which you have to build, right? So lot of people, they’re really set on, you know, they’re 401, K and their Roth IRA and things like that, which is really important. But the third bucket, so that we have the pre, pre tax after tax. The third bucket is the taxable, which is going to be in an early retirement bucket. So I would say probably those are the two big things for most people. Would be part time employment, and then, like a brokerage account, or like traditional savings. If you’re in the real estate, it could be rental income or liquidation of like a rental property. But then as you age, you know, the things that kind of get the green light are Social Security. You know, if you decide to collect that at 62 or you wait to 67 or even later to 70, and then getting into, once you’re past 59 and a half, you know, the traditional portfolio where you don’t get that 10% haircut, you know, you can start, you know, distributing from a 401K, IRA, etc. There are other things out there, like annuities. It could be, it could be a pension. You know, if you have a company or government pension, which we know aren’t necessarily, you know, a thing that a lot of people have, but that’s typically based on an age that you can, you know, get to that. It could be, you know, tapping into the value of your home, things like reverse mortgages, which get a nasty reputation, or selling a business, or could be cash value life insurance. But I would say the heavy hitters here, especially early on, it’s going to be part time employment. It’s going to be things like a brokerage account savings, and then, you know, potentially, you know, real estate, things like that.

Tim Ulbrich 20:08

And as you mentioned, especially with the brokerage account, especially with real estate, there’s planning that has to be done there, right, for us to be able to accrue those savings, to tap into those in early retirement. So, you know, early planning, of course, really important here, and when we talk about priority of investing, this is always the one asterisk, right? Hey, if you’re if you’re thinking about early retirement, you know this sequence changes when we think about more the traditional buckets, like the 401K, 403B’s, IRAs, etc, because of that 59 and a half restraint that you mentioned earlier. Tim, number four on our list is, hey, what if there’s a market downturn early on in my early retirement? So I’ve decided to retire early. You know, let’s say there’s a market downturn and we experience some of that volatility, that that can be disruptive to the nest egg. Always a problem, but maybe more of a problem here if we’ve got a longer runway of years that we need those funds in retirement.

Tim Baker 21:06

Yeah. So what we’re talking about here is sequence risk, or sequence of returns risk, which, which is the potential negative impact that the order of your returns, your investment returns, on your portfolio due to the market, is heightened, especially in the withdrawal phase. So if you take and I’ll run through this, I know we don’t have a ton of time, but I wanted to kind of, I feel like we’ve talked about sequence risk, but I haven’t really talked through, like a scenario. So I actually did a scenario where we have one where it’s favorable returns, so like double digit returns, like the second that you retire. And then one that is like negative returns. So, and then what does the, what does the outcome look like at the end of I did it for like a 10 year period. So if you look at, if we start with a million dollars, and you have an annual withdrawal of 50,000, which is 5% and we have a, you know, we’re doing this over 10 years. If we go into the first year of favorable the favorable scenario, the first year, we get a 15% return, 12% return, 8% return, even taking out 50, you know, and over the 10 years, it’s like 4.7% in aggregate, a return. At the end of the 10 years, you’re gonna have $1.2 million. So early on we’ve got, you know, the first, you know, three years, you know, 30 some odd percent. If we look at the same thing, instead of getting positive 15, we get negative, you know, negative 15, negative 12. That same portfolio, even over the 10 years, which is going to get a 4.7% return, is going to end with 361,000. So it’s almost a million dollar swing. So it’s the same aggregate, you know, 10 year, you know, return. But after the first year, for the favorable, you end with 1.085 million. After the first year, you end with $800,000. So you’ve taken off 15% because that’s your that’s basically the market downturn, but you’ve also withdrawn $50,000. So that’s what we’re talking about here with sequence of return risk is that the timing of when you retire is probably one of the most important things related to the market. So what we’ve always said is like flexibility here. So if the market is tanking, it might be worth to, like, work another year, and most of the time, like, you know, in this scenario, we have, you know, four years minus 15, minus 12, minus eight, minus five. Typically, the market doesn’t do that. You know, we don’t have, you know, consecutive years, maybe two, maybe three of year. But like, this is where, you know, pushing that out and having flexibility of like, okay, maybe I’m not going to retire at, you know, 53 I’m going to retire at 56. I’m going to retire at 57. That type of thing. So that, to me, is really important, and that, and that speaks to the the timing of the investment returns that you’re getting. Now, the ways to combat this is, which is really hard, is, is really to kind of be more conservative, take your money from, you know, equities to bonds or even cash. But the problem with that is, you know, nobody has, like, a, you know, a crystal ball to say, like, when’s the best time to do that? So that’s, that’s kind of sequence, risk at play.

Tim Ulbrich 24:20

Number five on our list, Tim, I alluded to this a little bit earlier, is what will I do for health insurance coverage? We’re not yet at the age of 65 we can’t necessarily put Medicare into play. We no longer have employer coverage if, if we’re working part time or not working at all. You know what options are we thinking about here and and obviously we’ve got to factor this in as a cost as well.

Tim Baker 24:42

Yeah. So I mean, unfortunately, and we’ve kind of bemoaned this fact being business owners, there’s not a great option here. You know, I think you know, looking at employer sponsored COBRA coverage, but that only typically lasts 18 months, and that’s really expensive because you’re paying the full premium. If you have a spouse that you can ride his or her coattails, that’s one way to do it. It could be private health insurance. So looking, you know, at the exchanges, things like healthcare sharing ministries like that, that might be something. I know you looked at those in the past. It could be, you know, there are some, and I don’t know if Starbucks still does this, but I remember a lot of people. I think my sister worked for Starbucks, you know, when she was in college, just to get in, you know, insurance through them, she was working part time. It could be Medicaid if you don’t have assets, like, if, you know, I would say that you probably shouldn’t be retiring if that’s the case. Or just, like, short term plans that provide, like, temporary coverage. So probably, for most people, it’s going to be looking at the exchanges and trying to trying to find the best, you know, probably catastrophic plan that they can. But unfortunately, there isn’t really a great, you know, a great solution here to kind of bridge you before you get to 65 to get to Medicare, you know, yeah, it’s, it’s kind of, you know, pick your poison, so to speak.

Tim Ulbrich 26:00

You know that you mentioned the Starbucks, there’s actually a FIRE pathway, barista fire that’s named after that, that play, right? Which is, you know, working part time at a place like Starbucks or a place that has those benefits to be able to get access to those. You know, the other other comment I’d make here, Tim is, I think while these costs are very real, like, we have to put them as objectively in play as possible. What I mean by that is, like, if you’ve done a good job and the dollars are there, like, even if this feels scary or you don’t want to spend money on it, like, if the math supports it, like you just factored into the plan, right? I’ve seen some people, I think, talk about this as like, Oh, I’ve had employer coverage my whole life. I’m three years away from Medicare. I’m done working. I’m over it. Don’t need it, you know. Don’t want to be working anymore, but I’m gonna wait till I get to 65. And maybe that’s the play. But if the nest egg is there, like, we just need to factor this in as an expense and consider it. I mean, the other note and comment I’d make here, back to our discussion of early planning with something like a brokerage account. This would be another play of early planning with something like HSA contributions, where, you know, can we be accruing and saving money in HSA throughout our career, such that one of these instances here, we’re talking about early retirement. We’ve got some dollars that are earmarked specifically for that, that we don’t have to have to necessarily draw separately from our portfolio.

Tim Baker 27:21

That’s right, yeah. HSA would be a great bucket for this, because it has the triple tax benefit, but the flexibility to be able to use for you know, now and later. So yeah, that’s a great bucket for that.

Tim Ulbrich 27:34

Number six is, are my dependents independent? And if not, have I factored that into my planning and assumptions? Tim lots to think about here, kids and elderly parents, but looking at dependence and cost of dependence.

Tim Baker 27:48

Yeah, this is, um, this is, this is kind of hard too, because, you know, I always joke with my with my kids, that, you know, they they need to move out so I can, you know, turn their room into a a whiskey room. And, you know, my kids are 10 and five or whatever. Obviously, Zoe’s always younger, but I think this is hard, because I think we are all trying to prepare our kids to kind of launch, right? But, you know, oftentimes they come back. And you know, we have to kind of figure out what that looks like. So that could be, you know, it could be for kids managing, like, their college and expenses related to that. But then after, like, if they don’t get a job, or if they’re not, you know, able to support themselves. Like, what are the, what are the rules around rent and things like that, and just, how does that affect your overall financial plan? And then elderly parents, there’s a lot of, you know, pharmacists that we work with that they say, I am my parent’s retirement plan. Like, that’s the thing, right? And, and I respect that, you know, a lot of it’s like, Hey, I’m a first generation immigrant. You know, they’re you know, they’re sacrificed to get over here. And my sacrifice is kind of making sure that they’re okay, you know, in retirement. So, you know, we have this term called the sandwich generation. It typically is, you know, people in their 40s and 50s that are taking care of, like adult children, but they’re also taking care of, like elderly parents. That’s a big thing. And again, like, I would say, it kind of goes back to when we talk about, like, education planning, like you have to put your mask on first and then put on the mask of your child. I don’t think that ever goes away. So I think that, you know, this can be an unexpected thing for a lot of parents, but you know it can, really, especially like elderly plant parents, if you’re the one that’s kind of, you know, caring for them, and these are often the things that kind of force can force a retirement early for you is that you’re taking care of other people, right? So I think having these conversations with, you know, your kids, with your elderly parents and and come up with a plan and kind of ground rules. I think is really important. So we can kind of include this in the plan and know, you know, when does zig and zag?

Tim Ulbrich 30:06

Yeah, Tim, anytime we talk about this topic, always comes to mind conversation we had with Cameron Huddleston on the show a couple times, who wrote the book, Mom and Dad, We Need to Talk. And, you know, in the context of elderly parents, this is where those conversations are so important, as uncomfortable as they may be, right? Because, you know, I’m thinking about even discussions I’ve had with my parents about, you know, what does their financial position look like? What are their retirement goals? What are their desires for, you know, staying in the home versus other living arrangements. What is their long term care insurance policy look like? And, you know, part of those conversations, obviously, is focused in a genuine care and desire of what, what do my parents want? But there’s also a reality of like that may impact our financial plan, and that’s not being selfish, like we’re just trying to be responsible. And I think you know, if we can get into those open conversations, we can start to plan around that a little bit, to understand what the impact may or may not be of that situation with parents on our financial plan.

Tim Baker 31:05

That’s right.

Tim Ulbrich 31:06

Number seven, we touch on this a little bit. Tim, but when will I draw on Social Security? We talked before in episode 294 about common Social Security mistakes to avoid, and a big part of that discussion was around when we opt into starting Social Security benefits. For someone who’s saying about early retirement, you know, and building that retirement paycheck, a Social Security benefit might, might be an important part of that, and the temptation, perhaps could be there to start those benefits early and just understanding what the impact of that could be versus a delayed benefit selection. So thoughts here on this question of, when will I draw?

Tim Baker 31:41

I think a lot of financial planners are, you know, coming around to the fact that, like, if you can delay your Social Security benefit as long as possible, the better knows for the the overall plan. And I know this, to your point, it can be if you’re, if you’re working for or if you’re, if you’re retired for, you know, 10 years or whatever it is, and your funds are dwindling in some of those, you know, brokerage accounts or savings. I think it can be tempting to to draw earlier, right? But I think if you look at the math, and I have, you know, I think I pulled, I think this is from my Social Security statement. If you look at my Social Security statement. If I were to retire at 62 my monthly benefit would be $1,826. if I were to retire at not full Social Security age, but 65 it would be $2290. If I then go to 67 which is my full retirement age, it goes to $2662. If I delay it till age 70 so I’m getting those deferment credits, it goes to $3,306. So the spectrum of early at 62 is $1826, to delayed is $3307. But the big thing here, Tim, that doesn’t get enough press, is that it’s inflation protected, which there’s no other pension or annuity out there that you can get that does that. So one of the big hang ups for for retirees is like, I’m working on a fixed income. I’m working on a fixed income. But once you know inflation takes over, as we’ve seen in recent years, that really, like, you know, provides pressure on, okay, how am I going to let you know, how I’m going to make this, you know, these dollars last. So that would be the thing that I would implore, you know, people, when they’re looking at their, you know, their, their benefit for Social Security is, you know, if we’re planning this, can we plan to at least get the full retirement age, or, you know, can we delay it from 62 to 67 at least, to get from, you know, an $1,800 benefit to a almost $2,700 benefit because this will pay you out for the rest of your life, which we don’t know what that is, inflation protected. And that’s where you see that exponential benefit versus, you know, if you, if you, if you peg it at $1,800. So it’s still inflation protected, but I think you want that, that percent of your paycheck to be as high as possible that is covered by, you know, the Social Security and Inflation. So it’s really, it’s a really important discussion to have.

Tim Ulbrich 34:21

Tim, it’s a good plug and a reminder for folks, if they’re not already doing this, to check out their My Social Security account ssa.gov just to dig into that report, what are the expected benefits? Always a good thing to build into. I typically try to check it in just once a year, kind of see what’s going on. So since you mentioned inflation, Tim, let’s jump down to that one, and that question being, have I accounted for inflation? You mentioned social security being inflation protected, but really nothing else beyond that. So, you know if we think of inflation as of late, which has been higher than historically, although that’s come down, you know, more recently, but even the historical rate of inflation, if we’re retiring, let’s say, in our early 50s and were afforded the opportunity to live into our 90s, like costs are going up right significantly over that time period. So the question here is, have I accounted for inflation when I’m looking at these early retirement numbers?

Tim Baker 35:13

Yeah, and one of the best ways to account for inflation as retire is to be in a you know, is, have some of your your assets in equities, right? Which gets scary, because then we talk about, you know, the sequence of return risk. But I think, really, for a portfolio to endure 30, 40, 50, 60, years is, is to make sure that you’re taking, you know, intelligent risk in the market. So you know, we just got news of the rate cut yesterday, and immediately, you know, you’re seeing like our cash account at our custodian went from 5.1% which is really solid, to 4.6%. So savers, and often, you know, people that have reached you know that are in retirement have a good amount of cash, or they should, because, you know they’re they’re basically taking slugs of cash out to basically build their paycheck. That’s going to affect them potentially negatively. Now, you know interest rates, you know in inflation, sometimes, you know we’ll see interest rates go go down, but we won’t see like the cost of goods go down because they’re pegged that we talked about that in previous episodes, they’re kind of pegged at that high watermark. So I think is really important, you know, when we talk about this question is, you know, are we accounting for inflation? I think the best way to do that in a retirement, you know, setting is, again, as much as your dollars can come from Social Security as possible is great. But then also taking, you know, intelligent risk in the market, where, you know, the market is kind of, you know, performing in a way that kind of, you know, keeps pace or outpaces inflation, you know, is what we want. So, you know, on the so that’s, that’s kind of on the asset side, but then on the debt side, you know, just making sure that, you know, we’re, we’re efficient, you know, there with with rates and where inflation is as well. So I think it’s important to, you know, for retirees that are potentially living on a fixed income to account for, and a lot of people this, and really, taxes. Tim, it’s kind of like, can be a second, you know, an afterthought.

Tim Ulbrich 37:20

Good point on the taxes, probably a whole separate episode, yeah, around like, tax planning and early retirement. Um, number nine on our list is, is my partner spouse significantly now they’re on the same page. We already talked about this in the context of, hey, what does that, you know, schedule look like? What does that ideal life, that rich life, look like in retirement? And, you know, what’s the I? What’s the we? But I think it’s also just a bigger question of, like, are we on the same page with this concept of early retirement, and maybe, if one spouse wants to work longer than another and one’s having to draw down from their assets, like, are we good with that? You know, does that jive?

Tim Baker 37:55

And I think, I think this kind of starts with, you know, where are we at and where are we going? So you know, when we do this with clients, we we call the first meeting, Get Organized where, you know, we’ve plugged everything into our client portal, checking, savings, credit cards, student loans, investment accounts, value, the house, the mortgage, all the things, right? And for a lot of people, it’s the first time they’ve seen their stuff all in one spot, right? Because we bank over here, we have debt over here, we have investments over here, and then for spouses, that’s also true, right? Because I don’t necessarily see everything that Shay has, you know, if I’m not tuned in. So if we plug that all into one platform, we can kind of see the landscape of where we’re at, and then I think from there, once we establish where we’re at, we talk about where we where we’re going. And then I think this is some of these questions that come up is like, okay, Shay, if I retire and you’re still working for 10 years, like, Are you cool with that? Probably not, right. So I think those that’s the space to have the conversation again. I’m biased, Tim, right? Because, you know, we’re planners, but sometimes these are hard to have with your spouse. So having that third party, like the independent third party that has your best interest, that can ask questions, is, I think, a safe place so to speak, to have these conversations. Because, you know, if Shay says I’m going to retire early and you can keep working. I’m going to say, Yeah, that’s cool, whatever. But maybe I have some resentment about that, you know, and I think if you’re in a in a place where, you know, it’s safe, and we can kind of talk these out and get on the same page, it’s really important because, you know, we’re trying to row this boat in the same direction. And if, you know, if we’re just, you know, having these service conversations and not really getting, you know, into depth, then we’re just kind of spinning in a circle. So I think it’s really important to to make sure you know, and this goes back to life planning, to make sure that you know your vision of early retirement, you know, overlaps. It doesn’t have to be the same, yeah, but it overlaps with your spouse or with your partner to make sure that you know your needs are taken care of, but also your spouse’s needs are taken care of.

Tim Ulbrich 40:08

What came to mind, Tim, as you’re talking about, is my I think my parents, to their credit, have done a really good job of this. My mom’s been retired now for a few years, and my dad has no plans in the near future retire. He just loves his work. It’s energizing, and he acknowledges maybe that will change at some point in the future when it does, and maybe it looks part time or consulting or whatever, but they have kind of figured out like for them individually. My mom, you know, has a ton of joy that she gets from just the daily rhythms and routines that she has, and it doesn’t mean my dad has to be doing the same thing. So I don’t think there’s a right or wrong here. It’s more about what works for you as a couple. And as you mentioned, having some of those conversations to avoid, or try to avoid, as much as you can, some of the resentment or other feelings that might come up along the way. All right, our last question, number 10 on this list of 10 questions to consider for early retirement is, am I prepared for potential long term care expenses? Tim, we talked about Medicare already briefly, but here we’re talking about some of the significant expenses that can come beyond what Medicare may cover, and specifically here thinking about long term care insurance, we talked about this on episode 296, we’ll link to that in the show notes. Your thoughts here on, am I prepared for potential long term care expenses?

Tim Baker 41:25

Yeah. So I think the stat is, is that you know, a person that’s age 65 is going to spend $157,500 on health care and medical expenses, you know, throughout the course of their life, a couple of $315,000. So you know, and this doesn’t necessarily include the cost of, like, long term care. So when we talk about long term care, this is really, you know, help with kind of the the daily living thing. So like being able to get out of bed, you know, move around your house, use the bathroom, dress, feed yourself, but also kind of more like, you know, cognitive things like being able to pay bills, or, you know, shop so, you know, oftentimes, and actually one of the biggest, the biggest cause for, like, you know, a long term care policy to get triggered, is Alzheimer’s. But the second one is, the second biggest is arthritis, Tim, believe it or not. So, you know, a lot this is one of those things. It’s like, Ah, this will never happen to me, or I don’t got to worry about that, or I’ll figure this out later. But you know, it’s, it’s one of those biases that we have that, you know, it often can come and bite us in the rear end. So what we talk about with long term care is, there’s, there’s really two ways to prepare for this. One is to self insure. So just like we’re talking about being able to, like, pay our own health care and things like that, this is kind of, this is not that. This is where we’re basically saying we’re going to forego a policy. We’re basically going to, you know, if this comes up, we’re going to reach into our own pocket, reach into our own portfolio, and pay for the care that we need. The alternative, and what I would recommend, is purchasing a long term care insurance policy where it really affords you access to benefits that allow you, at a minimum, to age in place. So these, you know, there’s studies that show that, you know, couples are willing to spend, you know, $2500 to $3,000 a year on a long term care policy. And you can get a policy that you know can kind of get you a basic, a basic policy that will have, you know, someone come in the home, or things like that. I think a lot of people, when they think of long term care, they think of like, of like a nursing home and things like that. This is really trying to, you know, get, get a policy that provides benefits that can bring people into your home to assist you as you age. So, you know, there’s typically a Goldilocks zone. Is that you should start, you know? So we talk about early retirement, you should start discussing this, probably in your 40s and 50s, start really assessing it in your 50s. And the kind of, the sweet spot the purchase of policy is, like, early 60s, yeah. So this is really important, because, again, like the once you once you kind of go into, like, a facility, if that, if that’s the case, like, that’s where expenses can get really astronomical. So the longer that you can stay in place and have the help that you need, the better, I think it is for you from a psychological perspective, but also from a financial perspective. And again, this is one of the ones. It’s like, like, not going to happen to me, Tim. I think important to look at. And I think we look at these policies as almost as like a a coupon for future care. So, like, hey, you know, if I get a benefit, that’s $3,000 a month, but you know what I need is $4000 then I’m only reaching in my pocket $1000 bucks to kind of cover down on the difference.

Tim Ulbrich 44:54

Again, episode 296, five key decisions for long term care insurance recovered that topic in depth. We’ll link to that in the show notes. Tim, great stuff. And one thing I would say to our listeners, early retirement or not, we touch on a lot of areas of the financial plan. We talked about the importance of having a life plan, having the vision for where we’re going, why we’re going there. We talked about building a retirement paycheck. We touched on insurance, Social Security, investing priorities and decisions to make around investing and how to prioritize different parts of the investing plan. And at YFP, this is what our team of certified financial planners and tax professionals do. We support pharmacists at every stage of their careers to take control their finances, reach their financial goals and build wealth through comprehensive – looking at all the different areas we discussed – fee only, financial planning and tax planning. And we’d love to have an opportunity to talk with you, to learn more about your situation, to learn more about our services. Determine if there’s a good fit. You can book a free discovery call with Tim by visiting yourfinancialpharmacist.com top of the page there, you’ll see an option to book a discovery call. Thanks so much everyone for listening. We’ll catch you again next week.

Tim Ulbrich 46:01

As we conclude this week’s podcast an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts, is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer, thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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YFP 377: 10 Moves to Make to Become Financially Fit

Posted on by YFP Media

Gathering wisdom from his own journey and those of many other pharmacists, Tim Ulbrich, YFP CEO, shares ten moves that are key in building a strong financial foundation.

Episode Summary

YFP CEO and Co-Founder, Tim Ulbrich, distills the lessons learned from his own financial journey and from speaking with thousands of pharmacists about their financial plans into a list of ten moves that are key in building a strong financial foundation.

Whether you’re just getting started and have the opportunity to build a strong foundation from the beginning or you’ve been at it for a while and sense the need to reinforce that foundation, this week’s episode is for you.

About Today’s Guest

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Financial Moves to Build a Strong Foundation [0:00]
Commitment to Living Off Less Than You Make [4:05]
Building an Emergency Fund [5:59]
Developing a Plan to Eliminate High-Interest Debt [10:17]
Determining the Best Student Loan Repayment Strategy [12:07]
Tracking Net Worth and Understanding Insurance Needs [14:53]
Starting to Invest Early and Often [19:03]
Refusing to Accept a Fixed Income [20:04]
Implementing Systems and Automation [21:30]
Conclusion and Encouragement [24:51]

Episode Highlights

“As I truly believe everything else we talk about, right the X’s and O’s, whether it’s investing, insurance, debt repayment, tax planning, whatever it may be, all that stems from understanding and improving our own financial IQ.” – Tim Ulbrich [4:07]

“Life happens, and you want to be prepared. I want to be prepared so that those bumps don’t derail momentum and progress in other areas. The last thing we want is that we feel like we’re finally making progress towards building wealth, saving, investing for the future, achieving the goals that we’ve desired to achieve, and all of a sudden, we haven’t prepared for an emergency, and something sets us backwards and disrupts that momentum.” – Tim Ulbrich [5:00]

“Your six figure income – it’s a great tool, but it is not a financial plan. Without a vision and a plan, that good income is only going to go so far.” – Tim Ulbrich [27:51]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I’m flying solo with an episode that is short and to the point. One that distills a lot of learning from my own journey and from speaking with 1000s of pharmacists about their financial plans. I’ve taken those experiences and narrowed it down to a list of 10 financial moves that are key in building a strong financial foundation. Think of these as the prerequisites to building wealth and living your rich life. So whether you’re just getting started and have the opportunity to build a strong financial foundation from jump street, or perhaps you’ve been at it for a while, and sense the need to reinforce that foundation, this week’s episode is for you. And if you’re looking to identify areas within your own financial plan that could use some love and attention, we’ve got a great free resource for you. We created a five minute financial fitness test so that you can learn about the areas of your financial plan that you may need to work on, where you’re doing well, and resources that can help along the way. So head on over to yourfinancialpharmacist.com/fitness and see how your financial health is tracking. Again, that’s yourfinancialpharmacist.com/fitness will also provide the link in the show notes.

Tim Ulbrich 01:25

All right, let’s jump right into our list of 10 moves to make to become financially fit. Number one on our list is be a sponge. Be a sponge. This is intentionally number one on the list as a consistent commitment to learning, I believe, is going to yield the greatest return on your investment. The earlier you learn, the higher the return on investment of your time. At most, some pharmacy schools offer a personal finance elective but the vast majority have little to no personal finance that’s embedded in the curriculum, whether that’s at the graduate or the undergraduate or even the K through 12, although we see that expanding more recently. While you don’t need a master’s degree in finance to be successful with your money, you should have the basic knowledge that helps you make good decisions and develop good habits. Read books, listen to podcasts, watch YouTube videos, whatever works for you. Some of my favorite personal finance books that have had the most impact on my journey include Rich Dad, Poor Dad by Robert Kiyosaki; I Will Teach You To Be Rich, by Ramit Sethi; The Millionaire Next Door, by Tom Stanley; Money: Master the Game by Tony Robbins; and of course, I’d be remiss if I didn’t mention the book that we wrote, Tim Church and I co authored, Seven Figure Pharmacist. These resources, as well as many other podcasts for me in my own journey, were instrumental to just developing that hunger and habit to learn, recognizing that there’s always an opportunity to grow, right? This is a journey. This is a marathon. This is not a sprint when it comes to long term financial success, and we have to put the work in to make sure that we’re upping our financial IQ over time. So be a sponge. When I think about some of the guests that have been on this show recently, right Brandon Gerleman on last week’s episode 376, that shared his debt free journey paying off about $160,00 of debt. Or Dr. Manny on Episode 375, a new practitioner that has opened up his own community pharmacy, is building his business. Or Mike Beyer from 365 who shared his story, going from a net worth of zero to becoming a Seven Figure Pharmacist. These are just a few of the stories, but one consistent theme and thread that I think of from their journeys is that they really believe there is no arrived. There is no arrive. When it comes to the financial plan, they are hungry to learn, to grow, despite the success that they have, they recognize there’s always an opportunity to learn, to improve and to grow. So that’s number one on our list. As I truly believe everything else we talk about, right the X’s and O’s, whether it’s investing, insurance, debt repayment, tax planning, whatever it may be, all that stems from understanding and improving our own financial IQ.

Tim Ulbrich 04:22

Number two on our list is make a commitment to live off of less than you make. Make a commitment to live off of less than you make. Outside of learning, outside of being a sponge, this is at the top of the list because other goals require cash flow. It’s that simple, right? If we want to pay off debt, if we want to save and invest for the future, if we want to invest in experiences and travel, whatever goals we have, they’re dependent on cash flow. And cash flow comes from living off of less than we make now, easier said than done. Many of you know that firsthand, but until we figure out ways to take off the cap on our income. We’ll talk about that here in a little bit. The cash flow will come from the difference between what you earn and what you spend. The financial plan is this simple and this hard right. Executing, of course, is the hard part. But without cash flow and without a monthly system, we’re going to talk about that here in a little bit as well. We’re going to find ourselves spinning our wheels financially long term, right? We want to implement a system that from the breathing room and the cash flow that we create, we’re able to fund our goals each and every month, and know that we have a process in place for those goals, the dreams that we have to become a reality. So that’s number two on our list. Make a commitment to live off of less than you make.

Tim Ulbrich 05:48

Number three, you’ve heard me say it many times on the show before, build an emergency fund. This is not just about the dollars in the account. It’s about the breathing room that this creates in your financial plan, getting out of the day to day, month to month, year to year, mindset, and ensuring that we can have the peace of mind. So if you haven’t already done this, open up a high yield savings account or money market account that is separate – keywords – separate from your checking account, and label it as your emergency fund. One of these, my partner, Tim Baker, often says is, hey, if you’re doing the mental accounting, do the actual accounting. What does he mean by that? He means that if we’re looking at our funds, let’s say you’ve got 20, 30, $40,000 that’s sitting in a high yield savings account, or perhaps in a checking account. Hopefully not the case. But if we know that, hey, about five or 10 of that is for an emergency fund. About five or 10 of that is for an upcoming trip, about 10 of that is for a future roof replacement in the home, right? That’s the mental accounting. So if we’re doing that, let’s create the buckets here. We’re talking an emergency fund, label it and do the actual counting of putting it in a fund that is earmarked specifically for the emergency fund. Now we’re going to want to work towards saving three to six months of essential expenses. That’s our goal. That’s our target, general rule of thumb. But don’t let that number overwhelm you if you’re just getting started, or perhaps you’re doing some cleanup work in other parts of the financial plan, because here’s the reality, if you’ve never had an unexpected car or medical expense or another emergency, it’s only a matter of time. Life happens, and you want to be prepared. I want to be prepared so that those bumps don’t derail momentum and progress in other areas. he last thing we want is that we feel like we’re finally making progress towards building wealth, saving, investing for the future, achieving the goals that we’ve desired to achieve, and all of a sudden, we haven’t prepared for an emergency, and something sets us backwards and disrupts that momentum. Now here are five questions that I think you need to answer for your emergency fund, just to get you started and hopefully to get you on track. Number one is adequately funded. We talked about that general rule of thumb, three to six months of essential expenses, not all expenses, essential expenses. So what does that mean? Housing, food, transportation, clothing, minimum debt payments, things that you would continue to fund, even in the event of a short term job loss or emergency add those up. Multiply them by three to six. That’s a general target we’re shooting for with an emergency fund. So that’s question. One, is it adequately funded? Number two, a problem, but a good problem to have is, do you have too much saved in an emergency fund? I’ve talked with several pharmacists that have done a great job saving, but big numbers in an emergency fund, and ideally, we would put these funds, probably elsewhere, to use in the financial plan now, right now, because of where interest rates are at, it’s not a terrible option to have money sitting in an account earning four to 5% in high yield savings account. But if we have other high interest rate debt, or we’re looking to build up our long term investing or savings, there is an opportunity costs that can come from having too much saved in an emergency fund. So that’s question two. Number three, are you optimizing your emergency fund? So what I’m talking about here is making sure it’s not sitting in a checking account, that we have it working for us, especially with where interest rates are at right now. Whether that be a high yield savings account or money market account. You know, right now, at the time of this recording, most of those are in the four to 5% range. So are we optimizing that fund. Number four is, does it need a boost? So this is something that we can set it but forget it, and we have to come back and look at this, right? So, you know, especially for those that are earlier in their career, where expenses creep at a rapid rate, right? Perhaps when you when you graduated, maybe you didn’t have a home, or you didn’t have a family, all of a sudden you wake up in 3, 4, 5, years, our expenses have gone up significantly. So we want to visit this, revisit this at least once a year, and maybe at one point you hit that target of three to six months. But do we need to look at it again? And finally, our fifth question here. Is, as I mentioned already, is it separate from our everyday checking account? Right? If we’re doing the mental accounting, let’s do the actual accounting. So that’s number three on our list, build an emergency fund.

Tim Ulbrich 10:11

Number four on our list of 10 moves to make to become financially fit, develop a plan to eliminate any high interest rate revolving credit card debt, or any high interest rate revolving consumer debt. Now, if you don’t have any revolving, high interest rate consumer debt, credit card debt, high interest rate, car loans, etc, great, right? Let’s move on. But if you do, baby steps, baby steps, this, along with the emergency fund, is really a top priority, given the interest rates this debt often demands, right, especially when talking about credit card typically north of 20% we have to plug this hole before we can start playing offense with other parts of the plan. Now, I know that sounds obvious, but I see this mistake commonly made, where because student loan debts there’s there’s an emotional burden there, or because there’s a feeling that I need to catch up and save and invest for the future, we can often get these priorities mixed up, right? So if I have high interest rate credit card debt that’s accruing interest north of 20% but I’m paying down debt at 5% 6% whether that be student loans, or I’m trying to save and invest in various retirement accounts. I may have those out of order, right? So we got to look at that. Now. Last thing I want to say here is, if you have credit card debt, know that you aren’t alone. Okay? We often think that, hey, all my other pharmacist friends have this figured out. They’re making a great income. I’m the only one with credit card debt, I can assure you that is not the case. This is a fairly common struggle that we see, especially with new practitioners. Although others are not immune to this, but there’s a lot of expenses that ramp up in that final year of pharmacy school, or those that transition into residency or fellowship. High cost of living areas. There’s a tendency to accrue some credit card debt at the end of that training program. So know that you’re not alone doesn’t mean or minimize that we have work to be done. Of course we do, but you aren’t alone, and we got to really start to begin to tackle this. So that’s number four, develop a plan to eliminate any high interest rate revolving consumer debt.

Tim Ulbrich 12:15

Number five is we have to get clear on determining what is the best student loan repayment strategy for you. Now, if you’re listening and you have no student loans, you’re further along in your career. Great. Keep moving on, right? But for those that do have student loans, this is often a huge piece of the puzzle that we have to figure out, given the magnitude of it so that we can then plan around it. Because what you’ll notice, if you’re not already aware, especially when it comes to federal student loan repayment, there are a variety of options that can result in either big, big, big monthly payments or much smaller monthly payments, depending on which repayment plan you choose. And so we have to understand what fits into the budget. What is ideal, what is optimal for your situation, so that we can then plan and budget around it. Now, the median debt load for a pharmacy graduate here in 2024 covering right around $160,000 and for many grads, this is one of the most important and overwhelming decisions that they’re going to make. And to be fair, this is way more complicated than it needs to be, both on the federal and the private side. For those of you that have private loans. And to make that worse, this is just a hot mess right now, right. There’s a lot of changes that are going on with student loan repayment, a lot of uncertainty. The Save program has been held up. We don’t know what’s going to happen with that in the future. And by the way, we’re in the midst of a presidential election where student loans are often discussed and used in terms of political jockeying, so there’s a lot of unknown, which means for a lot of borrowers, it’s kind of a wait and see. Right now, it’s a wait and see for many people. So if you’re not already plugged into Studentaid.gov, make sure you get plugged in. We’ll link to that in the show notes so that you can stay up to date. We’ll also try to bring information here on our channels with what’s happening with student federal student loan repayment. But again, given the size, given the magnitude, notice, I didn’t say debt free, and I was intentional there, because for some of you, this is going to be a loan forgiveness pathway. But what I did say is we have to get clear on what our strategy is. We don’t want to be wandering when it comes to how we’re approaching our student loan. So once we can determine what is the optimal repayment strategy, we can then figure out what does that mean for a monthly payment. And then, as I mentioned, we can begin to build around that. So that’s number five, determine your student loan repayment strategy. Number six is, start tracking your net worth. Start tracking your net worth now if you’re early in your journey, especially if you have student loan debt or credit card debt, you’re not going to like this number, right? Because it’s a number that’s going to highlight especially if we have a high amount of debt that hey. We make a good income, but we’re probably not at the point we would like to be in terms of our overall financial health. Net worth is your assets or what you own minus your liabilities or what you owe. And I believe this is a much better indicator of your financial health than is your income, right? Because your income a six figure income. It’s a tool, but it’s not a financial plan, and it’s a tool that we can leverage to grow our net worth by paying down our debts and growing our assets that are hopefully compounding over time, but net worth is really going to shine a light on are we or are we not making progress. And so understanding and respecting this calculation can propel your financial plan. I really think about this as the 20,000 foot view on what’s going on for Jess and I in our own financial plan. So this is something that we’re tracking monthly. Very easy to do. I’ll share with you the template that we use. If you go to your financial pharmacist.com/toolbox. You’ll see a network tracking sheet there. You can save a copy for yourself, edit it. Nothing complicated. You can set up your own sheet as well. It’s a simply a listing of all the accounts that we have, checking savings, retirement accounts, real estate accounts, etc. Add up all the assets, subtract the liabilities. Amount that’s due. That’s our net worth. We’re tracking that over time to make sure that we’re heading in the right direction. If you’re not already doing this, even if you don’t like the number implement a system a recurring task to track your net worth each and every month. That’s number six on our list of 10 moves to make to become financially fed.

Tim Ulbrich 16:36

Number seven is determine what insurance policies you do and do not need and do not need is perhaps equally as important. And while there are a lot of different types of insurance to consider here, I’m talking in specifically about three that I see get overlooked most by many pharmacists: professional liability and having your own professional liability insurance policy independent of your employer. Term life and long term disability. With the latter two, term life, long term disability, we’ve got to be thinking about what coverage we need in addition to what our employer policies are providing, not only to plus those up if they’re not enough, but also we got to remember that those policies aren’t going with us when we transition jobs, right and so as time goes on, as we get older, these policies typically become more expensive. So if we can lock these in in terms of our own independent Term Life policies, long term disability policies, while we’re younger and we can get the coverage we need, that’s probably going to be the best action that we can take. Now, when it comes to long term disability, you put a lot of time, energy and effort to be able to become a pharmacist and make a good income, and that’s why it’s so important to protect it. Disability Insurance for pharmacists is really income insurance. It’s addressing what would you do and the event that you’re unable to work as a pharmacist, right on the term life insurance side, what we’re trying to do there is especially if we have dependents or someone else that relies upon our income, in the event that you were to prematurely pass away, and that income is needed. What is that term life insurance policy going to produce? What expenses is it going to cover both short and long term now, we’ve got more information and resources on all of this. You can check those out at our website, yourfinancialpharmacist.com, I’ll link to a couple resources we have specifically on term life and long term disability in the show notes; guides that we’ve written specifically for pharmacists, what you do need, what you don’t need. Make sure to check those out. That’s number seven on our list. Determine what insurance policies you do and do not need.

Tim Ulbrich 18:54

Number eight is we have to start investing as early as we possibly can. Now I know we’ve all been told this, but again, as with many of these items easier said than done, because when you’re flooded with things like student loans and other debt, it can be hard to balance prioritizing investing, and it’s easy to fall into the trap and perhaps feel that you can put off retirement savings for a few years, but the reality is that you want to take advantage of compound interest, time, value of money, and the earlier you start contributing, the better. And your investing strategy, it’s going to evolve over time. It’s going to get more complicated. But don’t succumb to inaction, because you’re overwhelmed with all the options. Start typically, what we’re focused on is starting with the employer match to a, 401K or 403B, 401 k, for those that you work work for a for profit, 403B for those that you work for a non profit, assuming that you’re there long enough to be vested, that’s a key factor we have to look at. And then we’re going to build from there, right? We’re going to look at things like IRAs Traditional and Roth IRAs, typically. Roth IRAs for pharmacists. HSAs health savings account and other investment vehicles along the way as well. We have talked extensively on the show about various investing strategies, long term retirement plan strategies, so make sure to check out those episodes for more information.

Tim Ulbrich 20:17

Number nine on our list of 10 moves to make to become financially fit is refuse to accept your income is fixed. Now, common misperception I see among many pharmacists is that there is a ceiling on their income, and that mindset can lead to stagnation. Stagnation. It can lead to career dissatisfaction, and it can really limit on what is possible. So whether it’s pursuing additional opportunities within your organization, or perhaps for some of you, it’s starting a side hustle or business or investing in real estate, these are just a few of the many examples of how pharmacists are taking the ceiling off of their income potential. Bob Berg, the author of the Go Giver, said that your income is determined by how many people you serve and how well you serve them. I believe that to be true, whether it’s people that start their own business, whether that’s people that get started in real estate and develop great collaborations and partnerships, or whether that’s folks within their own organization that really are able to demonstrate and provide the value that then unlocks additional opportunities for them. So that’s number nine, refuse to accept your income as fixed because,

Tim Ulbrich 21:25

as we talked about earlier, all financial goals stem from the cash flow that we create by living off of less than we make. One way to do that is cut expenses. The other way we’re talking about here in our ninth point is growing our income.

Tim Ulbrich 21:37

And finally, number 10 on our list of 10 moves to become financially fit, implement systems and automation as soon as possible. Now, if you’ve listened to the show for a while, you know that I love automation, and Ramit Sethi he talks about this in his book, I Will Teach You be Rich when he says, and I agree that automation can be the single most profitable system that you ever build. And as you’re getting started, it’s the process, not the outcome. It’s the process that’s most important. Remember, this is a marathon, not a sprint, and building and automating a system is ultimately what’s going to allow you to identify and fund your goals. You are directing your financial plan rather than reacting to it. That’s what we’re talking about here with automation. And it’s so apparent, so effective, so easy to implement, but it’s vastly underutilized. It involves essentially scheduling the transfer of funds to predefined goals, and doing so confidently, knowing that you’ve already accounted for it in your monthly spending plan. That’s what we’re talking about with automation. So whether it’s paying down your debt more aggressively through extra payments, whether it’s saving and investing money to an IRA or another type of investment account, whether it’s putting money towards a down payment on a home or investment property, whatever the goal is that we’ve identified and we account for in our monthly spending plan, once we identify that goal, automation, the next step here is to move those funds after we get paid, rather than waiting to see if there’s money left over, right? It’s proactive versus reactive. Sure, it takes a little bit of time to set up, but once it’s set up, it provides a long term return on your time, benefit and peace of mind, knowing that you have thought about, you’ve prioritized and you have a plan that is working itself to fund your goals. Do not underestimate how powerful that can be in terms of momentum and confidence. Now, what does this actually look like? So for my wife and I, we have a high yield savings account. We use Ally for all our online banking, this is not commercial for Ally, but in our high yield savings account within that, we have various buckets, and we name them according to the goals that we’re setting out to achieve. Now, of course, if there’s anything that I want to go directly to an account, not to sit in a high yield savings account, right? Perhaps this would be funding a Roth IRA or a brokerage account, or putting money into 529, those are going to be automated directly to that account. But for anything else, as I mentioned before, the mental accounting and the actual accounting, for example, this year we’re finishing, right now, a basement remodel project. So we have a bucket in our high yield savings account for a basement remodel. It could be a vacation. It could be the next car purchase. It could be gifts that you are funding throughout the year. It could be your insurance, homeowners or auto insurance that you pay once a year, twice a year, that you save up through throughout the year. Right? Any of these goals, we can create a bucket, and we can automate the contribution of the funds to that, and then we can see, and have a visual representation of what our goals are, and whether we’re not or not, we’re on track to achieve those. So this system, it took us about 15 minutes to set up, and could just as easily be achieved, probably through your own bank, or if they don’t have a bucket tool like that, through tracking in a simple spreadsheet. Again, resources I have that you can see more of our system. You go to yourfinancialpharmacist.com/toolbox, feel free to download any of those templates or resources and make them your own.

Tim Ulbrich 25:06

Now, if you’re someone that’s listening, that’s feeling perhaps financially stressed or stuck or overwhelmed or confused or anxious, whether you’re a new practitioner, mid career, approaching retirement, or maybe you’re wondering, why am I not further along? Right? I’ve earned a good income, or I am earning a good income. Why am I not further along? I want you to close your eyes for a moment, unless you’re driving, of course, don’t do that and imagine a scenario where you are regularly investing in time to enhance your financial IQ, whether that’s reading, podcast, whatever you’re consistently learning and growing in this area. I want you to imagine where you have a fully funded emergency fund, where you have the peace of mind knowing that you have a backstop in place. I want you to imagine a scenario where if you have any high interest rate revolving debt, that that’s gone, and for other debt, you have a plan in place for how that’s going to be paid off and where that fits in the budget. I want you to imagine a scenario where you’re regularly tracking your net worth over time each and every month. I want you to imagine a scenario where you’re saving and investing each month and hopefully growing that each month, taking advantage of compound interest and time value of money. I want you to imagine a scenario where you’re advocating and negotiating for your income to be commensurate with the value that you’re providing and the confidence that can come from that. And I want you to imagine for a moment that you have a system in place that is accounting for and automatically funding your goals each month. And as you imagine those things. How does that feel? What emotions are coming up, and how does that contrast against those feelings of feeling stressed or stuck or overwhelmed, confused, anxious, notice that there is nothing complicated about what I have shared today. Sure, there’s a time and place for more advanced strategies, many of which we have talked about on this show, but first we have to do the foundational work that will put us in the position to take some calculated risk. And this just this isn’t just new practitioner stuff, right? I know many pharmacists, myself included, that sometimes we have to go back to the foundations, whether we’ve been out five years, 15 years or 25 years. And while all of this is pretty straightforward, you and I both know that executing consistently over time is a different challenge. So let me wrap up by saying that if you could use some help and guidance, we have a team of certified financial planners and tax professionals at YFP that can help. Your six figure income. It’s a great tool, but as I’ve said already once on this show, it is not a financial plan without a vision and a plan that good income is only going to go so far. That’s why, in part, I started Yfp back in 2015 because at Yfp, we support pharmacists at every stage of their careers to take control their finances, reach their financial goals and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners and tax professionals work with pharmacists all across the country and help our clients set their future selves up for success while living a rich life today, both are important. So if you’re ready to see how yp can help support you on your financial journey, you can visit your financial pharmacist.com, and at the top right, you’ll see an option to book a discovery call that will take you to a scheduling page to book a meeting with my partner, a 60 minute meeting. Tim Baker, fee only, certified financial professional, where we’ll talk and learn about your situation, your goals, what’s working, what’s not working. We’ll share more about our services, and from there, we can determine whether or not those are good fit again, yourfinancialpharmacist.com, at the top right, you’ll see an option there to click on book a discovery call. Thank you so much for listening to this week’s episode. If you found this information helpful, do me a favor. Share this with a friend and colleague and leave us a review on Apple Podcasts which will help others find the show. Have a great rest of your day, and we’ll catch you again next week. Take care.

Tim Ulbrich 29:14

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only, and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer, Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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YFP 376: From Student Debt to Financial Freedom: How Brandon Paid Off $160k

Posted on by YFP Media

Brandon Gerleman, PharmD shares the strategy for how he paid off $160k of debt.

This episode is brought to you by APhA.

Episode Summary

Brandon Gerleman, a 2017 pharmacy graduate from the University of Iowa, shares his journey of paying off $160k of debt through not one, not two, but five refinances along the way. Brandon discusses his repayment strategy, why he decided for a more aggressive loan payoff, and what’s next for him and his family. He emphasizes the importance of living within your means, being aware of finances, and the impact of interest rates on repayment strategies. Brandon and his wife are now looking toward the future and he shares what other financial goals they are preparing for.

About Today’s Guest

Brandon Gerleman, PharmD is a 2017 graduate of the University of Iowa College of Pharmacy. He currently works as a Senior Product Manager on the Pharmacy Product Team at Outcomes, where he manages products to help pharmacists practice at the top of their training and provides tools to help drive pharmacy campaigns and increase efficiencies. After graduating in 2017 with $161,000 in student loan debt, he paid it off in May 2024. Brandon and his wife, Mariah, have 2 children and live in a rural community in Iowa. He enjoys spending time with his family, golfing, and watching Iowa Hawkeye football.

Key Points from the Episode

Brandon’s Passion for Personal Finance 1:36
Career Journey and Student Loan Debt 6:08
Refinancing Strategy and Financial Discipline 9:29
Balancing Financial Goals and Family Life 19:48
Future Financial Plans and Legacy 28:59

Episode Highlights

“Within that entire last seven years, though, I’ll say that we lived within our means, but we weren’t crunching pennies. We’re not in some fancy house. We’re within our means here. We still go on vacations with the kids. We still do fun things with the kids.” – Brandon Gerleman [20:59]

“For me and my wife, it was just like, how can we tackle the student debt and take that off our shoulders to then enable us to do more things? And it’s all about the family, and it was like trying to prepare for the future that way.” – Brandon Gerleman [21:38]

“At the end of the day, the math is the math, and we weren’t so aggressive, where we couldn’t do things. And we weren’t so passive, where the dollars kept loading on. So I think it was finding that right balance.” – Brandon Gerleman [22:34]

“We want to be able to live in the moment and celebrate and do things with our kids. I love the word intentional. Be very intentional about what we’re doing. We can still splurge on a Starbucks every now and then, right? You can still do things while living within your means and being intentional about how we’re how we’re approaching our student loan debt payoff.” – Brandon Gerleman [24:50]

“We’re always learning, I feel like the more aware we are around what’s happening. That’s why I was listening to all these Your Financial Pharmacist Podcasts back in pharmacy school, on fourth year rotations, and ever since, it’s just being aware. It’s always learning. It’s asking questions and trying to put ourselves in the best position for success.” -Brandon Gerleman [30:25]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I welcome Brandon Gerleman onto the show, a 2017 pharmacy graduate from the University of Iowa and longtime listener of the YFP Podcast, to share his journey paying off $160,000 of debt through not one, not two, but five refinances along the way. We discuss his repayment strategy, why he decided for a more aggressive loan payoff, and what’s next for him and his family. Today’s episode of the YFP Podcast is brought to you by The American Pharmacists Association. APHA has partnered with YFP to deliver personalized financial education benefits for APHA members. Throughout the year, APHA will be hosting a number of exclusive webinars covering topics like student loan debt payoff strategies, home buying, investing, insurance needs and much more. Join APHA now to gain premier access to these educational resources and to receive discounts on YFP products and services. You can join APHA at a 25% discount by visiting pharmacist.com/join and using the coupon code YFP. Again, that’s coupon code YFP at pharmacist.com/join. All right, let’s jump into my debt free interview with Brandon Gerleman.

Tim Ulbrich 01:26

Brandon, welcome to the show.

Brandon Gerleman 01:28

Hey. What’s going on?

Tim Ulbrich 01:29

Super excited to have you on. It’s been a while since we’ve done a debt free story and celebration. So I’m certainly looking forward to that. And you and I connected back in 2023 although, as we discussed before the interview, we had some connections before that we weren’t necessarily aware of. And at the time, I saw a post that you shared on LinkedIn of a pharmacy personal finance talk that you were giving to Iowa pharmacy students. So let’s start there. Where does your passion for personal finance come from?

Brandon Gerleman 01:59

Yeah, no, I appreciate that. Definitely comes from being aware, and that, you know, just being aware of your situation, and it kind of spurs from my parents really having that instilled, instilled that at a young age, and just being aware, you know, living within your means, having the ability to kind of see everything that that has come in and coming out, and yet again, just just that awareness issue and a little bit of that pharmacist, hey, I need to control a little bit of something here.

Tim Ulbrich 02:31

I love that. And you shared with me, you know, 2017, year you graduated, you were on APPE rotations, and you ran across the YFP podcast, which helped, in part, light a spark that you certainly took and ran with, and you’ve done the hard work, but I love that you’re now giving that back as well as you’re sharing with other students, and as you and I both know this is such a topic of interest and need among pharmacists at large, but certainly students and new practitioners. So thank you for your commitment to this topic, and as you continue to share the good news with students and others as well. Before we get into the weeds on your student loans and your Debt Free Journey, how you paid them off, why you paid them off, tell us about your career path, what led you into the profession, and what’s the work that you’ve been doing since graduating 2017.

Brandon Gerleman 03:18

Yeah, for sure. For sure. Graduated in 2017. Prior to even getting into pharmacy school. I live here in a small town of 5,000 folks here in South Central Iowa, and really that independent community pharmacist and seeing the impact on what they did to the community. That sounds super cliche. You probably hear that a lot. I’m sure pharmacists talk about that a bunch. But the pharmacist at the independent community pharmacy uptown, like they were the, know it all for anything. It was, you know, drug related, it was, you know, any ailment related. It was, when’s the next bus come in? I mean, it was any question, you know, community events like they were just that go to resource. And I just, I just admired that and thought, gosh, I just, I like talking to people, love science. I think this could be a really good fit. Started working there as a pharmacist, you know, technician, tech and training prior when I was an undergrad and just ran, ran from there and never looked back. So graduated from the University of Iowa College of Pharmacy in 2017 and immediately ran back home, right. Came back to my hometown and was overseeing a lot of the clinical operations within the small pharmacy chain that we had here. And that was a really nice, fulfilling, you know, giving back to the community. Being involved in the community; was there for about two and a half years, and really had the mindset of wanting to impact more than just 5,000 in my community. So made the transition over to Outcomes MTM, where I could really help impact millions upon millions of patients. Patients, and help them with outcomes for about five years now, so been there ever since, worn a number of different hats within outcomes, been on the clinical team, been on the payer product team, and most recently, I’m on the pharmacy product team. So I’ve got a little bit of a non traditional pathway, A, B, current position, so I’m a senior product manager, and I oversee all the clinical pharmacy products for Outcomes, and so that that that involves or brings in anything from looking at our collaborative practice agreements and being on the clinical lens to review those, to writing pharmacy sponsored opportunities on the outcomes platform, to also writing clinical workflows that enable the pharmacist to, you know, to practice at the top of their license and submit as a medical bill. So really, anything clinical in the pharmacy, in pharmacy land from outcomes I oversee, and I absolutely love it. I sit with software engineers every single day, and they’re a tremendous group of folks and provide that clinical lens on a lot of what we’re doing. And it’s a very fulfilling position, a need position, and the ability to not only impact patients, but to increase efficiencies and provide more tools for pharmacists to impact even more patients and truly get that fulfilling, that point of patient care, that great, we’re in a state we can do test and treat. But what does that mean? Where do I start? What do I do? You know, how can I decrease my my risk of, you know, DIR fees, you know, how can I practice, you know, practice at the top of my license. So it’s a fun, fun position that I’m at. And been there, been been there, five years, five years now.

Tim Ulbrich 06:48

Outcomes holds a special place for me, and I didn’t share this with you in advance, and I’m dating myself a little bit. And our listeners may not know this about my career path, but I graduated back in 2008 and I spent a year residency in community practice, and then my first job out of community practice was a shared academic role with the university up in Northeast Ohio. And then I was practice component was with a local community regional chain. Giant Eagle is the name of the chain, and we were implementing medication management services across the region. That was my job to go to various stores and help them think about the clinical workflows and how to embed this into patient care models. And it was a really exciting time, right? This wasn’t too long after the passage of the Medicare Modernization Act, and this was for us in Ohio, there was a huge Medicaid contract that landed, and through outcomes was really the ability that we had to do many of these services at the time, so just really fun memories and and really being able to help expand practice at the time. So feels like it’s coming full circle as you’re talking here and sharing your career journey as well.

Brandon Gerleman 07:55

Yeah, definitely it’s that next, that next chapter, right? And now we’re just, we’re beyond just traditional MTM, and now we’re trying to help pharmacists just do more on that same platform.

Tim Ulbrich 08:05

So let’s get into the student loans. Give us the juicy details. How much debt did you have when you graduated in 2017 and what was the average interest rate on your debt at the time?

Brandon Gerleman 08:17

Yeah, did some math here, and kind of added things up. And I still have, when I first graduated, just kind of memory of seeing the number in my head there. But just shy $161,000 in student loan debt from both undergrad and grad and pharmacy school. So I’ve got twoundergrad degrees. I went the four and four route, and they averaged across all of them about 6.75% so remember, just graduated and be like, Oh, that’s a kind of a tough pill to swallow.

Tim Ulbrich 08:51

Yeah. And as you and I were talking about before we hit record, you know, the the interest rate matters a lot, and we’ll talk about how that played into your repayment journey. Unfortunately, we’re seeing those rates – I graduated again, 2008 6.8% a lot of my loans were fixed. You mentioned in the six, sevens. We’re actually seeing now rates on those unsubsidized graduate loans, you know, north of 8% so those are tough interest rates. We talk a lot about the number right, 161, 170, 180, 190. And actually the the average debt load is, we just got the latest data from the class of 2024, hovering around that hovering around that $170k mark still. So it has flattened off over the last several years. But we don’t give enough attention to the interest rate, and I think that’s going to come to life as we talk about your repayment strategy, because for you, as I understand it, it was refinancing your loans, not once, not twice, but five times, ultimately, getting your rate down to 2.24% now, before our listeners, you know, are just like, what in the world, those interest rates don’t exist today, right? So talk us through that decision to refinance. What was it primarily or only based? Based on that 2.24% because there are some considerations, right? When people take their loans from the federal system to a private lender, which is what you’re doing through a process of refinance, there are some things that you might be giving up. Oh, and by the way, when something like a global pandemic happens and there’s a freeze on interest and no payments are required, right, that was something we never could have seen coming as a potential negative impact and consequence of refinancing. So tell us about that decision to refinance and how you ultimately got to the point that that was the best plan for you.

Brandon Gerleman 10:33

Yeah, yeah. Definitely didn’t have global pandemic and halt on student loan payments in my in my Uno cards there. But yeah, for me, it was the aspect of I knew I was never going to, I shouldn’t say never, never say that you never know where the career is going to take you. But highly unlikely for me to go to a another career that kept me in that student loan forgiveness within the federal sector there. So knowing that it just came down to math, and at the end of the day, it wasn’t a jump from 6.75% directly to 2.24% it was refinancing. And I would just always got in the habit of, every three months checking, and I actually always go on on Your Financial Pharmacist and go over to see what deals were going on, right? You know what was the bonus for refinancing? What were the rates at playing around? And never, you know, never hurt your credit score by checking. And you don’t know what you don’t know. And so I would just continue to chip chip, chip away, and eventually got that down to that 2.24% with that auto pay, you know, the rate reduction there by a quarter percent. But it just came down to math. And at the end of the day, what we’re doing is, is math here. And I hate to pay in interest, oh my gosh, just to think that I’m like, giving, like, somebody giving money, and I’m paying them back, and the interest payments are, you know, what’s killing you. I just wanted to that was just a fire in the belly. Wanted to reduce that as much as possible.

Tim Ulbrich 12:05

Yeah, you know, I gave a presentation just a couple weeks ago to a group of student pharmacists, and I walked them through how interest accumulates, right? Because when we’re talking about unsubsidized loans, which you know for most pharmacy students, that’s going to be all of your federal student loans. When it comes to your pharmacy education, there’s the principal, which is the original amount that you’re borrowing, and then there’s the interest which accrues while you’re in school. I often say, Well, when I’m presenting, hey, not to scare you, but while we’re sitting here, the interest is accruing, right? That’s just a matter of fact. And then when you get an active repayment, that separate pot of interest gets added to your principal, and that grows interest. What I say is baby interest, which is referred to as capitalization. So the result of that, why that matters, is that most borrowers, myself, included my own journeys, you vastly underestimate how much you’re actually going to pay off when it’s all said and done, because you’re looking at as a pharmacy student saying, okay, you know, I’m borrowing 15, $20,000 a semester. I’ve got so many semesters, that’s the number, right? And what we’re leaving out there is the interest that accumulates in school, and then the interest that accumulates all the while in the repayment period as well. So such an important lesson, whether we’re talking about student loans, credit card debt, mortgage, car loans, anytime you’re borrowing, right? Interest is the cost of borrowing anytime a bank is lending someone money that that’s a risk they’re taking, and obviously you’re going to pay for that in the form of interest. We have to understand how that interest accumulates and how we feel as well, which is an important one that you mentioned in terms of your hate of that interest. I also want to highlight Brandon, you said something important, which I don’t want to overlook for our listeners that are thinking about their own situation. You said, Hey, I first determined that something like Public Service Loan Forgiveness wasn’t going to be my pathway. Once I made that decision, it really came down to a math, the math. And I want to highlight that, because that’s how I think about it, in terms of a decision tree, right? If there is a pathway to be considered, and it makes sense. And there’s some pros, cons, things that we gotta factor in before you ultimately make that decision. Let’s have that discussion first, if that is not a possibility, then we’re looking at, how do we maximize our repayment options and strategies? And for some people, that might be a refinance. Now, Brandon, I know our listeners are listening to say, is anybody refinancing anymore, right? Given where interest rates are at, and the answer is, actually there are, it’s certainly not anywhere to the point of what you did when you got this all the way down to the low twos. We saw that right before the pandemic. A lot of people, flurry of activity into refinancing below threes. You know, that has largely gone away for the most part, but there are many people out there who have existing private loans that may be at eight, 9, 10, 11, 12, plus percent, which is crazy to say out loud, that certainly should be considering whether or not they can move that private loan and get a better deal on that. So I just want to kind of pause for a moment and make sure we address that. So when you look at the math, clearly, you know, 6.7% down 2.24%. That looks good. What did that actually mean in terms of how much time that took off the repayment period?

Brandon Gerleman 15:11

Oh, I should have written this down! Every single time I would use the some of the calculators that that are on the Your Financial Pharmacist website and and every time I would, you know, crunch it. If I’m here, here’s where I’m at, bringing it down, here’s where I’m at. I have to dig in there. But I know it was of the 10s of 1000s of dollars, and then as far as a time, I think that’s where, that’s where I compounded and snowballed things. So like my wife and I were incredibly comfortable paying when I first graduated this, you know, unsightly amount that was more than our house payment and and thinking, Okay, well, if we’re comfortable paying that, we’re going to refinance from, you know, from A to B, and that reduced my interest rate. Well, I’m going to continue to pay that because out of sight, out of mind, but I’m going to add that extra because my payment went down. My monthly payment went down. I’m going to add that extra as principal only. And so by the time you did that five times you’re you’re knocking it down. It is dollars that you’re not even used to seeing because you haven’t seen it yet that are just snowballing toward that principle. And then every time I would refinance, I’d play around with the calculators as well. Can I, you know, decrease the duration, you know, of my student loan as well? And the last one that we did in 2021 that got me to that 2.24 I also cut it from at that point would have been seven years down to five years. And so that also helped me, you know, really snowball. And then I’ll say that anytime we had a, you know, a tax return, or any, you know, any type of dollars that we felt, hey, let’s, let’s start throwing, throwing additional dollars that way. We throw it as a lump sum, and we’d, we chase it, you know, chase a traditional payment with a principal only. Payments would only go toward that principal, and that was, you know, the combination of refinancing, reducing that, the length of that loan, continuing to pay what we were used to paying, and have it go to our principal, and then the lump sums, kind of, you know, along the way doesn’t have to be much. Can be 500 bucks. This one month can be, you know, $1,000 you know, this other month can just be adding on. Hey, let’s, you know, just add on a little bit. Add 20 bucks a month toward principal. Those small things added up where all of a sudden you became much more manageable. And every time I was very aware, I’ve said that a couple times, I’m very aware, I would always be checking, you know, you know, what’s the balance? Now, you wouldn’t check every single day. That would just drive about, you know, a person crazy. But you know, as you’re checking, then you’re noticing that your payments going more towards principal and less toward interest and and then you can start breathing a little bit, right? And then there, you know, there’s that light at the end of the tunnel and that snowball. And just continue to snowball and snowball and snowball.

Tim Ulbrich 17:58

Yeah, what I hear there is momentum and energy that is coming, which, which is really defined by that snowball approach. And we’ll talk a little bit more about that. But you know, often people will refinance to potentially save on a monthly payment, and then that frees up cash flow to do other things, no right or wrong there. That’s just an option that people choose. Others kind of take the approach you did, which is, hey, we’re going to refinance, get a lower rate, but since we’re used to this monthly payment, even though we only have to now pay 1100 bucks a month, but we’re used to paying 1500 or whatever the number is, let’s keep paying 1500 we’re going to make these principal only payments, and by doing that, we’re going to jump down the amortization table, right? And for those of you that haven’t geeked out on an amortization table, it’s important to understand these things. Again, it’s not just student loans, it’s house payments, car payments, any other type of debt. To really understand what percentage of your payment is going toward principal, what percentage of your payment is going towards interest, and after you make that payment, what’s the balance due? Oh, and by the way, if we make an extra payment, what does that mean, right, in terms of where we’re at, and so depending on your goals, what you’re trying to achieve, interest rates, all these factors are going to determine how aggressive you may or may not be in that debt repayment to that point. And you mentioned Brandon that you know, when you first started, you were paying this unsightly amount. I remember that feeling very well, and that for you, it’s Hey, I hate interest these need to be gone as quick as possible, as what I’m gathering from you, and that’s a decision point that people have to decide, right? We talked about the first branch of the decision tree, which was, Hey, are you going to pursue loan forgiveness or not? If not, then it’s a mathematical decision. Now, once you go to the next decision point, it is, how quickly do I want these gone? And what does that mean for our monthly cash flow and potentially being able to do X, Y or Z. That could be a myriad of things, right? It could be that, hey, we’re looking to save up for a home. We’re looking to buy a second investment property. We want to invest in more in our retirement. We want to have experiences. We got kids on the way. There’s a million other goals that could be coming. But ultimately, you decided that, sure. Or more cash flow would be nice, but we want these gone, you know, tomorrow. And so how did you and your wife get to that decision, that despite the rate arguably being pretty darn low when you get to that point, 2.24 and even before that pretty low, that even though those rates were coming down, you really wanted to go that aggressive repayment. What was the philosophy behind that for you guys?

Brandon Gerleman 20:20

Yeah, yeah. Great, great question. I would say it wasn’t hard to not even going to use the word convince. My wife is already on the same page. So just more of demonstrating, showing the math, and saying, you know, by doing this, you know, semi aggressive plan, instead of being done in 2027 we can be done in 2024 so that freed up, you know, three years of more than our house payment worth of student loans that then will allow us to do more things. And so I’ve got two young kids under the age of four. And, you know, now all of sudden we can, we can go out and we can maybe do something. And, you know, go on a vacation here, and within that entire last seven years, though, I’ll say that we lived within our means, but we weren’t crunching pennies. We’re not in some fancy, fancy house. We’re within our means here. We still go on vacations with the kids. We still do fun things with the kids. Went and saw Caitlin Clark play in Minnesota last week, right? So, yeah, you know, so we’re, it’s from, for me and my wife, it was just like, how can we tackle the student debt and take that and just, you know, a big relief off our shoulders to then enable us to do more things? And it’s all about the family, and it was like trying to prep for the for the future that way. Also say that the snowball doesn’t doesn’t just stop with with my student loans. We We’ve now taken what we’re used to paying for my student loans, and we’re snowballing into other things, a truck payment. My wife student loans are almost done, you know, yeah, so, like, by the end of 2024 you know, really being able to breathe. And then you know that that allows you, and I’m sure I’m leading on to the next question. You know that that allows a person to do a little bit more. And now I can start putting dollars for a 529, plan for, you know, for the kids. And I can start, you know, and add a little bit more in the 401K, which can then reduce my, you know, my taxable income. So there’s other things that that that we can consider while, you know, we have a, you know, freed up a little bit of monthly cash, you know, when it comes to looking at the cash in and out, but it’s really having that supportive spouse who, at the end of the day, the math is the math, and we weren’t so aggressive, where we couldn’t do things, we weren’t. So, you know, passive, where the, you know, the dollars kept, kept loading on. So I think it was finding that that right balance,

Tim Ulbrich 22:49

I suspect that balance was really important for the two of you to get on the same page. And it’s something I see often. It was true in our own journey as well, that, I think, where people run into some issues, especially if you have two different money belief systems. And I’m not suggesting that was the case here, but when that is the case, you know, when one person’s like, hey, we want to go all in and I want these gone tomorrow, and we’re not going to do anything. Like, obviously, there’s going to be friction there, right? And I think we often have this perception of, hey, I would love to be debt free, like Brandon’s debt free, but I’m not willing to sacrifice everything. And what I hear you saying is like, Hey, we’ve lived within our means. We’ve done hard work. I’m not going to minimize that. We’ve been intentional, but we haven’t been, you know, to the point where we’re not also enjoying things and living this rich life that we so often talk about on the show. And what I often see, and I’m confident I will see here as well, is that when someone is as intentional as you have been, and you and your wife have been for for as long as you’ve been, then when you go to the next decision point, when your wife’s loans are done, and you’re like, hey, we were putting x per month between our loans. Now what? That’s the question. Now, what? Right this money isn’t going to go off into the ether and you’re going to be like, what happened? We used to pay loans, and now we don’t know where that money went. Like, you’re going to be intentional about, hey, it’s the 529 account. Maybe it’s putting a little bit more towards investing for retirement. Maybe it’s being intentional if we’re going to take another vacation a year or, you know, do whatever it means for you guys to be living the rich life. So I love that, and I think we don’t talk often enough about that that there are benefits that come long term from how we approach our decision making and how we live today, that even when the debt’s gone, you’re gonna see the fruit of that well beyond that.

Brandon Gerleman 24:35

Definitely. And you know, I’ve seen other folks that have been on your podcast that have paid off way more in a shorter amount of time. And I think that is phenomenal. It’s kind of driving your own, you know, your own why? And for me, it was in my wife. It was like we want to be able to live in the moment and celebrate and do things with our kids. And as you know, before we had kids as a couple, but also be and I love the word intentional. Be very intentional about what we’re doing. You know, we can still splurge on a Starbucks every now and then, right? You know, you can still do things while living within your means and being intentional about how we’re how we’re approaching our student loan debt payoff.

Tim Ulbrich 25:15

As you and your wife look towards that finish line of her loans coming in the not so distant future, and obviously, as aggressive as you’ve been there, there’s going to be some cash flow available, which is exciting. And you’ve, in part, answered this. You mentioned the kids college savings of 529, accounts. I’ve heard kind of the family experience aspect of it as well. What else? What else is? Is a priority for you guys as you look towards, say, the next decade or so?

Brandon Gerleman 25:42

Man, hard to look past the next decade. When you’ve got two kids running around, doing everything every single week, there’s something new! I would say, you know, free enough to be able to start investing more, right? So because, I’m because we were so intentional about paying down debt, we weren’t as heavy on on investing. And so I would say, you know, investing personally, as well as investing in my children’s future with, you know, 529 plans. I’m that’s probably my biggest thing is, like paying it forward. I will say, here’s the nice little asterisk that I’ll throw with my 161,000 in student loan debt, my folks took care of my undergrad. So that includes, you know, around just shy or about $35,000 out of that $160k my mom and dad were very intentional to pay off for my twin sister and I, to allow us to then kind of pay it forward. So I’m really looking forward to being able to pay it, forward to my to my children. So I’d say, you know, between 529 some investing, some decreasing my taxable income, as well as saving for retirement. And then I, I think the biggest thing is, like taking a breath and just saying, Hey, we did it. Let’s just kind of, you know, relax, enjoy it for a little bit and and really enjoy the family and start doing more things and really getting those, those family experiences involved. We’re not anytime we’re doing presents for kids or anything we’re not big on, like a product or an item, like, for all those that are parents out there, Tim, yourself, included, like, man, like you, for you, the kid forgets about it maybe in two weeks, or plays with the box instead, right? Or and so those are replaceable, the the memories and the experiences are what we’re really trying to pass on, I think that’ll allow us to do a little bit more, you know, travel, and just be even more involved with our kids.

Tim Ulbrich 27:38

I love to hear that Brandon, and I’m intentionally asking the question, you know, to encourage our listeners to be thinking about this as well, and to encourage you and your wife to continue these conversations as well, because they’re so important, right? You’ve done incredible hard work with the student loan debt. You’re going to do great work with saving but, but there’s a bigger story here, right? And that’s what I’m asking about, because there will be a day. I call it the rocking chair exercise. There will be a day when I look back, when you look back and, you know, yeah, oh yeah. Remember, we paid off all that debt, yeah, we did that. You know, remember when we got to the point of financial independence because we saved for the future, and we don’t have our mortgage anymore, and our kids are taking care of, yeah, yeah, we did that. What do we remember, right? What’s the So, what? What’s the vision? What’s the engine behind all of this? And at the end of the day, money is a tool. Money has value because we all agree it has value, and as long as that’s true, it will have value, but it’s what we’re able to do with that money. And getting clear with that no right or wrong answer is really what this whole financial plan is about. So I hear a strong why of family experiences. You know, that’s something I often hear when I ask this question. You know, for other people, it might be a dream they have of starting a business, or it might be, you know, some type of giving aspect of time, reminding you’re having an option to work part time. Or it could be a myriad of things, and really getting clear on that, I think, for those that are listening, that are in the middle of the weeds of going through a journey like this. You know, it’s not a hey, I’ll think about that tomorrow. It’s, let’s think about this now, because that’s going to propel and give us some motivation while we’re in the midst of this journey. And we don’t want to wait till we get to the finish line, because this is something we constantly want to ignite the fire in the flame with. And for those that are doing this with a significant other, partner, spouse, so important, so important. We’re having these conversations because all the strategy is somewhat noise. If we aren’t clear on where are we going or why are we going there? And that really, I think, is where we see so much of the joy come and the opportunity. So I love what you shared there, Brandon, I’m so excited to see where you and your wife go into the future, and congratulations on the success that you’ve had so far.

Brandon Gerleman 29:43

Very much appreciate that. And I will say one more thing, and that is, you know, nobody pretends to be an expert in this area, right? We’re always learning. And so even myself, as I’m going through this last year, learned about, you know, a. 529 you know, Secure Act. And then I was able to, you know, throw some dollars toward that, a 529 plan over last year and this year, that even helped me from a tax benefit that I knew I was going to pay them off this year. So I might as well throw it in an account that I can kind of shelter a little bit through taxes. Had no clue about that. I was just kind of over a beer, discussing with with another colleague, and it’s like, Wait a minute. So I just just want to throw that out there that, you know, we’re always learning, I feel like the more aware we are around what’s happening. You know, that’s why I was listening to all these Your Financial Pharmacist Podcasts back in in pharmacy school, on fourth year rotations, and ever since, it’s, it’s just, it’s being aware. It’s always learning. It’s asking questions and just, you know, trying to, trying to put ourselves in the best position for success, for whatever that why is

Tim Ulbrich 30:50

What I hear there is a curiosity, a desire to learn and grow. I love that example, right? Because there’s a state tax deduction that you’re talking about from a 529 to be able to pay off your loans, and that was opened up, you know, others might be using it to pay for kids private education, you know, K through 12. That’s a relatively new thing as well. And some people might hear that and be like, Well, what actually is the dollar savings, right? And sure, you know, we could look at that and say, you know, are we talking 1000s and 1000s of dollars? No we’re not, but it’s, it’s an important example, because it’s an indication of the curiosity you have, the desire to learn, to grow. And as I often say, there is no arrive at the financial plan, as long as we are hungry to learn and grow and be open to different ideas and strategies and figure out what’s best for our plan, right? There is an infinite number of possibilities for where we could go. So that is such a cool example of what comes from from compounded learning over time. So Brandon, thanks so much for taking time, time to come on the show again. Congratulations to you and your wife. Look forward to following your journey as well into the future.

Brandon Gerleman 31:49

I appreciate it. Thanks for having me on.

Tim Ulbrich 31:51

Before we wrap up today’s episode of The Your Financial Pharmacist Podcast. I want to again thank our sponsor, the American Pharmacist Association. APHA, is every pharmacist ally advocating on your behalf for better working conditions, fair PBM practices and more opportunities for pharmacists to provide care. Make sure to join a bolder APHA to gain premier access to financial educational resources and to receive discounts on YFP products and services. You can join APHA at a 25% discount by visiting pharmacist.com/join and using the coupon code YFP. Again, that’s pharmacist.com/join using the coupon code YFP.

Tim Ulbrich 32:33

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

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