financial planning for pharmacists

YFP 227: Why Tim Baker, CFP® Bought a Depreciating Asset

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Why Tim Baker, CFP® Bought a Depreciating Asset

On this episode, sponsored by GoodRx, Tim Baker talks about his recent decision to buy a depreciating asset, how his journey becoming a Registered Life Planner® (RLP®) impacted his decision, and how he coaches clients considering big financial purchases.

Summary

Your Financial Pharmacist co-owner & YFP Planning Director of Financial Planning, Tim Baker, talks about his recent decision to buy a depreciating asset. He explains why he would purchase an asset that he knows will go down in value and how it became part of his financial plan.

Tim shares what the depreciating asset purchase is and how he and his wife arrived at their decision. After learning a bit about life planning and its incorporation with the financial plan, Tim realized that one of his goals was to make lifelong memories with his family. Tim and his wife decided that purchasing a motorhome was part of their life plan, allowing them to take adventures across the country, creating those lifelong memories, as Tim did with his own family growing up.

He explains how his journey to becoming a Registered Life Planner® (RLP®) surfaced this experience-based purchase and how the financial plan can and should support the life plan. Tim further details his coaching philosophy when working with clients weighing whether or not to make a large purchase. He considers the entire picture, not just the ones and zeros, creating a plan that benefits the client financially, balancing financial wealth with the client’s idea of a wealthy life. Investing in yourself in ways that align with what a wealthy life means to you ultimately makes for a healthy financial plan by taking care of the whole person.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim, welcome back to the show.

Tim Baker: Yeah, good to be back, Tim. Thanks for having me on.

Tim Ulbrich: Before we jump into your story of purchasing a depreciating asset, you and I were talking this past week about how grateful we are for the journey that has been this podcast over the past several years. We started Episode 01 back in July 2017, didn’t know exactly where we were going to go, how long we were going to do it, but are grateful to be here today, over 225 episodes in, three different shows on the channel each week, recently surpassing an important milestone: 750,000 downloads of the show, so pretty awesome, right, to reflect on that journey?

Tim Baker: Yeah, it’s incredible, really. You know, we talk with a lot of prospective clients that we work with one-on-one with YFP Planning. You know, when you get those comments of like, ‘I’ve been listening to you for so long,’ and you kind of build a relationship with your listeners and you know, after the red drains from my face experience in that, it’s also very something that I’m proud of and I think we should be. And it’s been a good forum to really showcase, you know, like what we believe and our approach to money, and I think this is — and wealth building — and I think this particular episode is another step in that. And you know, it’s just been a great forum for us I think to take something that maybe is a little bit — can be a little bit dry and boring for people and get them excited about it. And I think the podcast has been one of the most monumental things that we’ve done. And that was really kind of the first big thing that we’ve done together, Tim.

Tim Ulbrich: Yep.

Tim Baker: And I think it’s been just a great launchpad for our partnership.

Tim Ulbrich: Absolutely. And one of the great joys we have is, you know, we get periodic emails from those that are listening to say, “Hey, Tim, I was listening to this podcast and I did this or it inspired me to take some action or to work toward this goal,” and you know, those mean so much to us. I think the goal with this podcast is to hopefully inspire, to motivate, to educate, and we believe this topic is a lifelong journey. It’s something that we’ve practiced in our own lives and I’m hopeful that folks find it as a source of inspiration. So all this to say thank you, thank you to the community for listening, for staying with us, for sharing the good news with others as well, and we appreciate those that have been listening to the podcast and many who have even contributed with being a guest on the show. Alright, Tim, it’s confession time. So I’m putting you on the hot seat in front of the 35,000 or so folks that listen to the show each month to really, you know, ask you why as a financial planner did you decide to make a purchase of a depreciating asset. And so let’s just start with the purchase. What was it? When did you make it? And give us a little bit of the why behind that.

Tim Baker: Yeah, so my wife and I, we purchased a Class C Thor motorhome over the summer. It’s about 30-31 feet. It sleeps 10, so it has a bunkhouse, you know, bunker with a cab, kitchen, bathroom, you know, the whole — dinette — the whole 9. And yeah, we purchased it over the summer from a guy here in Ohio. And it was a long time coming — well, I wouldn’t say a long time coming. It was and it wasn’t. But that was the purchase that we made, and for someone who is very much thinking about finances and things like this and growing wealth, this was not necessarily a move that helps in that department. You know, lots of storage costs and repairs and it’s a 20 — I think it’s a 2014 with about 40,000 miles on it, storage, insurance, the tax that we paid on all that stuff adds up. But probably one of the better decisions I think I’ve made, even in — it’s early, so check in with me later — but I think just great in terms of what I think this can do for our family and the experiences that we can have. And that’s really the crux of why we decided to kind of pull the trigger on this.

Tim Ulbrich: So it’s been over a month, right, now, maybe even two?

Tim Baker: Yeah. I think we bought it in August.

Tim Ulbrich: OK.

Tim Baker: So we’re recording here in October. I think August is when we purchased it. Yeah. So — and back up, like this was something — and I give my parents a lot of credit growing up. When I was preteen, my parents bought — we first had a travel trailer growing up, so like we had one of those old conversion minivans and a travel trailer. And we took a trip when the three of us were I think preteens. I have an older brother and a younger sister. And we did four weeks, and I grew up in south Jersey, kind of outside of Philadelphia. And we did a four-week trip to as far west as the Grand Canyon, Mount Rushmore, the Alamo, Yellowstone. And for me, that was transformational. And I think that’s one of the words that I would use for this episode is really that. And you know, it kind of really changed my perspective, oh wow, when you drive west, there’s just — just the topography and there’s just so much to see and people are just different and they speak different. And it really broadened my — I don’t know if I would say worldview, but at least my domestic view of the United States and really kind of lit a fire for me to want to travel and see other things. You know, we did other trips outside of that and my parents would take it up to West Point for football weekends, and it was always like a great reprieve, like being able to go inside and like kind of hang — like chill and not always be buttoned up in uniform and things like that. So I kind of just equated that to freedom. And for awhile, you know, I was like, man, I would love to do this with — I was first thinking like when I retire, so like when I’m in my 60s, 70s, and you know, get a big old rig and drive around. But I just started thinking more and more, and as I went through my experience with life planning, really kind of changed my perception or at least my timeline, so to speak.

Tim Ulbrich: So Tim, I want to talk for a moment, you know, we talk on this show before we — I know the planning team does as well. Anytime you’re making a significant purchase or any purchase, for that matter, it means you’re not doing something else with that money, right? So the economic term here being opportunity cost. So you know, as you’re looking at making this large purchase, I know I’ve heard you talk about real estate as a goal, obviously something that you and I are both bullish on and see a growing interest in our community and in large part why we’ve got the podcast that David Bright and Nate Hedrick are doing a bang-up job leading each and every Saturday. So whether you look at say, hey, could this money go to real estate? Could this money go into long-term investing or a brokerage account? You know, could this money go into the 529 account? I think this concept of opportunity cost is — we often talk about it in terms of the dollars and making a decision, but I think there’s also an opportunity cost to not making decisions as we make the connections of how our life plan is supported by the financial plan. So just to nerd out here for a moment, if you were to put $40,000 or let’s say $50,000 and save that for 40 years at 8%, you know, that’s $1 million. So there’s the $50,000 purchase, and then there’s that hidden cost of what that could be if that money were to grow over 40 years. So just talk us through that process as you evaluated this purchase. I suspect others might be thinking the same as they’re weighing big purchases. Like, how did you both consider the opportunity cost and then eventually get to the point where you overcame just the mathematical aspects of it to determine that this was the right decision for you, for the family, and the goals that you guys have?

Tim Baker: Yeah, it’s a great question. And you know, I think for all the way up until almost like go time, you know, it was real estate investment. You know, we — my Ally account that this money was being, like where this money was, was called “Real Estate Investment Account.” It might still be called that. I don’t know if I ever changed it to like “Motor Home Account.” I mean, it’s fairly empty now. We paid cash for this, and I didn’t want to put a note on it, so I wanted to kind of keep in the budget that we were — that we had. But you know, I think it comes down to like windows, right? So I’m really bullish on real estate, and we have one property that we completely gutted and redid our home in Baltimore and are renting that out now since we’ve now moved out to Columbus, Ohio. And that’s been great. And I wanted, I definitely want to do more of this. But when I say “windows,” it’s kind of windows of time. And that’s what life planning is really about. And you know, specifically about the length of your life, but in this case, when we sat down and we were looking at our plan, I asked my wife Shea, I was like, “Is this really what you want to do?” And she’s like, “Yeah, of course it is. This has been — this is the plan.” And we kind of had this role reversal because I’m more of the — and I see this a lot in couples. I’m more of the person that is thinking like long-term and making sure that we’re doing what we need to do to have a wealthy life in the future. And my wife is typically like, hey, we’ve got to make sure that we’re doing — we’re living our life today.

Tim Ulbrich: Yep.

Tim Baker: But in this case, it was kind of a little bit of a role reversal. And I asked like, you know, I asked the question, is this really what you want to do? And she’s like, well yeah, that’s the plan. But then once I said kind of a combination of these words, she’s like, you’re right. So I basically — what I said to her was, Olivia, our oldest — we have Olivia who turns 7 this Halloween, so in about a week or so. She’ll tell everyone about it. She turns 7 this year. And we have Liam, who turned 2 this year. What I was examining, like I was kind of thinking about this as like, we only really have with her, I don’t know, six, seven years maybe until, you know, we’re no longer cool, like she doesn’t want to hang out with us. You know, you get to the teen years —

Tim Ulbrich: And we’re running out of time.

Tim Baker: Yeah, we’re running out of time.

Tim Ulbrich: Sure.

Tim Baker: And you know, I thought about that even with like the trip that I took that, you know, my brother two years older than me, he was kind of right on that preteen. And we had a good time, but I don’t know — like a summer or two after that, I don’t know if that trip would have worked. So when I put that in context in that kind of emotional tug that that gives you and specifically my wife, she’s like, where do we buy a motorhome? Like where do we do this? And that was really it. You know, that was really what brought us is that, you know, I view this purchase as an investment. You know, so many people view this as an expense. And if you do that, it doesn’t really work. And believe me, there are lots of expenses that are tied to this. But if you view this as an investment, you know, a memory-maker investment, that’s where it works. And I’ve had conversations, you know, we kind of bought the motorhome with my sister and her family in mind. They have twins that are a little bit older than Olivia and our boys are about 10 days apart, so they’re like best bros. So we kind of bought it with them in mind, hoping to share this with their family as well. But they’ve actually been thinking about buying their own and kind of doing big trips and like taking a year of that and all this kind of stuff. And for them, it’s hard to get — like they’re doing it down to the penny in terms of expenses. I’m just thinking — like it’s just tough, that’s a tough sell. It is a tough sell. And I get it. Like as a financial planner, it’s good to do that. But for me, this was really about letting go a little bit. And again, I know in the back of my mind that we’re going to be OK for the future and we’re doing a lot of things in that regard and we have a fully-funded emergency fund and all of those things. But to me, like the emotion, which is what drives our choices of I want my kids to experience similar things that I was fortunate enough to experience as I was growing up, and I think we only have a window of time — and not to say that when she’s a teen and things like that, but when you’re camping, like to me, it’s close quarters. Like you’ve really got to love your kids and your family and I think it gets harder as you get to be a little bit older. But that was the impetus, really. And a lot of that really is rooted in my own life planning journey of how we got to even make this transaction.

Tim Ulbrich: Such a good, reminder, Tim, about, you know, if we only look at the numbers — and here, you’re talking about one thing. I would argue that applies to other things as well where if you’re looking at this only as an expense, we would never make these life planning decisions.

Tim Baker: Right.

Tim Ulbrich: Or these decisions that spark the life, right? I mean, I get the numbers. If instead of buying a motorhome, whether that’s $40,000, $50,000, $60,000, whatever — let’s call it $50,000, if instead of buying the motorhome, you saved $50,000 and you put it into a long-term savings account and it grows for 40 years and you have $1 million. In one, we’re looking at $50,000 of a purchase that’s going to go down in value and has other expenses. And in the other, we’re looking at an investment that’s appreciating and is going to be worth $1 million or more. Like but what we’re really trying to highlight through this journey and through the discussion around the planning process and the importance of bringing out these goals and visions that you have for your plan and for the family and for you individually is that it can’t just be about the numbers and the expense. And Tim, you’ve mentioned a couple times now life planning. Tell us more about what is life planning and how did your journey in going through not only your own life planning but ultimately being registered as a life planner and being able to use that skill set for clients of YFP Planning and training the rest of the team? Like what is that life planning process? And how did going through that journey ultimately lead you down this decision here?

Tim Baker: Yeah, so I found out about life planning kind of George Kinder, who’s kind of the founding father of life planning, and his three questions. And it’s something that once I went through the three questions myself years ago, I immediately incorporated that into kind of our goal setting. We call it Script Your Plan at YFP Planning. And we’re — that’s what we’re doing is we’re kind of saying, OK, now that we know kind of where we’re at, we’ve gone through a get organized, where is all the — what do the finances look like, let’s talk about where we want to go. So we do the three questions with clients now, but I think for me, what I — it was powerful to go through that myself when I was answering those questions, and I found out that there’s a registered life planning designation, RLP, that I just finished this year. And really, it’s been a couple years in the process that I have been going through that. What life planning is, to back up, they say it’s kind of financial planning done right. It’s really about putting first things first. You know, we often live our lives by like a paradigm that is not ours. It’s been kind of something that’s been dictated to us over the course of our lives, you know, get good grades, get a good job, earn a lot of money, that type of thing. But for a lot of us, we kind of get stuck on that, stuck in that, and we can sometimes fall into this state of not really examining our lives and not really saying like, is this really what I want? Is this what I’m doing right now, is this what a wealthy life is? And again, it’s not just about the 1s and 0s, it’s about what are you passionate about? What enriches your life? So years ago, I went out to Arizona and I did the first step, which was the seven stages of money maturity, which kind of focuses on listening, believe it or not. So as planners, we need to shut up. And so much of us, we see like student loans, OK, this is what you do, dah, dah, dah, dah, dah. And there’s a plan. But it’s really about focusing on your client and being there with them, being present with them, and not trying to overpower or not listen. And it’s about communication, kind of the client-planner attitudes, the biases and behaviors that we grow up with, so understanding that. You know, one being money is the root of all evil. Like where does that come from? Or you know, don’t trust — like some of those things were built into me I think. You know, my mom came from a very — her upbringing was tough. And I think some of those were kind of implanted on me. And you go, I have to understand that. And we see a lot of clients with that type of thing. So that was eye-opening. And really the next stage, which I think was truly transformational, was a five-day in-person training called The Evoke Life Planning Training. And this is where you actually go through the different stages of life planning. So I was life planned myself. And I life planned my partner Dan, so shout out to Dan. And I think this for me was very transformational. I kind of went into that training not knowing what to really expect but came out saying like, I am burnt out. My schedule is not mine. You know, kind of what I’m doing right now is not healthy. And from there, you know, I changed a lot of things. But the big thing that I took away from that was my vision meeting, which is the second — you know, it’s all about uncovering your kind of most exciting, meaningful, and fulfilling aspirations. And when Dan went through that with me and lit my torch, it was about really the motorhome and doing that with my family. And I still remember that meeting like it was yesterday. And you know, you go through that and you know, you create so much energy that that’s all I think about. Like that’s all I thought about for a while. And it took me longer than I thought to get it done, but you know, you could run through walls. And then finally, the life plan that you go through like a mentorship, which is like a six-month thing where you go through case studies and one-on-one guidance and group conferences and things like that. So that finished this year. And to me, the challenge that I have now is how do I best inculcate and integrate, I should say, the life planning methodologies into what we’re doing with clients. Right now, we do portions of it, and I tested out kind of the full Evoke method on clients and trying to figure out how to best balance getting to the core of what a client is passionate about but also making sure that we’re soothing the pain that are student loans, investments, tax questions, insurance, home buying, all that stuff. So that’s my challenge going forward. But I think to me, it’s where you really create and have meaningful relationships, meaningful conversations. And that’s what the RLP is about. And I think without me going through it personally, I don’t think that we would be at this step. And like I said, to go back to the whole if you invest this money, what would it be in 30 years? $1 million. I’m like, that’s great. But I would suspect that if you asked a 30-year-older version of myself, I would trade that $1 million for I think the experiences that we’re going to have with this investment, the RV, and with my family. And that’s I think what this is really about.

Tim Ulbrich: And I think that’s what a good coach does, right, what you just mentioned there is ask that question or ask the right set of questions that get somebody thinking about what might 30-year-into-the-future self think of this looking back? And you know, I think there’s some good accountability in that process. I think as you’ve gone through the RLP and just briefly scratched the surface here, I think that has really enriched the planning process and obviously you seeing the value of that being able to bring that effort to clients of YFP Planning, so I’m grateful for that. Tim, I’m looking at your credentials now on LinkedIn. You’re starting to look like a pharmacist with all these letters after your name.

Tim Baker: Alphabet soup. Yeah, I know. I’m working on a few others.

Tim Ulbrich: I was going to say, you’ve got one coming down the pipe, right, the RICP is coming. So.

Tim Baker: Yeah, if I can study, if I can get studying for it, yeah. I mean — and again, I think, you know, one of the things that one of our core values at YPF is optimize you and you know, I’ve been in organizations where it’s stagnant because hey, we’ve figured everything out and we’ve seen everything. And I think that’s just poison to an organization. So you know, I’m not necessarily one for designations just to get them, but I look at it in terms of what can this provide to our practice? How can this further benefit the clients that we serve? And you know, I think that is important. And you know, having that. And it’s funny. I always kind of go back to this story. When I graduated from West Point, I’m like, ‘Well, that’s it. I’m done with school. I never have to pick up a book or do anything.’ And you know, really that changed more when I became an entrepreneur and now I’m a — I read all the time and listen to podcasts and I’m always trying to figure out ways to do things. And I think, you know, that’s the message really even to our clients is keep evolving and keep sharpening the salt, so to speak. You know, I think that it just, it leads to more of an enriched life but also I think it just can continually improve your skill set. And again, like the RLP, the Registered Life Planning, there are advisors, financial advisors, that have taken this training and have stopped being financial advisors. Like all they do is the front end life planning and then they hand it off to advisors. And I actually thought of like even doing that internally is you know, having just life planners that are doing this front-end work that it’s a form of planning, it’s a form of coaching, and then hand it off to our CFPs to kind of, you know, put a lot of that into practice. So it’s an option that I’ve been playing around with. And I think the cool thing about this is you don’t have to have all of the other financial designations to do this, but to me, it’s how do we further enrich ourselves, enrich the lives of our clients?

Tim Ulbrich: Yeah, and you mentioned Kinder and the three questions. We’re going to link to those in the show notes for those that want to dig a little bit deeper. And for those that are hearing this in real time saying, “Hey, I’m really interested in having a financial plan that also considers some of what we’re talking about here around the life plan,” we would love to have an opportunity to talk with you to see if the services offered at YFP Planning are a good fit for you and the financial goals that you have. We do a free discovery call, you can learn more, schedule that at YFPPlanning.com. Tim, talk me through the process not only that you use but in coaching clients of YFPP that are making a big financial purchase, right? It could be a home, whether that’s a first home, an investment property, a vacation home, could be a car, could be a motorhome. What questions are you prodding to help them reflect upon that purchase that hopefully leads to a situation where there’s a purchase that has confidence behind it and not one that leads to buyer’s remorse?

Tim Baker: I think that you know, this is a process, right? So it’s not — you can’t look at it in a silo. I probably wouldn’t have made this type of purchase without a good, solid foundation. So like you know, cash emergency fund, a good savings plan beyond that, I think doing well in the investments, stable job, all those things. But beyond that, you know, like what we often ask clients is if we get into the Delorean, the imaginary Delorean, and we go ahead five years, like what does success look like? You know? If we look back at those five years. And I like to kind of equate age with that because I’m turning 40 next year, Tim, so like in 30 years, I’ll be 70, which is kind of like where my parents are. My dad’s a little bit older than that. So like trying to put myself in their shoes and like what do I want to accomplish because the further away it gets, the harder it is for us to kind of like feel that time. So I think framing it — and just for a lot of us, it’s actually just sitting down and actually asking some of these questions of ourselves. Like I said, I always tell the story when I was — my first job out of the Army was Sears/Kmart. So I would drive to work in the dark at 5 in the morning, and I would drive home in the dark at probably 6 at night or 7 at night or something like that. And those drives I would never remember. Like I would get in my car, and I was on autopilot. And so many of us, like that’s our life is like we’re not really thinking. It’s kind of an automatic thing, so like even asking ourselves these questions, so I think it’s — that’s part of it. It’s just going through that process and examining is this what we want to do? And if it’s not, what the heck are we doing about it? So like one of the things I say to prospective clients, you know, we might go through the wealth-building stage of the financial plan and we’ll do a nest egg calculation that says, ‘Hey, Tim, you need $5 million to retire.’ And that’s typically where they look at us like we have 5 million heads, right, because it’s a big number that’s in the future that doesn’t really mean anything to me. So you know, we go through the process of kind of discounting that back to a number that says, OK, if you’re putting this into your TSP or this into your IRA or this into your 401k a month, you’re on track or you’re off track, right? So we can kind of break that down into more of a digestible number to see if we’re trending to that goal given, you know, a handful of assumptions. But the point of this story is if we do work together for the next 30 years, and you don’t have $5 million, you have $7 million, $8 million, $10 million, whatever that is, that’s great. Like those numbers are bigger than $5 million. But if you’re miserable because you look back at that list of all the things that you wanted to do over 30 years, 20 years, 10 years, whatever that is, and you haven’t done anything and you’re miserable because of it or you’re disappointed, the question I would ask you is what’s the freaking point?

Tim Ulbrich: That’s right.

Tim Baker: Why get this education, why earn this money, why pay down this debt, why invest, whatever, if we’re not going to intentionally direct it to the things that matter to you most? And I don’t think that I’m going to be on my death bed and I’m going to say, “I wish I would not have bought that RV.” I just don’t think that in my heart of hearts because of just — I just think about the reaction that my daughter and my nieces had, just when we pulled that up. And even the two camping trips that I had, I think I snapped a few pictures and texted them to you, Tim, even in our first camping trips, it’s going to be an adventure. And to extrapolate that out, like that’s our lives. Our lives are adventures. But we have to be willing to take it, you know, and seize it. And I think that’s what life planning really tries to get to the surface is what is that adventure? And taking that road and not necessarily adapt to a paradigm that’s not yours.

Tim Ulbrich: Yeah, and you talked about this, I think there’s some really practical things, right, making sure do I have a good foundation in place? We talked about that on Episode 212, you know, what does it look like to have a good, strong financial foundation in place. You know, looking at the value that this purchase is going to add, what are the alternatives, right? We talked a little bit about opportunity cost. You know, waiting a little bit before making that purchase and feeling that peace and the thought that went behind making the decision. But you know, as you highlighted, I think the example of fast forward looking back and really asking some good questions to reflect on that, so, so important. So and you mentioned that — if I heard you correctly — it’s the Thor, right? Which is great. I just see like Tim Baker behind the wheel of the Thor and think of the Thor films, which is fantastic.

Tim Baker: Yeah.

Tim Ulbrich: Where has it gone so far? Where is the Thor going in the future?

Tim Baker: Yeah, so we’ve just done basically weekend trips in Ohio. We’ve just done camping sites that are within a few hours’ drive. So we went up to Cedar Villa one — that was our most recent one. I think next year it’s really looking at some of the national parks. And it’s a lot — it actually is different than growing up. Like you have to book these pretty well in advance, so if we want to go to Yosemite or things like that. And you know, I kind of look at this as like, you know, some summers of adventure is really to get the kids, especially when Olivia is not in school, and go out and do it, you know? And you know, a lot of it is, you know, just being outside of your comfort zone. I don’t think I’ve ever driven something this big, but it’s fun. And you know, it can be a little stressful, and that can be true for whatever your life plan is is that it can be outside of your comfort zone. But it’s one of those things that, again, I’m tooling down the road and I look back and the two boys are in their car seat just gabbing on and the girls are doing their thing. And it’s brought me a lot of fulfillment already, and I think one of the things Shea and I have a long drive here this afternoon heading back to Maryland for a wedding. That’s one of the things we’re going to talk about too is what is the slate of trips? And start scheduling them. And I’m really excited for that. So it’s a journey. And I’m excited, I’m excited for what’s in front of us and again, to me, I look at this as a window of time with our kids. But just to extrapolate that out further, like we have a window of time, which is our life. And again, to kind of bring it back to life planning, it’s really important that we’re taking full advantage of that and not necessarily leaving anything on the table.

Tim Ulbrich: Yeah, one of the things we’re blessed with here in Ohio, Tim, shout out to the Buckeye State, is just some awesome state parks. So you know, trips locally and I know you’ve got a sabbatical coming up here. So one of the benefits we offer for the team at YFP is when you get to the five-year mark, we’ve got a month off and some funds to take a trip with the idea that we’re supporting the things that are central to the life plan. So pressure’s on, Tim, to be planning that, that sabbatical when it comes to the motorhome. Great stuff, Tim. Appreciate your willingness to share the story. And again, for those that are hearing this and interested in taking that next step with the financial plan, especially considering some of the dreams and goals that you have for you individually or for you and your family, love the opportunity to talk about the services at YFP Planning. You can learn more and schedule a free discovery call at YFPPlanning.com.

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YFP 181: How YFP is Different Than Most Financial Planning Firms

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How YFP is Different Than Most Financial Planning Firms

Tim Baker, YFP co-founder and Director of Financial Planning, talks about his journey becoming a financial planner. He discusses why all financial planning is not created equal, how and why YFP Planning services differ from traditional firms, and the importance of fee-only, fiduciary, and comprehensive distinctions.

Summary

Tim Baker, CFP®, joins Tim Ulbrich on the show to dig into how YFP Planning was born and how and why it is different from many traditional financial planning firms.

After working for a traditional firm himself, Tim realized that there were a lot of gaps that he wanted to fill in supporting people on their financial planning journey. Tim decided to launch his own firm and began working with pharmacists from the start. After meeting Tim Ulbrich, Tim Baker joined the YFP team and merged his financial planning firm with YFP. Now YFP offers comprehensive, fee-only financial planning for pharmacists.

Tim breaks down several reasons why YFP Planning is so different from traditional firms. To start, YFP CERTIFIED FINANCIAL PLANNERS™ carry a CFP® designation. He explains that the barrier to enter the financial planning world is fairly easy and many people pass as financial planners without much education or experience. However, having a CFP® designation means that the YFP Planning team went through more rigorous training and testing and had to lock in between 4,000 to 6,000 hours of experience.

Tim shares that YFP Planning offers comprehensive financial planning. Many financial planners only focus on life or disability insurance or investments, however YFP Planning supports every part of your life that carries a dollar sign. YFP Planning offers support, guidance, and financial planning in the following areas: debt management, savings, insurance, investments, tax planning and filing, retirement, estate planning, budgeting, student loans, open enrollment navigation, credit, education planning, FIRE, real estate investing, and buying a home, among others.

Lastly, YFP Planning offers fee-only financial planning. This means that clients are paying for advice, not for the sale of a product like most traditional firms. In addition, YFP Planning follows the fiduciary standard. By law, YFP CFPs® are bound to act in your best interest.

If you’re ready to take stock on where you are and where you want to go in 2021 and create a financial plan to support your life plan, book a free discovery call with YFP Planning today.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, excited to have you back on the mic. How’s everything going?

Tim Baker: Things are going well, yeah. Looking to turn the page here on 2020 fairly soon. So good to be meeting with you and Tim and our crew to figure out what YFP looks like in 2021, get a plan in place. So been a tough year but excited to look forward, look ahead and what’s to come for our team here in the future.

Tim Ulbrich: Man, I’m with you. It’s been a tough year. Looks like the first half of the year may be tough as well. But hopeful that we’re going to turn the corner here with the pandemic. Obviously we know many of our listeners, community has been impacted by that. And hopefully our community who’s been on the frontlines is going to get a little bit of a break here and some relief and hopefully get some time to refresh. I know we’ve talked with many pharmacists that I think are probably feeling burned out given the pressures, the circumstances, trying to manage work, trying to manage home, but we’re thinking of you all often, appreciate what you guys do, and yeah, we’re excited about 2021, lots of exciting things planned for YFP. And here, today, wanted to talk a little bit more knowing that we have grown a lot in the last few years, knowing that we obviously have many of our community members that are aware of what we do at YFP Planning, some that are not, and knowing that one of the things I find myself often talking about when I speak on the topic of personal finance is hey, when you’re looking for a financial planner, it’s really important not all financial planners and financial planning services are created equal. And it’s important to understand what you’re looking for, what’s a good fit, what’s not a good fit. And so we wanted to spend some time here today talking about why we do what we do, what some of the terms mean around fee-only comprehensive financial planning, how we got to this point, and ultimately what’s included in the types of planning that we do. So we’re going to do that. But Tim, before we dig into that, I think it was all the way back maybe Episode 015, somewhere around there, we had you on to chronicle your career path, your journey into financial planning. But it’s been awhile. And I don’t want to assume that the listener here in 2020 necessarily listened to Episode 015, so take us back into your trajectory into financial planning, all the way back to obviously your time at West Point, what you did from there, and then how you got into the work that you’re doing now and offering fee-only comprehensive financial planning to pharmacists.

Tim Baker: Oh man, I feel like it’s been awhile since I kind of told this story. So I’ll try to dust it off a bit. I feel like now it’s more about like the team that we’ve assembled and everything.

Tim Ulbrich: Yeah.

Tim Baker: But yeah. I took a very kind of a different route to becoming a financial planner. I — like to your point, Tim, out of high school, you know, I was pretty set on the United States military academy at West Point. And my trajectory for my career I thought would be very much intertwined with service, military service. So I worked my tail off to get into the academy. The world changed very — very quickly when I was there my freshman year, I think my first day at West Point was July 2, 2001. And obviously, a couple months later, you know, 9/11 happened and really changed the tone of what our job was and why we were there. So you know, I graduated four years later with a degree in international relations, you know, again, thinking that my career would follow more of a service track and commissioned as a Second Lieutenant and as an Armor Platoon leader, so tanks. But I quickly found out that, you know, sometimes you have a plan and life happens, you get punched in the face, and that plan goes out the window. So unfortunately, I was involved in a training accident that kind of derailed my military career, and I medically was separated from service. And I found myself a civilian, not really knowing what I wanted to do and really lost for a bit. So I backpacked Europe for about four months, saw 20-some odd countries and came back and started a career in material management, actually in Columbus, Ohio, where we recently moved back to. So my job was to basically move — manage the department that moved boxes from A to B for a big retailer here in Columbus. So I did that for a span of years and then moved out to southern California to work for a construction company kind of doing the same type of stuff of moving materials from A to B. And I would say it was around this time that I kind of had a — kind of a quarter-life crisis. I liked my job, but I felt like it didn’t like me. I was working way too many hours for a six-figure income, which was great. I didn’t really necessarily get a warm and fuzzy of what I was doing from a day-in and day-out. And you know, I had a relationship that kind of ended at that time and I was just not living the best version of myself. So I took some time off. I took probably about 9-10 months off to kind of figure out what I wanted to do. And I kind of came to this epiphany, kind of from some of the input from two different family members that said, “Hey, we think that you’d be actually really good as a financial planner.” And I didn’t really know anything about it. You know, finance had always interested me, but I decided to pursue that path and I moved from southern California back to the East Coast to work with a solo practitioner in Baltimore, Maryland, who was actually a Naval Academy grad, and basically started at the very bottom of the ladder. And I was more or less a glorified assistant and took probably a third of the pay of what I was making previously to really kind of introduce — or reinvent myself and really get into this profession of financial planning.

Tim Ulbrich: Well, I’m grateful — and I mean this genuinely — as my own financial planner but also knowing the impact you have had on the pharmacy community that you found this career pathway. I mean, I think it’s safe to say — and we’ll talk more about the team and the services that this transition and quarter-life crisis, whatever you want to call it, one of the results has been really putting a positive dent on helping pharmacists in managing their personal finances, obviously debt is one part of that, debt management, student loans, but also the rest of the financial plan, like we talk about often on the show. And I genuinely think the work that you did and the work that you continue to do has had an incredible impact, not only on our community but on others as well. So you’re working with a solo practitioner, and you decide to make a jump to start your own firm. So why, why, why take on that risk? Why take on that journey? And what was enticing about going down that path?

Tim Baker: Yeah. So again, not really knowing what I was getting into — and I think sometimes I talk to pharmacists, and they say the same thing when they go to school. I think the big difference is the debt that’s often taken on, you know, with becoming a pharmacist, which is a good and a bad thing from a barrier to entry perspective. So I completely just shifted and pivoted from what I was doing from a professional standpoint. And you know, to kind of back up to that, when I was trying to reinvent myself, my resume was written in a way that like that I just kept going back to material management. So I really need to do something bold, and it actually came down to networking. I know, Tim, you talked about that, to kind of get into that firm and really be super vulnerable to say, like, I don’t know anything. Like when I got into material management, I used to say like I didn’t really know what a forklift was. When I got into financial services, like the only thing that I really knew about financial planning was you would hire a person to help you, and I knew that credit card debt was bad and investments were good and buy a house, that was a good investment, which is what my parents had said. That might not necessarily be true. So I get into this world, and I’m working with a solo practitioner, and it’s very much kind of like you work with people who have hundreds of thousands of dollars and you’re working with them to help them with insurance and their investments and maybe give them a little bit of tax advice and things like that. And I quickly realized that me as a 20-something-year-old, I didn’t resonate — I wasn’t really resonating with the people that I was working with. You know, I was supporting the guy who was working with a lot of like pre-retirees and things like that. And then I quickly realized that there’s a lot of gaps.

Tim Ulbrich: Right.

Tim Baker: So after I started the process of getting my licensing and working on my CFP and getting that in place and getting everything that I needed to actually do the job, I started working with pharmacists fairly early on after that because I had friends — most of my friends in Baltimore were pharmacists, one of the guys I went to West Point with, one of my best friends, married a pharmacist. They were very much champions of me and what I was trying to do. And I found with pharmacists and that type of client that most financial planners will say, “Well, you have $150,000-200,000 in debt. I can’t help you. Come back to me when you have a couple hundred thousand dollars in your investments, and we’ll go from there.” Or they would say, “We can help you. We’ll invest your IRA, we’ll sell you a crappy insurance product. And then we’ll talk to you once every three or four years.” And when I looked a the student loans, in particular, I’m like, you know, and you’re not getting supportive advice, like that’s not good. You know, most financial planners — I think it’s gotten a lot better — but most financial planners, at least at that time, would say, “Oh, don’t worry about the loans. They’ll figure themselves out. And invest or buy this product.” And that’s not good advice. We say with pharmacist-type debt, it’s not hyperbole to say it’s a six-figure decision on which way you go. And I think you and Church would attest that like if you would have went a different path for your loans, maybe like a forgiveness route, it would have been a different result. So I was starting to see this gap in the market, and you know, a lot of it was like, “Hey, find your niche.” And I kind of had stumbled into this niche already of working with pharmacists. And it just steamrolled from there. So I stumbled upon a group called XY Planning Network, who was a group of fee-only CFPs, Certified Financial Planners, that really focused on Gen X and Gen Y, who are typically those individuals that maybe have a lot of debt, maybe decent incomes, but are not being serviced the financial planning sector. So that was really the main drivers as I was thinking like, hey, like I think I can do this better, more efficiently, more targeted to who I was serving anyway. And that’s what I decided to do.

Tim Ulbrich: So you started the firm Script Financial.

Tim Baker: Yep.

Tim Ulbrich: And I actually have in my hand right now as we’re recording right now my Script Financial pen, which is just an awesome, awesome piece of history. So you started Script Financial, and then you meet this other chump named Tim who knew this other chump named Tim that was also talking personal finance.

Tim Baker: Yeah.

Tim Ulbrich: And the paths started to align, right?

Tim Baker: Yeah. So I think one of the other reasons that I decided to go out on my own — and it wasn’t necessarily feasible in the model that I was in — was I wasn’t fee-only in that first, in that solo practitioner. And I think that’s a good distinction to make. So what I often tell a prospective client today when I talk to them, I’m like, for me, like whether you work with us or not, you know, that’s obviously a decision you need to make. But to me, table stakes are are you a Certified Financial Planner? So unlike a PharmD, a JD, an MD, you know, those are professions where there’s an education requirement, experience requirement, an ethics requirement. To become a financial planner, there’s none of that. You take what’s called the Series 65, you study for 8-12 weeks, and then you take a test, you know, and you can do exactly what I do or what we do today. So there’s often a lot of sales people that parade as financial advisors but that are really just hawking crappy products, to be honest. So sometimes people get upset with me, but it’s like thinking about like a real estate agent. Like the barrier to entry to become a real estate agent is really low. Now, to be a good real estate agent, you have experience and all those — good ethics and things like that. But the CFP designation is something that’s really, really important. And then the other thing that’s kind of table stakes is really if you’re fee-only. So this is really confusing, and it actually confused me because I was probably about a year, year and a half into my career as a financial planner before I even knew what fee-only was. And fee-only is where you basically separate the sale of a product like an insurance policy or an investment with advice. So anytime that you have an overlap between the sale of product and advice, there’s a conflict of interest because I would say, “Hey, Tim, you’re my client. If you buy this insurance product, it’s better for me in terms of commission, maybe not so great for you.” And the same thing with the investments. So in the fee-only world, you are — we’re what’s called “product agnostic.” So if I say, “Hey, buy this life insurance policy,” it’s not because I’m enriching myself anymore. It’s because that’s what I believe is a tool to better protect yourself and your family. So I kind of use the medical analogy. It’s why physicians are not supposed to get kickbacks from pharmaceutical companies because it taints their ability to prescribe medications without strings. The difference in our profession, you know, “profession,” is not only is it legal in our profession, it’s prevalent. So there’s something like 95% of advisors out there can sell you a product that enriches themself, i.e., commissions or kickbacks, that a lot of times the advisor doesn’t know. So that was a main catalyst for me to move. I wanted to very much niche down. Most financial planners, they want to be everything to everyone. That’s not our game. So we are very niche to the pharmacy profession and really wanted to provide services that kind of ease those pains that they were having. And then the other thing is to put myself out as fee-only or as a fiduciary, meaning that our — we are legally bound to act in the client’s best interest, which most people, you know, if you say, “Hey, your advisor can put their own interests ahead of yours,” they would be surprised by that. But that’s actually the case. So yeah, once I made that leap, I started to network and to figure out how to get myself out there. I came across Your Financial Pharmacist on Twitter, and you know, I always say like, “Who’s this imposter Tim talking about personal finance and pharmacy?” And I read your stuff, and I really liked it. And it resonated, what you were saying resonated with a lot of the conversations that I was having with pharmacists at the time. And you know, I reached out to you, and we decided to meet in Bob Evans in Ohio, and I think our first collaboration was the podcast, which now has almost 500,000 downloads, I think is where we’re at right now.

Tim Ulbrich: So fun story for our listeners about the podcast. I was reflecting on this recently — and then we’ll get to the meat of what we’re actually talking about here — is we at one point, Tim — I remember it vividly. I was on vacation with my family, we were down in Hilton Head, we were actually working on “Seven Figure,” wrapping it up, and we’re like, man, what should we call the podcast? Like should it be, you know, like — I was thinking of like Mike and Mike on ESPN, which are no longer a thing, right?

Tim Baker: Right.

Tim Ulbrich: I was thinking about other names. And then, I mean, clear as day, you’re like, “Maybe we should call it the Your Financial Pharmacist podcast.” Ahhh.

Tim Baker: Yeah.

Tim Ulbrich: So sometimes, it just hits you in the face, and you know, you don’t know it. But it was a good time as we were getting that started.

Tim Baker: Yes, yes.

Tim Ulbrich: So we’re going to come back, I want to come back and break down a little bit further in a moment fee-only, fiduciary, comprehensive, and compare some of the terms: fee-only versus fee-based, fiduciary suitability, talk more about why that’s important. But take us for a moment down the path of — so you start Script Financial, we merge efforts at YFP, obviously we start the company, you’re kind of doing — not kind of — you are doing all of the planning. Obviously now it’s a team that really believes in what we’re doing and really embodies obviously what you have built and the beliefs that we have around planning. So what’s your current role at YFP? What’s the YFP Planning team look like? And what can folks expect from that team?

Tim Baker: Yeah, so my role at YFP today is a bit different than when we started. My role is Director of Financial Planning. It’s really more about kind of managing the RIA or the Registered Investment Arm, advisor arm of the business. So I manage the team that basically brings financial plans to the pharmacists that we work with all over the country. And I think we’re in like 38 states now. So it’s really managing that team and our process and making sure that we are delivering plans consistently and kind of with — in line with our belief system. It’s the business development, so like the prospect meetings. It’s the IT stuff, the HR stuff, the compliance stuff. You know, we’re now overseen by the SEC, which is good but also compliance can be a bit of a tough thing to crack. So yeah, my day-to-day is more, you know, managerial now and the great team that we’ve assembled, we now have two lead planners, Robert Lopez and Kelly Redy-Heffner, who basically are in Arizona and Pennsylvania, respectively. And these are the individuals that really quarterback the financial plans for our clients. And they have the help of a support system, you know, Paul is our Director of Tax, Kim, Tom and Heather are really support to them. And really my vision with financial planning is that it takes a village. Oftentimes, financial planners, they’ll have themselves and maybe another person in support. We kind of employ the diamond team model that is the group that supports the client’s effort. So that’s kind of the makeup of our team. And I’m really excited about the team that we have. I look at across — and obviously, we’re pharmacy-owned, which is very unique. But we have CFPs that are both married to healthcare professionals — Kelly’s married to a physician, and Robert, I think his wife Shirley is a psychologist — and they’ve worked in their own firms dedicated to helping healthcare professionals. We have an MBA, we have a CFP-in-training, we have an IRS-enrolled agent. So I really like the team that we have, and I think it’s imperative that the team is in place to really support the efforts of delivering the financial plans. And like I said, this is — I think, Tim, you struck a chord with talking about your experience and your initial blog posts, you know, five years ago, with Your Financial Pharmacist. And we’re seeing that year-in and year-out as more and more pharmacists raise their hand and really are excited about putting their financial plan in place and improving kind of where they’re at currently from a finance perspective.

Tim Ulbrich: Absolutely. And a shout out to the team, they have done incredible work and I think have been so integral to our vision of helping as many pharmacists as we possibly can on their path towards achieving financial freedom. And as I mentioned, Tim, I want to come back to digging a little bit deeper into comprehensive, fee-only, fiduciary. And I really like what you said, whether somebody ends up working with us or not, I think it’s really important that they understand what they should be looking for that will point them in the direction of the services that meet their needs and that have their best interests in mind. And I can attest to what you said earlier about it may catch many people off guard when they hear that about the variety of these services but also the realization that most legally don’t have to act in the best interests of the client and may be charging for services in a way that may not align with their interests or needs. And I know for me as a pharmacist when I first started that work and did some of the exploration into the types of services, that was certainly eye-opening for me coming from a training where it is drilled into us over and over and over again that your job as a pharmacist is you need to obviously take care of the patient, but you need to be acting in their best interests at all times. So when you say comprehensive, what does that look like? Paint the picture of comprehensive financial planning.

Tim Baker: Yeah. So when you go to school to become a CFP, which I guess there’s schools now. I feel like that wasn’t there even when I was doing it. But they have a curriculum that kind of follows really I think the six main components. It’s kind of your fundamentals, which you think about like debt management and savings, insurance, investment, tax, retirement, estate planning. And a lot of people, you know, the last one there is estate planning. What is that? So you know, just to break those down, again, when we talk to prospective clients, the things that we talk about for us, we go a little bit further. Like we look at like banking, like how you bank, your cash flow and budgeting. Most financial planners kind of provide kind of ongoing cash flow and budget support, they’ll say, “Hey, you’re a good saver or you’re not,” and that’s it. We provide — because it’s behavioral. And I think a lot of pharmacists were saying, like, “Hey, I just want to be efficient with this resource, this income that I have.” The big piece and the fundamentals are the student loan analysis, which a lot of financial planners, you know, there’s a stat there that says 70% of financial planners don’t advise on student loans. Obviously with working with pharmacists, that’s huge. And then really a savings plan. You know, most financial planners will say, “Hey, just put that in your emergency fund.” And I’m like, man, I just want more. There needs to be more than just that. So we take it a step further. We really try to line up in a savings plan what we’re actually trying to achieve with the dollars that we’re setting aside. But insurance is typically your life, your disability, your professional liability if you’re a pharmacist. We do a lot more I think with like employer-provided benefits, so we do like a lot of open enrollment optimization meetings, so hey, Tim, it’s open enrollment, it ends this month, like what do I do? And we just log on — because that’s a big part of your compensation package. Investments, so we manage the client’s investments both at their job, so like 401k’s and 403b’s. Most financial planners don’t do that. So we can actually do that for you. And also, at our custodian, we do that at TD Ameritrade, so IRAs, Roth IRAs, you know, kind of the back door conversions, that type of thing. The big thing that I think that — I think a lot of financial advisors will do — is kind of like a nest egg calculation, are you on track or off track? I feel like most advisors will say, “Hey, you need this amount of money,” and then that’s it. We kind of like zero it in on like you’re either on track or you’re off. So we do the nest egg calculation and we dial that back. Another big differentiator is that we do taxes. Most financial planners don’t. They’ll say, “Hey, work with this accountant.” And in my experience, that’s what we said in my last firm, there was never really any cross-planning between the accountant that we are sending them to and their investments or anything that they had going on tax-wise, which I think is a major misstep. And I think the other reason that we do taxes now, Tim, is that most financial planners don’t understand student loans and kind of the tax ramifications to student loans. And by proxy, neither do accountants. So I got tired of sending people elsewhere to do their taxes and then completely mess up the benefits of what we’re trying to do from a student loan perspective by not aligning the tax strategy. So to me, keeping that all in house. And then finally, the estate plan, do we have the proper wills, power of attorneys and things like that? So that’s where most planners begin and end. And when we say comprehensive, we mean comprehensive. We go through credit, so credit score, credit report, especially if we’re leading up to a big purchase like a home purchase. Because we work with so many — I mean, we work with people of all ages, 50s, 60s, 70s, even 20s and 30s — but because a lot of our, initially our clients we’re in their 20s and 30s, a home purchase was a big thing that they hadn’t figured out. And when I bought my first home right before the housing market crashed, I didn’t know what a home inspection was or what an appraisal was, what I should be spending, how to get financing, where to find a good agent. So we kind of do that from A to Z, you know, whether it’s using our concierge with Nate Hedrick, going through the home purchase worksheet of what they should be spending and what their must-haves and nice-to-haves are, helping with financing. It’s such a big thing that most financial planners are going to be working with people in their 50s and 60s that they’ve run that race already. So I kept seeing like mistakes on the home purchase, and I think I’ve made them, Tim, you’ve made them. And I’m like, there’s got to be a better mousetrap here that we can build. And I think that we’ve done that. Salary negotiation is another thing. I kept hearing like, “Ah, I just accepted a job,” and I’m like, “Well, did you negotiate at all?” “No, not really. I was happy to have the job.” And I’m like, “Yeah, I’m with you.” But I feel like — and we’ve had some clients on recently that have experienced that and how to negotiate and things like that, so like, I think that that’s another thing to be able to advocate for yourself. Real estate investing is another one. Most financial planners are not going to encourage you to do that because a lot of financial planners are really incentivized by you investing traditionally in your IRA, 401k, etc., not something like real estate. But we feel as a team that is a viable way to build wealth, has lots of good tax — it’s not correlated, etc. Small businesses, we work with a lot of pharmacy entrepreneurs, and we’re expanding our services there. Education planning, so hey, you have kids, how do we tackle that, more people are interested in the FIRE, Financially Independent Retire Early. So that’s a completely different way to tackle the financial plan. And I think the thing that we do differently too is most financial planners, they’ll say, “Hey, here’s a 30-page document of what you need to do.” We don’t do that. So we’re very much education-focused of like, “Hey, this is kind of what you need to know,” enough to make you dangerous but not enough to bore you to death and then recommendations, really looking through the lens of how can we help you grow and protect income, which is the lifeblood of the financial plan, grow and protect net worth, which means increasing the asset efficiently and decreasing the liabilities efficiently. Most financial planners just care about hey, I got you a great return on your investments in terms of the IRA. But they could care less about the $20,000 in credit card debt or the $250,000 in student loans. And I think that’s a big misstep. So it’s income, it’s net worth, while keeping your goals in mind. And I think I put them in descending order of importance. So income is important, not as important as net worth, but not as important as your goals. And what I typically say is, the client is like, we might work together for 10, 20, 30 years, and at the beginning of our journey, we might say, “Hey, Tim, you need $5 million to retire.” And that’s typically where you look at me like I have 5 million heads because it’s such a big number and way in the future that we discount back to the present value. But let’s pretend that we do work together for decades and you have $10 million. That’s a great accomplishment, it’s a great thing, but if you’re miserable because you haven’t achieved or done the things that you wanted to do in life, what’s the point?

Tim Ulbrich: Amen.

Tim Baker: So to me, the hard part about financial planning — it’s not the technical aspect just like you need to be technical to be a pharmacist, that’s not really the hard part. The hard part is the human element. It’s really threading the needle between what — your present day self and your self that’s 30 years older, 40 years older, in the future. And I feel like if you’re not — if you don’t feel that push and pull, we’re probably doing something wrong. So that’s it, you know. It’s using all of these tools that are in front of us and trying to work with a client in the most efficient manner that is delivering a plan that is, you know, the best version of what a wealthy life is to them. And that’s what we try to achieve here every day.

Tim Ulbrich: Yeah, and as you say and I think articulate so well, it’s not just about the 1s and the 0s in the bank account, right? We’ve got to be thinking about the goals, we’ve got to keep that front and center. It’s got to be the framework from which we make decisions. And I think a fee-only fiduciary model allows a planner to invest the time and attention to putting goals front and center, even if that does not necessarily mean all the time that you’re dumping more money into investments, it might mean paying down debt, it might mean philanthropic assets, it might mean real estate, it might mean — insert any other goal that might not have a direct tie to compensation in a fee-only model but is the best for that client, for their goals, for the plan. And I think that’s the beauty of comprehensive, right, is you say all the time is that when it comes to planning and YFP Planning, comprehensive, anything that has a dollar sign on it, you want the planner to be involved and engaged with the client because everything impacts one another when it comes to decisions that are being made.

Tim Baker: Yeah, it’s true. And I think like — and I’ll invoke a conversation that I recently had, actually before we started recording this. We had a client that signed on with us early this year, and we were kind of doing a review. And their net worth when they started with us was like -$328,000 I think it was. And this was in February is when we actually like, you know, did I think our get organized meeting. Today, so we’re talking 10 months later, their net worth is -$188,000, right around there. So that’s a net worth increase of about $140,000 in less than a year. And again, I will stipulate — we were talking about compliance — this isn’t necessarily indicative of all results, all client situations, but I look at that, and I’m like, man that is great progress. That’s really — you know, we got the debt buttoned up, the investments are humming, they’re doing a lot better job budgeting and savings, but there’s — for one of the people in the marriage, like the work situation is almost to the point of being unbearable. And that to me is what’s on fire, it’s nothing really anything that’s really tied into the financial plan, it’s the anguish that she’s feeling with kind of her day-in and day-out job. And I’m like, we have to figure this out immediately because it’s just not sustainable. So like the 1s and 0s, like impressive, but like, one of the things we talked about early this year is to potentially look for a pathway out of her current position. And we just haven’t done enough, and then obviously COVID happened, but to me, like they’re wealthier than they were in a lot of ways, but in a lot of ways, we’re still stagnant. And I think it’s kind of making sure that all of those important pieces and those goals that are out there we’re working towards and we’re being — the word that we always say is we’re being intentional to that. So you know, to me, I think that’s what it’s really about. And it’s going to be different for everybody, right? And life changes. I have a lot of people that look at their goals and then 12 months later, they laugh because they’re like, they were in such a different place. So to me, I mean, I think part of this is like why we are so comprehensive in a lot of ways is maybe it’s ego on my part. You know, I think the finances permeate everything.

Tim Ulbrich: Absolutely.

Tim Baker: And I just — and for me, it’s like, alright, we would talk early on about salary negotiation. I’m like, I need to be a better resource to clients to help with that because you know, that should be something that pharmacists, our clients, are really putting themselves in a position to get the best deal that they can. Home purchase, I’m like, I really need to understand this from A to Z so when they make this biggest purchase of their life, they’re confident. And even like going into retirement, to talk about the other end of the spectrum, is I don’t think that financial advisors are really trained well to provide like a retirement paycheck and really figure that out. It’s all about accumulation in masses. But what happens when we then pivot into retirement? And not just the 1s and 0s and the mechanics of that, but also like what does a wealthy retirement look like? These are things that are I think a good financial planner is coaching and talking about to their clients on a continuous basis.

Tim Ulbrich: So I think the comprehensive nature, you know, as I’ve talked with many individuals, that resonates a lot with people, right? Because they understand that they’ve got multiple things going on. And I think with some background information, they can understand that the traditional industry may focus more on investments or insurance, but as you go down the list of the other topics, you gave the stat about student loans, not so much and certainly many others along the way, which we’ve mentioned here during this recording. So I think yes, I think many people will hear this and say, “Yes, comprehensive, comprehensive, comprehensive. I get it.” When it comes to fee-only, this is an area where I see people confused or perhaps sometimes get in trouble where they may work with maybe with an advisor that may advertise being fee-only but really come to find out that they’re fee-based. They’re not always in a fee-only situation. So tell us the distinction of that briefly between fee-only, fee-based, and why it’s so important. I know you’ve already mentioned, defined fee-only. But the fee-based specifically.

Tim Baker: Yeah, so when I was in my first firm and I was working with clients, you know, but when they do, typically for the planner or for the advisor, they kind of squirm in their seat a little bit because one, it’s not very transparent to the client. So like if someone were to say, “Hey, Tim, before you started Script Financial, how would you get paid?” or if a client would say, “How would you get paid?” I would say, “Pull up a chair because it’s going to take awhile for me to explain this to you. So in the fee-based model, what those advisors — and again, I don’t want to demonize, they’re good people — but again, like if I was a consumer, I would want to be in a position where I was treated as a fiduciary at all times or treated by a fiduciary at all times. So in the fee-based model, the previous model, if someone said, “Hey, how do you get compensated?” I would say, “Look, I could charge you hourly, an hourly rate like what an attorney does. I could sell you a mutual fund that pays me x% upfront plus a trail or a bigger upfront and no trail, so like an ongoing fee that basically takes away from the investment. I could charge you a percent of the assets that I’m managing, which is by and large what a lot of planners do. And even fee-only planners, that’s how they mainly do it. They’ll say, “Hey, you have $500,000, it’s 1%, it’s $5,000 a year.” I could charge you to sell you a life insurance policy, and typically those are the worst ones for you or better for me in terms of what they pay out. It could be an annuity. There’s just so many different ways to do it. It could be a flat fee. There’s so many different ways to do it, and it could be a combination of those too. So when I would work with like young pharmacists at first, I would be like, “Alright, well, I can charge you a flat fee for the financial plan, and then I’ll charge you x% of whatever I’m managing in terms of dollars, which is typically not a lot. And then I’ll charge you a commission to sell you this life insurance policy and this disability policy.” At the end of the day, it’s just so confusing to the consumer because they don’t even know what they’re being charged. And that’s why like — like when I talk to a lot of younger pharmacists, you know, I’ll say, like, “Who’s making the decision on who you’re going to hire as a financial planner?” And they’re like, “Well, it’s me, but I’ll talk to my parents about this.” And I’ll say, like, “Ask your parents what they pay their financial planner. They’re not going to know.” The first thing that my parents said to me when I decided to — after I was going through my quarter-life crisis and I’m like, I think I want to be a financial planner, they’re like, “Well, why would you do that? We have a financial planner, we don’t pay them anything.” And when we peeled back the onion, it was actually very, very significant of what they were paying. But it’s not an industry that’s known for being transparent. So in fee-only, you are not enhanced or enriched by any of the products that you’re selling. So if I sell you a life insurance product, I don’t get any commission for that. If I sell you a mutual fund or some type of investment, I don’t get any additional commission for that. So you’re paying for advice, not the sale of a product. And when I was in the other model, Tim, I would — you know, we would get taken out to lunch by mutual fund wholesalers that would show up in their fancy suits and take us out to an expensive lunch and show us these glossies of why their funds were so good. And they would say, “Hey, when your pharmacists bring money over, sell our funds,” wink, wink. So it’s almost like a drug rep almost — no offense to drug reps out there. But it’s almost like that type of relationship. And you kind of feel beholden to them, like, ugh, they took me out to a nice lunch. So it’s just kind of like icky. It was kind of like gross.

Tim Ulbrich: Yeah.

Tim Baker: So by separating the advice from like the tools and the products that you use, you’re not in bed with anybody, so to speak. So you’re really clear to advise on the client’s best interests. Now, that’s not to say that there aren’t conflicts of interest. There are. You know, if you’re in a AUM model, an Assets Under Management model, where you’re charging a percent of the assets that you’re managing, if a client has inherited $50,000 and they have $50,000 in debt or they could put $50,000 into their investments, from that perspective, you’re better off for them to — in terms of your compensation — for them to invest. So there are conflicts, even in the fee-only world, so it’s important to understand what those are. But in fee-only, it’s much, much less. And that’s important.

Tim Ulbrich: Yeah, and I think that speaks to the importance of fiduciary as well and that they are obligated to act in your best interests, that situation being a good one. And kind of putting a bow around this, as you talked, Tim, the words that stand out to me are — as you’re evaluating a planner — is do they have the credentials? What’s the scope of the service they’re providing? And how are they deriving their fees? So obviously we talk here, we believe firmly in the CFP given its rigorous education requirements, given its hours of experience, the examination someone has to be able to pass, their competencies. So the credential is No. 1. Second would be the scope. We talked about the importance of comprehensive planning, making sure that they’re addressing all parts of the financial plan and aren’t incentivized to spend their time in one area more than the other. And then their fee, where are they deriving their fee? Where’s that fee coming from? Is it transparent? Do you understand it? And is it being done in a way that has your best interests in mind. And that’s what I always tell people, one of the things I’m most proud of of the service that we built — you really built — at YFP Planning is that the fee is the fee, right? The service is the service, the fee is the fee. It’s there, it’s on the table. We’ve got nothing to hide, and we obviously stand behind the quality of what we do in that service. So Tim, for our listeners that are hearing this episode saying, “You know what, I’ve been thinking about a planner for some time, I see the value, I heard about all of the things that are covered in that planning engagement, that planning relationship, and I’d love to learn a little bit more and figure out are the services offered by YFP Planning,” are they a good fit for the individual and what their considering with their own financial plan? What would be the best next step for them as they vet that decision further?

Tim Baker: Yeah, so you can go to YourFinancialPharmacist.com, there’s a big green button, two big green buttons that say “Book a Free Financial Planning Call,” so that would be either with myself or Tim Ulbrich, and we would see, again, if we would be a good fit. So that would be the best avenue. Like I said, a lot of people right now are thinking about man, this has been a tough year, I really want to get my stuff together as we transition into a new year. So it’s a busy time of year, but I think it’s kind of the best time to take stock of where you’re at and really where you want to go and have the financial plan, support that life plan that we talk about where it’s not just about the 1’s and 0’s. So YourFinancialPharmacist.com, click the button, “Book a Free Call,” and we’d be happy to see if we’re a good fit.

Tim Ulbrich: Yeah, and we hope we’ll have a chance to talk with many of you here as we wrap up 2020, head into 2021, looking forward to setting those goals, setting that plan for the New Year. And as always, we appreciate you joining us on this week’s episode of the Your Financial Pharmacist podcast. And if you haven’t already done so, we would love to have you leave us a rating and review on Apple Podcasts or wherever you listen to this show each and every week, which will help other pharmacy professionals find the work that we’re doing on the podcast. And we also would love to have you join us at the Your Financial Pharmacist Facebook group, a community of more than 7,000 pharmacy professionals all across the country that are committed to helping one another on their path towards achieving financial freedom. Thanks again for joining, and have a great rest of your week.

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YFP 177: New Book: Baker’s Dirty Dozen: Principles for Financial Independence

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New Book: Baker’s Dirty Dozen: Principles for Financial Independence

Joe Baker, author of the newly released book Baker’s Dirty Dozen: Principles for Financial Independence, joins Tim Ulbrich on the show. Joe talks about several of the principles outlined in the book, why he wrote the book and what he hopes the reader will glean from applying its principles.

About Today’s Guest

Joe Baker is an Adjunct Assistant Professor at the University of Arkansas for Medical Sciences College of Pharmacy where he has taught personal finance for over twenty years, as well as an adjunct instructor at Harding University College of Pharmacy. He holds a Bachelor of Business Administration from Southern Arkansas University and a Masters of Business Administration from the University of Central Arkansas. Joe retired early in 2019 from Pharmacists Mutual Company where he provided insurance and financial services to Arkansas pharmacists for twenty-eight years. Joe has spoken to both academic and corporate groups across the country promoting financial literacy.

In an effort to give back to his community, he has endowed a scholarship fund for students graduating from his hometown of Emerson, Arkansas.

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

Summary

Joe Baker has been teaching personal finance to pharmacists for over 20 years as an Adjunct Assistant Professor at the University of Arkansas for Medical Sciences College of Pharmacy as well as an adjunct instructor at Harding University College of Pharmacy. Tim Ulbrich approached Joe and asked if he’d be interested in writing a book and Joe realized there were a lot of lessons in personal finance he could share. With the help of his daughter Lindsey, Joe wrote over 250 pages of the key principles he teaches and has learned along his journey of personal finances. This book is composed of practical experience and contributions and stories from over 40 people.

In this episode, Joe walks through several of the principles he has written about like finding a path that will fulfill you, getting and staying out of debt, setting up a 401(k) and Roth IRA, finding the right house and picking the right mortgage, protecting your assets and making a difference in your community.

Through November 7th, you can use the coupon code BAKER at www.bakersdirtydozen.com for 15% off your order of the book.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Joe, welcome back to the show.

Joe Baker: Well, thank you, Tim, for the invite.

Tim Ulbrich: Excited to have you. Huge accomplishment as you release your new book, and we’re going to dig in and talk about several aspects of that book, really a comprehensive guide not only for pharmacy professionals but really just a guide overall about how to live a financially well life and how to do it with intention. And we had you on the show back on Episode 082 with Blake Johnson as he shared his debt-free journey. And during that show, Blake articulated how important your guidance was, your mentorship and your role as a teacher in terms of how important that was in the journey for he and his wife to becoming debt-free. And so now we get to talk about how you have compiled all of that wisdom that Blake and other students who have been blessed with your guidance and teachings often speak of as you release your new book, “Baker’s Dirty Dozen: Principles for Financial Independence.” So Joe, first of all, congratulations. I know a lot of sweat, a lot of time went into putting together this book. And here we are, finally getting ready to release it. So congrats.

Joe Baker: Yes, well thank you for talking me into it. I guess I say thank you.

Tim Ulbrich: So I have to ask, now that you’re on the back end of this and we finally get this into the hands of folks and many, many months of writing and editing went into this, and I told you very early on, I said, “Hey, Joe, at some point, this is going to become fun.” And you kept saying, “When is that? When is that?” So as you look now backwards, tell us about the process. What was it like? What type of time was involved? And would you do it again?

Joe Baker: Would I do it again? Yes, I would do it again. But I’d have open eyes this time. I had been thinking about writing a book for years. Former students and current students would say, “Why don’t you put this down on paper and let us have it in a book?” And I didn’t really think much about it until you mentioned — I think it was in May of last year, 2019 — you mentioned and said, “Hey, why don’t you write a book and we will help you promote it?” Then that got the bug started and I started thinking about it and said, you know, I think I can come up with some things. And on August the 15, I started the book. And coincidentally, I started writing the book for something to do in the hospital room. My wife was having some surgeries. And quite frankly, I wrote most of the book in the hospital room. Now, she’s fine today and everything went well. But you know, it was pretty tough having to write a book when someone’s over there moaning in pain. I’d have to call a nurse and say, “Hey, give us some pain pills in here. I’m trying to write my first book.” They weren’t too sympathetic, nor was my wife. But most of it was written, I mean, during the hospital stay. And what’s interesting — I tell people this story — is I thought I was pretty much finished at Christmas. And my daughter, who is just very astute on editing and all that sort of thing, she said, “Well, Dad, why don’t you let me read it and edit it?” I said, “OK. Go ahead.” Well, she started into editing the book, and lo and behold, she would say, “Dad, I don’t understand.” I said, “Lindsey, you’ve got to understand, I wrote this for millennials.” And she said, “Well, I don’t understand it.” So we went almost paragraph by paragraph throughout the book and rewrote it to where she could understand it as a liberal arts major and put in some stories. It was so much involved, involvement for her that I just felt obliged to name her a coauthor because she did, she made it sound so much better. I shouldn’t say this, but one day I was reading through it for the thousandth time, and I said, “You know, I know I’m getting old. But I don’t remember writing this part.” And she said, “Oh yeah, you did not. I put all that in.” I said, “OK.” There is a lot of her in this book, and I’m very proud of what she’s done.

Tim Ulbrich: And shoutout to Lindsey. I appreciated her input along the way. She did a fantastic job. I feel like it’s — as you know, Joe, as I know, especially as you’ve taught on this much longer than I have, it’s very different teaching on this and then putting that into writing in a way that is engaging, that is accessible, that is action-oriented. And I think it takes more effort, but one of the exciting things is this will live on, and it’s going to have an impact on many, many people. And just so folks understand the effort, when you talked about going paragraph by paragraph, we’re talking about paragraph by paragraph of over 250 pages that are in this book. And I think you did an awesome job. One of the first things I said to you after I read it was, “Wow, this is incredibly engaging because of the stories that you’ve included, because of the tone of writing, because of how action-oriented it is.” And you had over 40 people that helped contribute to the book. And I say that as we get ready to jump into talking about some of the key principles because I think this is a topic where multiple perspectives can be helpful to reinforce various points. And I love how you brought in those perspectives and obviously Lindsey put her own stamp on the book as well. So just overall, incredible job. And we’ve got — I think you have photo evidence of some of that hard work writing. I remember you sent me a text at one point with a photo when you were in the hospital writing. And so we’ve got photo evidence of that. So again, congratulations.

Joe Baker: Well thank you. Can I add another story to this? And it kind of goes to one of the reasons I was writing the book is we were playing cards this summer — and by the way, I had my other daughter, Brooke, and her husband, Gabe Crooks, to edit the book. And they did a good job. They weren’t as in depth as Lindsey, but they did do that. We were playing cards, and Gabe and my daughter happened to be there, and we had a big group there playing cards at the table, and one of the card members, one of our friends who is an attorney, says, “Well I couldn’t tell you the difference between an IRA and a Roth IRA.” And all of a sudden, to my right, Gabe, my son-in-law, another liberal arts major, he started explaining the difference, how it’s the taxation, you know, you tax up front and all of that, went into great detail. And I turned to him and I said, “How’d you know that?” He said, “By editing your book.”

Tim Ulbrich: There you go.

Joe Baker: And he’s even starting investing more and more from that. So it seems to have worked.

Tim Ulbrich: That’s great. And I think you know from teaching this for over 20 years as we’ve had several of your former students on this podcast, you know, some people will read this book and go line-by-line and take away multiple things that they’ll apply. Others may take one thing or they’ll jump in and out as their financial life and plan progresses. But I am confident, I know I took many things away, and I’m confident the readers will do the same. Joe, remind our listeners — maybe they didn’t hear you on Episode 082 way back when — a little bit of your career path and then also some of the work that you’ve done over the past 20 years in teaching personal finance. I think it’s a good segway into why you even wrote this book in the first place.

Joe Baker: Well, in my adult life, I’ve worked for 28 years with Pharmacists Mutual companies, so I’m very familiar with pharmacists and pharmacy students. And I spent a lot of time in the college of pharmacy. And in the late ‘90s, I was talking to the assistant dean and the dean about a personal finance course. And one thing led to another, and we started in the fall of ‘99 at the University of Arkansas College of Pharmacy, a two-hour elective for P3s. And I’m going to brag not because of me but because of the content, it is the most popular elective at the university. So it’s been going on for over 21 years. And it’s just — it’s been great. I look forward to it. Pharmacy students are like sponges, they just absorb it all. And we just — we have a good time. We tell a lot of stories. And I learn from them as well. So it’s a two-way street.

Tim Ulbrich: Absolutely. And I have been teaching a personal finance elective for I think 4 or 5 years, not 20+ years. But one of the things I often think of is, I wish I would have had this. And I know I hear that from others as well. So lucky to have the students that have been able to take your course, that they have access to that information. And Joe, I wanted to ask, you know, we throw around the term, “financial independence,” “financial freedom,” all the time. And since it’s in the subtitle of your book, “Principles for financial independence,” I want our listeners to hear from you, what does that term mean to you? And why is that concept of financial independence so important?

Joe Baker: Well financial independence to me means that if I want to pick up roots, move to another place, I can. I’m not obliged to stay at the same job that I’m in. It just frees you up to do so many things. And I know that money can’t buy happiness, but I have been without money, and that has made it very unhappy. It’s nice to know that if the refrigerator breaks down, the wash machine, or if you want to go on a trip, that you don’t really have to think that much about the monetary. I know I always try to get a good deal, but having the financial independence to do those things and to buy things that you need, it really makes a big difference. It takes the stress out of marriage and life.

Tim Ulbrich: One of the things too, Joe, that really resonates with me as I’ve gotten to know you over the past couple years and obviously got to be alongside of you in this journey, I often tell people as I’m describing this book, is it really is just spewing out with wisdom. And I mean that genuinely.

Joe Baker: Thank you.

Tim Ulbrich: Because I feel like your life experience really comes through in addition to what you have found as effective ways to teach these principles such that they’re easy to understand and they’re action-oriented. So you mention in the beginning of the book, you chronicle your timeline, 30 years old, you got married having nothing but some debt. I think that’s a story that I can resonate, our listeners can resonate. And then if we fast forward, 59 years old, your liquid net worth percentile increases from the top 8% to the top 4% in the U.S. And you mention it took 52 years to get to 8%, the top 8%, and only seven more years to get to the top 4%. And one of the things you mention there is that the significance here was the result of having no debt. So what else as you look back on this journey going from really a net worth of $0 or negative to obviously being in such a good financial position and being financially independent in addition to no debt and having that philosophy around debt. What else has been the secrets to your success?

Joe Baker: Well, I’ll go back even further. You know, it’s a really remarkable journey considering I grew up in a small rural area in south Arkansas near the Louisiana state line. We did not have an indoor toilet until I was 9 years old. And I always, when I’m mentoring students, I say, “Listen. If I can achieve what I have coming from not having an indoor toilet, you can achieve as well.” But fast forward to age 30, you’re right. I had debt. I did have a TV and a VCR and a bed without a headboard. So I did have some assets. But the fortunate turn in my life was I married a high school math teacher. And even though I had a business background, she came in and showed me time value of money and all of the other numbers. And I said, “Wow.” So she whipped me up in financial shape, and I knew she was the one when we were having a get-together at her condo. I think this was the second town we were together. And we had some people over, and someone picked up a paper towel roll, used the second to last paper towel and proceeded to throw it away. And from a distance, I saw my wife — or future wife — go over to the trash, pull that cylinder out and pull off that last piece that was glued to it. And I said, “Wow. I’m going to marry her,” because I knew that she was tight with money. And of course, she makes me frugal today — or excuse me, she makes me look like a spendthrift. But anyway, that helped transform me. And we instilled those — a lot of the money principles with our children. Those stories and more are in the book.

Tim Ulbrich: And a shoutout to Brenna Baker for allowing you to write this book but also for giving you the foundation, I feel like, for what allowed you to learn this topic and of course in turn, teach others. And I love that line that you say in the book, “My biggest financial accomplishment came from marrying a high school math teacher.” So one of the lessons, which I couldn’t agree more with, is making sure there’s alignment with your partner, your significant other, your spouse, when you’re talking about personal finance. And the earlier you can get to that alignment, the better. And you do a great job of discussing that in the book and how important it is. Let’s jump into different areas of the book. And we’re just going to scratch the surface on these. But principle No. 1, so Baker’s Dirty Dozen Principle No. 1, is find a path that will fulfill you. And I think many may pick up the book and not expect that it would start here. So tell us about why you started here and why this concept of finding a fulfilling path is so important and relevant to the financial plan.

Joe Baker: Well, the book did not start off this way. The book was evolved that I had in mind was don’t do this, don’t do that. And then we had a epiphany — excuse me, I’m under the weather today, so you’ll have to forgive me a little bit — when you and I went to Washington, D.C., last year, it was September of 2019, last year, and we both attended a conference with a speaker. And he changed my whole focus on the book. You know, by not telling people what they need to buy or whatever, so I said, “Everyone needs to find their own path, financially, career-wise,” but the purpose of my book is to show you the opportunity cost of every economic decision you make and let you make that decision. I can’t pick a path for you. This is the path that you have to come up, and with the help of the book, maybe we’ll find a way to finance that path. And you can tell a little bit about the speaker who that was. We’ll give him credit.

Tim Ulbrich: Yeah, so I remember that. FinCon 2019, we were in D.C. You actually, Joe, if you remember, we had I think lunch or dinner, and you handed me in a manila envelope the first copy of the book. And we could go back and pull that out, and to your point, there was not this part included. We sat through this keynote, which was delivered by Ramit Sethi, which should sound familiar to our listeners, author of “I Will Teach You to be Rich.” Fantastic book. And that keynote, Joe, I remember it was one of those moments for me as well that I talk about often when I am speaking on this topic. He was talking about the concept of money dials and really identifying the things that matter most to you and finding a way to prioritize and fund those in the financial plan. And he had a great example, he called on the audience to do a couple of these, and then finding the areas that don’t mean a whole lot to you and to stop spending money on those things. And he connected that to the concept that we talk a lot about on the show about finding your financial why, having a purpose, having a vision for your financial plan, and by the way, as you mentioned and alluded to in the book, this path can and will look different for probably everyone reading and many of our listeners as well. And so finding that path, articulating that path, defining that path is so important because the financial plan should be a mechanism to help achieve that and make it reality. And for some, that means a very ‘traditional’ path of I’m going to work full-time and I’m going to do that for 30-40 years and I’m going to make a good income. Others may say, you know what? It’s early retirement, it’s staying home with the kids, it’s doing this or that, it’s working part-time, it’s having options, it’s having flexibility. And I think we’re seeing this more than ever of the importance of this. And I know it’s something that I feel personally as well. So I think it’s a great concept and I think it’s a great way to start off the book before you then get into the x’s and o’s of the financial plan. I remember we looked at each other and we’re like, alright, this is something different.

Joe Baker: Yes. I turned to you if you remember, I said, “I’ve just changed the direction of my book.”

Tim Ulbrich: Chapter One, here we go.

Joe Baker: Right.

Tim Ulbrich: I think you do a nice job too in this first principle that I know will resonate with our listeners, many of which in the field of pharmacy while this book goes beyond just one for pharmacists that I know many are struggling with what do I do if I’m in a position where I’m thinking about a career change or I want to do something different or “more meaningful,” how do I consider that? How do I weigh that? And how does that, again, connect back with the financial plan? And you do a nice job of covering that in principle No. 1. Now, you also talk about in the book this concept of avoiding financial minefields. And I think this gets into a little bit of the defensive side of the financial plan. My question here for you is in your experience teaching on this topic and working with many students, what are some of the common financial minefields that you see people stepping into?

Joe Baker: The biggest one right now are weddings. Weddings, I think the national average cost is $33,000, excluding the honeymoon. And that is just a big, big financial minefield. Now, obviously if the person reading the book is not paying for the wedding, that’s a different story. But even for parents paying for the wedding or grandparents or whoever, that should be looked at in the light of opportunity cost. And that’s what I break down in the book, showing if you use less money for a wedding and quite frankly, the stress of a wedding, wow. My daughter, well, Lindsey, she’s one that really wrote a lot about financial minefields of weddings. And she was just in a wedding, and she was — it was very similar to the movie “Bridesmaids” where everything was costing so much, spending so much time. So people have to be aware of that. And that chapter also includes on making the decision on whether you do that or not and plus other decisions, and it’s very similar to another chapter I have, principle No. 4 about understanding the concept of opportunity cost. Every decision we make there’s an opportunity cost whether it’s economic or non-economic. And I try to focus mostly on the economic choices. So weddings, one of the biggest minefields in a list I think a couple more. And I think that’s the same area where I go into budgeting to find out where you’re spending all your money. And you might be surprised at all the smaller minefields.

Tim Ulbrich: Yeah, you do. You do a good job of that, a stepwise approach for budgeting and trying to identify where those minefields may be. And obviously, you build upon that by talking extensively about student loans, a topic that is near and dear to us. And you also do a nice job in another chapter building on this concept of what I view as some of the defensive parts of the financial plan of the importance of protecting your assets. So of course, details about emergency funds, life insurance, disability insurance, liability insurance, insurance insurance. The list goes on and on, right?

Joe Baker: Right.

Tim Ulbrich: We all know how important insurance is. And what you need, what you don’t need. And I think really being able to navigate that, understand it, and as you can tell already listening to this interview, this book covers a wide array of topics. Now, one of the areas you spent the most time in the book on — and I think you did a great job — is on the investing side, the long-term savings and really breaking this down, I would say this is probably the biggest section of the book and I’m guessing the area that you’ve had through experience, identified where there’s the most questions or confusion. And so my question to you as you talk about the principle around investing and establishing an investing plan, you know, we talk about these terms all the time: stocks, bonds, mutual funds, 401k’s, 403b, Roth versions of those, IRAs, traditional and the Roth, HSA, REITs, alternative investments, cryptocurrency — you know, the opportunities and the options go on and on. And I think this can be very, very overwhelming. I know it’s overwhelming from personal experience in talking with many of our listeners. So how do you walk the reader through understanding and applying this information on the very important topic of investing in long-term savings?

Joe Baker: Well, first of all, the way I wrote the book is the way I teach class. I make a promise to the students. At the beginning of each semester, I say, “My goal is for you to never say while you’re sitting in my class, you will never say, ‘When am I ever going to use this?’” To me, that’s very important because you and I, we’ve all been there where we’re sitting and say, ‘When will I ever use that?’ So I keep that in mind, and I try to keep it as simple and really what it boils down to — you know, the three-asset class is cash, bonds and stocks. And if you’re only relegated to participating in an employer-sponsored plan, you’ll have 25-35 funds to choose from. So it’s not like the thousands of decisions you’ll have to make. And I place a couple recommendations. I like stock index funds as well as Warren Buffet, as you know, Berkshire Hathaway, that’s one of his favorites. Target date funds are good too. And I try to make it as simple as possible. And I also include several stories in there from contributors and where they have messed up. And you know, I talk a lot about individual stocks. You know, people at parties, they’ll talk about buying an individual company stock. And it is a good conversational piece, but frankly, might as well just do that for fun because your investments and your retirement should come from your employer-sponsored plan. But I do have a section in the book about picking individual stocks and how to do that. So if you want to do it for fun, that’s fine. But the bottom line is I try to keep it as simple as possible. And I do cover all the areas, and hopefully the reader will have the same experience as the students in my class and say, ‘Oh, yeah, I’ll use this one day.’

Tim Ulbrich: And I think you did a nice job, in my opinion, of keeping it simple, what you need to know, what you don’t need to know. And then through the appendices, also providing additional information for those that want to dig a little bit deeper on some of the topics or where there’s a stepwise approach to things like understanding some of the retirement accounts or opening up an IRA but that there’s a core foundation that you provide. And I think it reads, in my opinion, such that you can go cover-to-cover but then it should stay nearby because you’re going to come back to many of these decisions or need a refresher.

Joe Baker: For example, when you leave an employer, which you will. On average, I forgot the millennials, I think they have 7-9 jobs by the time they’re out. So what do you do with your 401k or 403b? I point that. You have four options. And that is in the book. So there’s some things there that are practical that you can look at and a step-by-step process for that.

Tim Ulbrich: And again, we’re just scratching the surface on topics that are also included that we haven’t discussed yet: how to make sure you and your significant other are on the same page, where to look for things that can appreciate and avoid things that depreciate, how to get out of debt, best practices for home buying, for the financial plan. Now Joe, when we package the book and said, ‘OK, is it the book? Are we going to offer some other resources?’ We ultimately landed on that we thought there would be value in essentially an investing mini-course series, videos, 6-7 videos that would take people more in depth into investing. Tell us about what folks can expect to get out of those investing videos — I know you’ve invested a lot of time and effort into doing those — and why we felt like that was an important supplement to the book.

Joe Baker: Well, a shoutout to P3 pharmacy student Jason Lam, he’s helped me with the audio and video portions. And he has pushed me pretty hard. We have done several videos that we’re — I think we’re pretty proud of. The blooper reel should be very interesting, by the way. But I just filmed it, most of the videos are out back by the pool. I’ve got a big whiteboard. I’m old school, I like to show it on the board. And quite frankly, it’s kind of a mini version of what I taught to the students in class. We’ll see how it turns out. We’ve also filmed a little skit for Halloween day, so hopefully people will check that out.

Tim Ulbrich: I’m looking forward to seeing the bloopers. So yeah, I mean, that investing video series is meant to I think present the information in a different way. Obviously they’ll have the text to read but also more of a stepwise approach. And for those that want to dig deeper on the investing topic, I think you’re going to find that video series to be helpful. And that comes with either the premium or premium pro package of the book, which is again available at BakersDirtyDozen.com. Joe, I want to read a couple of the testimonials. We’ve got a lot of people that had great things to say about this book. You know, one here that I want to read comes from Nicki Hilliard, UAMS College of Pharmacy professor, past president of the American Pharmacists Association. And she says, “Joe Baker is a good-natured, all around nice guy that is passionate about helping others. He has graciously taught personal finance at the College of Pharmacy for many years, and it is always the most requested elective course, not just because of the good information but how these lessons are delivered with great stories and insight into the big picture of what is important in life. He has put to paper his life experiences, stories and wisdom to help others lead a happier, less stressful and more fulfilling life through financial management. I highly suggest you put Joe Baker’s Dirty Dozen lessons to work in your own life.” This is just one, and as I read through others in preparation for this episode, there was a theme that I kept seeing over and over again of the influence that your teachings have had on people and how they have been able to directly apply that information to their personal financial plan. You know, one that stuck out to me, Blair Thielemeier mentioned how important the financial principles that you taught were for her in her journey of being able to start her business and the work that she has done and being able to have her own personal financial plan in order, several students commented specifically on actions they took in terms of budgeting, opening up retirement accounts, other things that they did directly as an account of your teaching. So as you hear that out loud, and I know you’re a humble person by nature, but what does that mean to you in terms of the impact this work has had on people over the past 20 years? And what do you hope is the legacy of this book going forward?

Joe Baker: First of all, Nicki was very generous in her review. And I appreciate that. Well, it just gives validation, you know, when I hear students come back and they’ll repeat a story and say what they’re doing, if they paid off $200-something thousand dollars in student loan debt in four years, which one has, and when they tell me that those stories, that just validates why I did this. Financial illiteracy is — you know, you could be a pharmacist, doctor, lawyer, and still be financially illiterate. Just because you’re smart doesn’t mean — or high IQ — doesn’t mean that you know how to control your finances. So it makes me feel good, it’s the reason I do it. It’s a selfish reason because I know that I’m getting feedback and kind of confirmation of what I’m doing is the right path. So that’s what keeps me going at this. This was all — the first I think it was 10 years that I did this, I didn’t even get any pay, so it was — they came to me, the school came to me and says, ‘Hey, we want you to do this both semesters.’ I said, ‘Well, I was thinking I might not do it at all.’ They said, ‘Well, how about if we paid you?’ which wasn’t much. I said, ‘OK, I’ll do it both semesters.’ So anyway — and the way I look at it is it’s an unlimited attendance in my class. It’s tough, but if I can reach one or two people that would have not been in there if we had had a maximum size, then it’s worth it. So that’s almost like an evangelical feel to it, reaching more and more people.

Tim Ulbrich: Yeah, absolutely. And I know in talking with several of your pupils, you know, and speaking from personal experience, it’s not even just them. Obviously there’s the impact that you will have on them but also the folks that they interact with, that they rub shoulders with, the kids that they’re raising. I mean, this is one of the things we always talk about, hopefully a generational impact you can have in helping people shore up their financial plan to be able to do and achieve the things that they want to do. And ultimately, as you talk about in Baker’s Dirty Dozen Principle No. 13, to be able to have an impact on their communities, on their places of worship, on others, and to be philanthropic as they can do so once they have their own financial house in order. So I know your work has had a great influence on me. I mean that genuinely. I’m confident it’s going to do the same, it has done the same, will continue to do the same, with others. And I’m so glad that you ended up writing this because one of the beauties of a book is that this resource will live on. And it will have an impact, and people will be able to build upon this work, they’ll be able to give feedback on it, and ultimately hopefully be a conversation-starter for many in their own financial plan. So Joe, again, congratulations on the book.

Joe Baker: Thank you.

Tim Ulbrich: Excited to be a small part of this alongside of you in this journey. And again, to our listeners, head on over to BakersDirtyDozen.com. Through November 7, you can use the coupon code BAKER for 15% off. And as always, we appreciate you joining us on this week’s episode of the Your Financial Pharmacist podcast. Have a great rest of your day.

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YFP 088: Introducing YFP Planning!

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Introducing YFP Planning!

On this episode of the Your Financial Pharmacist Podcast, YFP Co-founders Tim Ulbrich and Tim Baker announce some exciting news as it relates to the launch of YFP Planning, talk through the benefits of financial planning for pharmacists and reminisce on the origins of Your Financial Pharmacist.

Summary

On this episode, Tim and Tim dive right into an exciting announcement regarding the launch of YFP Planning. YFP Planning provides comprehensive fee only financial planning services now as part of Your Financial Pharmacist. Formerly Script Financial, YFP Planning covers anything that has to do with your financial situation including cash flow, budgeting, insurance, retirement, tax preparation, and estate planning.

Tim Baker, CFP and head of YFP Planning, shares that financial success and wealth were based off of an old equation that is now a myth. The old method of thinking focused on being income statement affluent where a high income is made, however you have no savings to show for it. Conversely, balance sheet affluence is where money flows in and actually sticks so you can save for a purpose.

Comprehensive financial planning forces you to look at your current financial state and make moves to better it. This can be especially helpful for pharmacists who typically have higher incomes and a lot of student loan and credit card debt. YFP Planning doesn’t just provide you with information on how to pay off your loans, save money, or create a budget, but instead also offers accountability and coaching. Having someone offering an objective approach to your financial situation helps you to see the whole picture and pushes you to take the steps you need to reach your goals.

The YFP Planning process starts of with a free discovery meeting where the YFP Planning team learns more about you. If you decide to move ahead with YFP Planning, the first meeting focuses on getting organized. Then, another meeting is scheduled to discuss your goals and dig deeper into some questions you may have not asked yourself about your financial situation or goals.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 088 of the Your Financial Pharmacist podcast. Excited to be here with Tim Baker after we’ve had a series of side hustles represented by the one and only Tim Church. He’s doing a great job with that series, the side hustle series, so if you haven’t listened to those, check those out. Tim Baker, welcome back to the show. It’s been awhile since we recorded. I think — what? The New Year Game Plan back in Episode 081.

Tim Baker: I know. It’s actually crazy, like I think — not to be a broken record, but it’s actually nice to be like a listener and to hear all of these inspiring people come on and just the work that you’re doing and Church is doing on the podcast, like it’s really cool to see. Yeah, things have been good, been super, super busy, lots of things going on. But yeah, excited to be back on the podcast today.

Tim Ulbrich: I’m with you on that one. I kind of like the surprise of like an episode going online and get to see it as a listener and hearing the past couple weeks and being inspired by some of the pharmacists out there doing some awesome side hustle stuff. So we’ve got more of that coming also in the new year. So lots going on in your world and the tax prep, right? So we just did a webinar recently. And tell us more about what’s going on in that arena.

Tim Baker: Yeah, so one of the things that I really was thinking about in terms of like Script Financial and really providing great service to our clients is what are some things that really, we have to work through and really deal with every year? And it’s really tax. So before, you know, obviously, I’m a CFP, and a major component of that is tax, but I really wanted to learn more and look at ways to almost start a tax business as part of this Script Financial. And when the things with the Tims all kind of took off, I kind of set that aside. But I was lucky enough to have Paul Eichenberg, who’s a member of my team, who has experience with tax, become part of the team and really offer that as a service to our clients. So last night, we did our first webinar, our first YFP webinar. And it was great. We had great attendance and just kind of a learning experience for us on the webinar side. But yeah, we’re super excited to roll that out for clients. So when clients work with me, comprehensive is just kind of included in their fees, so every year, we’re doing a little bit of tax prep, which is kind of what we’re going through right now, this time of year. And really, kind of the planning that I’m a big believer in that, hey, halfway through the year, let’s take a look and do a projection and make sure that we’re not paying Uncle Sam too much or getting a refund back or whatever that looks like. So yeah, big changes, but very exciting. And just excited to roll that out.

Tim Ulbrich: Awesome. Yeah, you guys have been doing great work there. Shoutout to Paul, I think he’s doing an awesome job leading that. And for those that are listening that aren’t yet clients, if you want to learn more about that service, YourFinancialPharmacist.com/tax. And as Tim mentioned, that’s both inclusive of the filing part but also the strategy part of looking ahead to say, what can we be doing to maximize the tax situation heading into 2019? So Tim, we’ve got some exciting news to share on today’s episode alongside a discussion we’re going to have on the decision to hire a financial planner. One of the most common questions that we get — and we’re also going to be reminiscing along the way about our journey as we both individually reflect back on all of the things that have happened really leading up to this moment. And I think it’s — to be frank, I’ve been kind of giddy about this because, you know, when you and I met just a few years ago, I feel like really, the culmination of that vision is coming together. And it’s been a really, really fun ride. So before we start getting too sentimental, Tim Baker, let’s cut to the chase. Give us the good news. What’s the announcement?

Tim Baker: Yeah. So the big change is that Script Financial, which I just talked about, which I launched way back when in 2016 is now YFP Planning. So this has kind of been kind of in the works, so Script Financial is now part of the Your Financial Pharmacist brand. It’s just super exciting. I know Tim, like when I think back when we met, you know, via Twitter way back when, I never imagined that it would kind of lead our paths to this, but it just made sense in terms of kind of our beliefs and I think what we’re really trying to do in terms of empowering pharmacists and pharmacy students to really take control of their finances. So whether it is the blog or the podcast or a course or doing your taxes or comprehensive financial planning, which is kind of my bread and butter, you know, we felt like basically having that under one brand and one mantle made the most sense, so I’m giddy as well. I’m super excited about I think where we can really take this and I think with good feedback from our listenership and readers and all that basically YFP subscribers to kind of listen to what is needed and adapt. And I think one of the things that really was a catalyst for me to leave kind of the traditional financial planning firm was, you know, there wasn’t really a lot of planning out there for young professionals or individuals that were dealing with student debt or just cash flow and budgeting. So I think in that same breath, we always want to make sure that we’re adapting to the needs of the community and what’s out there and what pharmacists are dealing with. So I’m just super excited to really get going on this and kind of do this relaunch of the brand.

Tim Ulbrich: Yeah, I’m with you on that. And one of the most common questions we get is, hey, do you guys offer comprehensive financial planning? And for our listeners, here’s the answer. Yes, yes we do. So YFPPlanning.com is the launch of the site. So if you’ve been hearing us talk about Script Financial, Tim’s brand and company, we all are now one entity. So YourFinancialPharmacist.com, you can get there as well or directly at YFPPlanning.com. And I think this really, for me, as I mentioned before, is a culmination of the vision that we had when we sat down at Bob Edmund’s on I-71 in Mansfield, Ohio, and I was actually there with Jess and the boys recently, and I was kind of — I mean, she probably was looking at me like, why are you staring off into the distance?

Tim Baker: Get a little teary-eyed.

Tim Ulbrich: Got a little teary-eyed, I was looking at the booth where we sat and had my boys there, and it was just kind of a cool moment. But just sharing that vision of like, you know, we are so passionate about helping pharmacists in this area, and I think our vision at the time was, hey, everything A to Z. Everything from debt to budgeting to investing to estate planning in all forms and fashions, we want to be involved with pharmacy and helping people along that journey toward financial freedom, which for everyone means something different. And we had this vision that whether you want to come to YourFinancialPharmacist.com and check out our free resources and calculators, which we have a ton out there, or you feel like financial planning’s a great fit for you, we’ve got that all now in one place. So let me ask you the obvious question because I think it’s worth digging in a little bit deeper is, what does comprehensive financial planning mean? Because I think we throw that out there, and the industry, as we’ve talked about before in Episodes 015, 016 and 017, you know, is very different in terms of what you’ll get for that service. So for you and for us, what does that term mean?

Tim Baker: Yeah, I think I look at it as if it has a dollar sign, we’ll work through it. To me, if I’m hiring a professional to help me with my finances, I want someone — I want there to be someone in my corner that has my back, that has my best interests in mind, which unfortunately, the way the industry is set up, that’s not always the case. So I think we’re touching on all of the things that are related to the financial plan, more specifically, things like debt management and kind of your fundamentals and cash flow and insurance and retirement and estate. But there are going to be things that are beyond that, those life events that come up, and I think it’s just really important to have someone that understands what your goals are and kind of understands really the technical piece of the financial plan and point you in the right direction. You know, so much of kind of the old equation or the old guard of financial planning was to push product. Hey, you’re a pharmacist or a doctor, here’s a life insurance policy that, you know, is probably going to pay me a lot of commission or a disability policy or an investment. And I’ll talk to you once a year. That’s not necessarily, you know, the model that we employ. So I think that the idea that a lot of things in life, even in the financial services, is becoming more and more of a commodity. So you know, really what we’re focused on is kind of bringing that life plan that fits the view of what your view of a wealthy life is and have the finances really support that. Typically, most people don’t — they don’t accumulate wealth for the sake of accumulating wealth. It’s for, you know, the fact that they want to retire at age 50 or they want to have this vacation home in the woods somewhere. So that’s really the idea is to connect the dots with, OK, what is a wealthy life? And then how do we get there? And that’s, to me, that’s what fires me up.

Tim Ulbrich: Awesome. Love it. You know, Tim, one of the things that stands out to me is over the Facebook YFP Book Club right now, we’re working through the book, “The Next Millionaire Next Door,” by — we’ve talked about it on this podcast — Dr. Tom Stanley, Dr. Sarah Fallaw, which reminds me of our journey and our beliefs to buck the status quo and complacency that’s out there when it comes to achieving financial freedom and building wealth. And the one takeaway that I remember from this book and the first one that was published back in the ‘90s is that this old equation of high income=success is a myth. It’s a false reality. But so many pharmacists, myself included at one point, really subscribe to this false reality. So tell us more about this old equation and how you see pharmacists kind of falling into this trap.

Tim Baker: Yeah, it’s kind of what they talk about when we talk about income statement affluent versus balance sheet affluent. So essentially, income statement affluent — and I see this a lot where, you know, you have a household that makes $200,000, $300,000, $400,000 or whatever that looks like and have nothing to show for it: have no savings, have credit card debt, and essentially, the money, the household’s like a siv, the money comes right in and goes right out. Balance sheet affluent — and I’ve seen this even with residents who make $40,000 or $50,000 or incomes of less than $100,000 — balance sheet affluent are those people that when the money flows in, it actually sticks. And you’re saving for the purpose of retirement or a kid’s education or whatever it is. So the reality is that you’re spending, you know, for a lot of people, a lot of people will say, “Hey, I wish I could make a little bit more. I wish I could get a 10% raise, and then all of my concerns could be put at ease.” But the reality is and the psychology shows us that most people, their spending rises with really their income. So you know, if I double your salary tomorrow, a lot of people will double their spending. So the old equation is, you know, basically is when you follow traditional advice, you should really enjoy your income and really live for today, and we see that in society as being — we very much live on credit and we spend, spend, spend, you know, car payments, a big mortgage, that type of thing where what we really want to do — and it often leads to things that give us stress, so I’m thinking back to Jessica Louie about clutter and things like that. A lot of it is very near-term, like satisfaction of like, oh, this is awesome. But then we just surround ourselves — and I’ve been this way in my life in the past where I’m like, I just have all this stuff that I really don’t like or want that just causes more stress. So I think, you know, the idea is we want to make sure that we are being intentional. We talk about being intentional with our spending. And develop a savings plan that allows you to allocate dollars for the things that mean the most, whether that is a vacation to the Pacific Northwest, whether that is a vacation home in the woods or a trip to Paris, France. Those are really the things that I think are what I talk about life plan that are more important.

Tim Ulbrich: Amen. Preach it, Tim Baker.

Tim Baker: Yeah.

Tim Ulbrich: Preach. You know, it’s interesting because we just finished up “Rich Dad, Poor Dad,” in the book club, and now we’re reading “The Next Millionaire Next Door,” and that wasn’t intentional, but two very — I don’t know if different is the right word — but just very philosophically — you know, “Rich Dad, Poor Dad,” to me is all about growing the asset line and thinking about real estate and those types of things.

Tim Baker: Yeah.

Tim Ulbrich: And I think that “The Millionaire Next Door” focuses much more on frugality and cutting expenses, both of which are very important. And Jess and I were having a conversation the other night is you put the two of those concepts together, and boom. It’s like, game on, right?

Tim Baker: Yep.

Tim Ulbrich: And I was even thinking back to this old equation, thinking back to 2009, you know, Jess and I had over $200,000 of student loan debt, we had a house with almost no equity, we soon had a growing family to support with the loss of one of our incomes because she was going to be staying home. And we realized that despite all of the amazing opportunities that have been afforded to us, there’s really little discussed truth among practitioners, ourselves included, in this field about how to manage this. And I think many pharmacists listening find themselves in exactly the same boat. And so as you meet with pharmacists or residents or fellows or students, what are some of the most common frustrations and things that you’re hearing from them?
Tim Baker: Yeah, it’s a great question. And typically, when I meet with a prospective client, I’ll lay out essentially three things. And I’ll say, “Hey, Tim,” — you know, typically, when a pharmacist such as yourself comes to speak with me about their finances, they share one of a few things. It could be “I’m overwhelmed with student debt,” or even credit card debt, I’m seeing that more and more, this credit card debt. “I am confused how to properly budget, save and invest in my future.” And that’s kind of a broad, that’s a broader one. But it typically hits for most people. And the last one is, you know, “I’m frustrated by the fact that I make a good income, but I’m not progressing financially.” And kind of this idea of living paycheck-to-paycheck and maybe not enjoying kind of their work because they could be stuck in that work because they need that income, that type of thing. So there’s a lot — and typically, when I kind of go through those pain points, a lot of pharmacists look at me and then they say, “You just described me. Like you’re three-for-three.” So I think it hits on a point a lot of kind of what we’re talking about with empowering pharmacists to really get going on this because you can meander in life and wake up when you’re 45, 55, and really have nothing to show for it. It’s really that easy to do. So I think like part of what we do at YFP Planning now is really, we kind of force you to look at it. We meet quite often, so we almost like force you to really look at that, look at the kind of your current state and make moves to better it. And really examine — we often don’t do enough self-reflection, not just about finances but about life in general. You know, so when I say, “Hey, Tim, what does success look like in five years?” what I often see is, “Wow, that’s a really good question. I never really thought about that.” And then the other things I see, particularly between spouses is kind of like that rubberneck, like I can’t believe that these are the things that you want in five years or that type of thing. And again, it’s hard for us to imagine our five-year-older self, and essentially what I do with clients that if you’re 30 right now, you’re 35, I’m like, imagine when you’re 35 or 40, and put yourself in that place. So I think like the pain points are definitely real, and it’s easy to put your head in the sand and kind of not look at it and just live with it, but I think the sooner that we can kind of get a plan in place, the better. And hopefully, we can do that for you.

Tim Ulbrich: And I think just to build on that, Tim, one of the things I see, I’m sure you see it more often that people often come up to me after a talk or ask a question, and they’ll describe that “I really want to pay off my $200,000 student loans,” or “I really want to save $4 million for retirement.” But when I ask that next-level question of why or what’s motivating you or what’s going to keep you going, there really isn’t much thought there, right? And I think that goes to the point of visualization and thinking about not only your why but where you see yourself in five or 10 or 15 years. And what would be the negative impact if you didn’t do this? Or what are you hoping to achieve by doing this? And I think that gets to the point of accountability and coaching. And one of the things that excites me as we think about YFP Planning is that for the past few years on YFP at YourFinancialPharmacist.com, we’ve been providing a ton of information — and a shoutout here to Tim Church, who has done an unbelievable job.

Tim Baker: Yes.

Tim Ulbrich: The guides, the checklists, the calculators, the blogs, the podcasts. But what I’m getting to here is it’s not just about information. I’ve seen this firsthand with Jess and I working with you that I read on this topic all the time, but at the end of the day, if I don’t have an accountability partner or a coach, things may not get done. And you know, there’s a quote out there. It says, “If information was the answer, then we’d all be millionaires with perfect abs,” right? So you know, talk to me about accountability and coaching. And I think often, there’s this misperception that hey, my financial planner’s going to help me get x return on my investments when really, maybe the accountability and the coaching is the more important piece.

Tim Baker: Yeah, I think like when I look at it, you know, I kind of go through like when I more or less explain to a client what we do, a lot of it is kind of touching on the different parts of the financial plan, but I almost say like at the end of it, like crumble all that up and throw it away because really, I think the value that we provide is kind of the ongoing coaching and accountability. The technical side of it is important, but you think about even like in pharmacy, like it’s important that you know your stuff, but a lot of it is adherence, right? You want to make sure that your patients are taking their medication and all that kind of stuff. So like it’s the same thing as like I could give — what I tell clients often is just because life is so busy, I could give you the most well thought out, awesome financial plan. Most people will read it, say, “Hey, that’s nice.” And they’ll throw it on the shelf, and nothing ever gets done. So I think what we try to do is provide some, you know, where we have a client portal and we try to put those tasks back into the client portal, that pings them and reminds them. And really, again, the fact that we meet frequently, we’re trying to always push the ball forward and cross those things off the list, whether it’s getting your will done or insurance in place or setting up this Ally account for the purposes of Paris, France, which I want them to label it as “Paris, France,” even if it sits empty for two years. I don’t care. I want that there, ready to receive money when that happens. So I think that — I think that the accountability is important. But I also put a heavy premium on the objectivity. So you know, if we take you and Jess as an example, you guys view money differently. So sometimes, it’s good to have someone that has an objective opinion that says, “Hey, these are what my thoughts are, and this is my advice.” So I think if you couple the objectivity and kind of the objective approach to the financial plan with the kind of the ongoing coaching and accountability, it’s a deadly combination. And that’s what I think that often falls short with a lot of other advisors, so sometimes I’ll ask a prospective client, “Hey, who ultimately is going to make the decision? Is it you? Is it you and your spouse? Is it you and a Yoda in your life? What does that look like?” And a lot of times, you know, people will say, “Well, I really respect my dad’s opinion.” They have an advisor, and that’s an objection I kind of have to overcome because most of the time, dad’s advisor is not going to understand or really value what we do because dad’s advisor will typically — you’ll pay based on the assets that are invested and then maybe — and if they don’t have minimums like $250,000 or $100,000 minimums, and they will work with a younger professional, then they talk to you once or twice a year. That’s not our model. We’re very different. So it’s not an apples-to-apples approach. So again, I think the coaching and the accountability part is such a big part of that that I think it’s a differentiating factor between us and other financial planners.

Tim Ulbrich: So Tim, hopefully this is a feel-good for you, but as you were talking right then, I just started making a list of all of the things that Jess and I accomplished in the last three months that I’m confident we either would not have done or would not have done as quickly without your accountability and coaching. So I’m sure I’m missing some, but we’re back on track with our zero-based budget, using YNAB, we got the estate planning documents wrapped up, emergency fund is back to full fund after we moved recently, we worked through plussing up our disability and life insurance policies, umbrella insurance policies, we worked through lowering fees on investments, asset allocation of accounts, and setting up our savings sheet with our sinking funds. And even to your point earlier, some of those have a $0 but are a reminder of the goals that we have, right? So we have some real estate goals at $0 right now. That’s not the point. The point is it’s a reminder of the goal that we’re trying to get to and because of that, even at $0, it’s something that Jess and I are talking about. So that’s the power of accountability right there. Would I have done those things did I have the knowledge to do them? Yes. Would I have executed? Maybe yes, maybe no. And that matters.

Tim Baker: Well, it makes my heart happy. And you guys are great clients, so I think that, yeah, I think that it’s good feedback. Now, the 403b that we have in transit, that’s a work in progress. I’ll talk to you about that today. But you know, there’s always things that, you know — and again, it’s kind of like an ebb and flow. So it’s never going to be clean-cut in terms of like, hey, we knocked this out. Things are going to change in life. And imagine like in your life alone, what has changed over this past year, and you’ve accomplished all that, and you’ve been really intentional about that. And I think almost working together has kind of forced us into that. And I think that’s great. And yeah, I think that it’s hard to — so a lot of — it’s hard to quantify that, though. Like how do you quantify? Because at the end of the day, pharmacists are scientists. They’re very analytical, so they want to say, OK, if I’m paying this amount of fee, am I going to get this return? And I put that back on how do you value x or how do you value y? But I understand, like you have to get value from that. But yeah, it’s great feedback. And I think the things that really fire me up are those types of, that type of feedback but also seeing a client — and I have a few clients in mind that come to me with $40,000 in credit card debt, and they pay it off like aggressively, very quickly, so we can move onto the next thing. And we can see the movement in their overall net worth, so where before they were -$200,000, maybe they’re now they’re only -$140,000, which sounds like people laugh at that, but those are real dollars that we’re making moves towards. So I love those cases, and it inspires me to kind of keep going and really be the advisor, be the planner there that is there to back them up and really encourage them and really give them tough love when they need it as well.

Tim Ulbrich: Alright, so Tim, we’ve talked before on this podcast many times about the value of fee-only financial planning. Episodes 015-017, which I referenced earlier, and lots of variability that’s out there in the financial planning industry. So just real brief, fee-only, what is it? And why does it matter?

Tim Baker: Yeah, so I guess in my profession — and I guess I struggle to call it a profession for a lot of reasons, but really, the way that advisors are really identified, so if we have any John Oliver fans out there who does Last Week Tonight, he does a segment on financial advisors and kind of what they are and how they work, and I always reference that because I think it’s actually pretty funny and pretty accurate. You know, essentially, a financial advisor or financial planner, that name really doesn’t mean anything. Unlike a PharmD, an MD, a JD that actually carries weight to it, the CFP has, that’s kind of like an accreditation that you want, a Certified Financial Planner, but essentially, financial advisors, financial planners, are typically categorized in three buckets. You have a commission agent, which in the very extreme example, think of like Wolf of Wall Street. “Hey, Tim, I’m walking in the parking lot, I had this great idea on a stock that I want to sell you or this life insurance plan or this disability policy.” It’s very transactional, and it’s the sale of product. So I’m trying to get my commission and then go. The fee-based world, which this is where I started in the industry before I launched Script Financial was fee-based. Fee-based is basically where you have advice and the sale of product, basically they’re merged together. And anytime that happens, you have a conflict of interest. So in my last firm, I would say, “Hey, client, I could sell you this mutual fund that pays me a 1% commission and a 1% trail or this one that pays me a 5% commission. Or if we talked about term and whole-life, this particular term policy pays me a commission of x and whole-life pays me a lot more,” so anytime that you have — and we see this, Tim, we see this with physicians. So physicians are not supposed to get kickbacks on the medication they’re prescribing because, you know, there’s a conflict there. So it’s the same in our industry, except right now, most of the advisors out there operate in that fee-based world. What fee-only does, and it’s a very, very small subset of financial advisors out there. I’ve heard estimates it’s less than 5%. What fee-only is is basically you separate the advice, the dispensing of advice, from the product. So my compensation comes directly from the client, there’s no kickback or referrals. It’s not through a mutual fund or insurance company. It comes directly from the clients. So I don’t really — I’m not influenced to put a client in Product X or Y. I want to basically — I’m giving them the advice, they’re paying me for the advice, and I’ll put them in products that I think are in their best interest. So the big thing with fee-only is that it follows that fiduciary standard of care, which means that I’m legally bound to act in my client’s best interest versus a suitability care, which the majority of advisors out there where they can actually put their own interests ahead of their clients’. Which is crazy to me that that is actually a thing.

Tim Ulbrich: And I think just to drive that home one step further, if we think about the traditional financial advising model, typically, there’s a compensation based on Assets Under Management, so how much you’ve invested with them or commission from product scales, which often are hidden from view or hourly fees. So in other words, that advisor is incentivized to focus on investing over other options. And sometimes, this means that your goals as the client and their goals as the advisor are not fully aligned. And that is so important for pharmacists to hear that message because as we launch YFP Planning, we talk about fee-only financial planning services, which is what you’ve been doing with Script Financial, that it really bucks that model entirely. And that’s really important for those of you that are looking comprehensively, that I need help with student loans, I need help with credit card debt, I need help with my budget, I need help with home buying, I need help with estate planning and all these other things with investments being one piece of that. But we’re not going to only focus on investments, ignoring the rest of the financial plan. And so I think that holistic model and that pricing incentivizes that comprehensive nature is incredibly important for our clients to be considering, whether it’s us or somebody else, to make sure that they’re looking at a model that’s fee-only, that there’s a right educational credential and that pricing is done so in a way that really incentivizes that advisor to work with you on a comprehensive nature.

Tim Baker: Yeah, and one of the things that frustrates me a bit is, you know, when I’m talking to a prospective client and they’re like, “Well, maybe I’ll go with my parents’ advisor that doesn’t charge them anything,” which is utterly false. It’s so, like, nothing comes free. So you know, typically, what happens there is that they don’t know what they’re being charged, which is a problem. Transparency is a problem in our industry. So that’s a problem. But I think also is the — I think when you work with a professional, there’s almost like a sense that they know what they’re talking about. And I would say by and large, most advisors have no idea what to do with student loans or how to help clients with a budget because it’s just not something, you know, most advisors want minimums of $250,000 in investable assets, so there’s almost this assumption of wealth. So it’s like, “Hey, kid straight out of pharmacy school, good on you. But you don’t need financial planning help,” which is utterly false. It’s just that their model is set in a way that they’re incentivized to go after those that have investable assets. And then really with the student loan piece in particular, I’ve had clients that say, “Hey, I’ve been working with this other advisor, and their advice on the student loans was like, oh, they’ll just take care of themselves. They’ll just amortize over time,” which is like ugh, I just want to scream to the heavens and say, “No, that is terrible advice.” But then they’re also in a whole-life policy or whatever. So it’s just crazy talk.

Tim Ulbrich: Follow the dollar. Follow the dollar.

Tim Baker: Yeah, exactly.

Tim Ulbrich: So talk us through the process at YFP Planning. Where do people begin? And then once they go through that process of trying to figure out is it a good fit for them or not? What does that look like from there?

Tim Baker: Yeah, so it’s a great question, Tim. So I think the best, you know, if you’re listening to this podcast and you’re like, man, I think this works for me, probably the best thing would be to go YFPPlanning.com, and you can actually schedule like a free discovery meeting with myself. And really, this allows me to kind of learn a little bit about you and potentially your spouse, what are the big issues that we’re dealing with and kind of talk through the process and what we do and kind of get a sense of each other to see if we would be a good fit. So you know, if we decide that, we kind of go through a step to kind of get you onboarded. So it could be really the first meeting that we have is get organized. So in the get organized meeting, we essentially look at your client portal. So once you become a client, you get a welcome email that says, “Hey, start linking all of your things to the client portal: your checking, your savings, your student loans, all that.” And what I’m doing is I’m building the first lens in which I’m going to look through to give you advice. So I’m looking at a snapshot of your income and your net worth, and then we also do kind of a 90-day retroactive budget exercise just to see how money is flowing through the household. So that’s really the first meeting. And then from there, we essentially schedule the second meeting, which is the second lens in which I’m looking through is it’s all about the goals and kind of hearkens back to the three questions that we went through with you and Jess. And really, it’s where I learn the most about my clients and really how the client views what a wealthy life is. So we’re going to ask you thought-provoking questions that you probably have not asked yourself. But the idea is to really, based on those two meetings, build a plan in a way that I am helping you grow and protect income and grow and protect your net worth while keeping your goals in mind. To me, that’s the name of the game.

Tim Ulbrich: So Tim, I’m guessing some are thinking, can I just do all of this myself? So what is your answer to that? Because I know for you, fit is very important in terms of the right fit for you, the right fit for the client. So what is your response to that?

Tim Baker: Yeah, I think, you know, I think the answer is that you can. You absolutely can. And there are a lot of people that kind of more of a DIY approach. And Tim, I would probably put you as a more DIY, especially before we first met, but I think once you start working with someone and you can kind of see the power of kind of the ongoing coaching and accountability, it almost kicks that into second gear. So I think you can. I think my view on that is, you know, I’m a financial planner, and I need a financial planner because, again, I need someone to objectively look at Shea and I’s situation and say, hey, we come from very different places in terms of money. These are our goals, how do we get there? So I get it. Pharmacists are very smart. They’re very analytical. But you know, even if you’re going to play a sport, you’re going to workout, typically, you have a trainer or you have a coach that kind of looks at your situation and looks at it from that third-party viewpoint and say, “Hey, brass tax, these are things that I think you’re doing well at. These are things that I think we need to improve upon.” So I think that you can. I would argue that what we do across the board with tax — so the slide that I put up last night was the average pharmacist will make $9 million, and $6 million will flow through your accounts. What’s at stake is really the $3 million that typically is eaten up by tax. How do we be as efficient with that as possible? You know, I’m analyzing an individual’s 401k now, and their expense ratios are like 2.67%, which is crazy. Like it’s crazy. So with a little bit of adjustment, we can really lower that substantially. And over the course of their lifetime, we’ll save probably hundreds of thousands of dollars, not an exaggeration.

Tim Ulbrich: Maybe more.

Tim Baker: Maybe more. And again, that’s not a guarantee or anything, so nothing like that. But like, it’s those types of things that either you — the audience, you guys are trained as pharmacists, you’re not really trained to look at some of these things that I do every day with clients. So it’s just that other, maybe more technical piece of it to really look at. And again, I think kind of the high-touch that we are with offering the tax and the cash flow and budgeting piece is I think a really differentiator between us and maybe the other guy.

Tim Ulbrich: So to our listeners, regardless of whether you choose to explore YFP Planning, I want to offer up a challenge to you that is two questions. No. 1, what are you going to do in the next 30 days to change your financial situation? And No. 2, what’s the first step that you’re going to take towards your wealthy life? Because everyone we’ve talked to, myself included, constantly says, “I wish I would have started earlier,” right? And when I go talk with students and residents and I talk with faculty and pharmacists and preceptors, the one thing they say is, “I wish I would have started earlier,” or “I wish I would have learned this information sooner.” So Tim, let’s wrap up here. Just give us a little bit of background on the YFP Planning team — I know it’s a team that’s growing — and what our listeners can expect as they engage with us as a group.

Tim Baker: Yeah, so I’m super fortunate enough to have a good team that surrounds me. Like I mentioned, Paul who was on our webinar last night, he is essentially my go-to. He’s basically Director of Operations and Tax. So he handles all of the tax returns internally. Frankie, who’s my assistant, she does all the behind-the-scenes work that sets me up for meetings and follow-up and all the things that are crucial to kind of push the financial plan forward and helps me with that. And Tom, who’s my assistant advisor. And all Tom does is work on cash flow and budget. He’s a super nerd, he likes that stuff.

Tim Ulbrich: Super nerd.

Tim Baker: Super nerd, yeah. So I’m so happy to have them as part of my team. And of course, you guys in terms of helping the firm grow and Caitlyn, who does an excellent job with the podcast, all integral parts of the team. But I think like as we — and Tim, I was thinking about this, like you know, the other day, I’m like maybe we should have like a career section on our website. Because I think that we are growing, and I would love to be able to have maybe jobs out there that maybe would be interesting to the YFP community. But I’m excited. We’re looking at bringing on a paraplanner in the coming weeks and just to add additional backup. And I think as we grow, one of the things that we’re really — and we talk about this a lot, kind of the three Tims — is making sure that our brand is — we want to make sure that what we represent and what we believe in is kind of is shown amongst all of our team members. So I’m just excited about, you know, really the rebrand and I think where we’re going to take this going into 2019 and beyond.

Tim Ulbrich: Absolutely. And to the point you made about the careers piece, we’ve got some exciting announcements coming out, looking for some writers that are passionate about this topic.

Tim Baker: Yes.

Tim Ulbrich: We welcome and value other perspectives. And then also, we’ve been floating around the idea of a student internship. So if there’s any students out there listening that are nerds on this topic, we’d love to hear from you. [email protected]. And we’re hoping to make that a reality here in 2019. So to the YFP community, as always, we appreciate you joining us each and every week. And we’re excited to be on this journey alongside of you. And if you’re not yet a part of the community over at the Your Financial Pharmacist Facebook group, check it out. That group every day inspires me as they’re challenging, helping one another, motivating one another, sharing success stories, looking for encouragement. So again, that’s the Your Financial Pharmacist Facebook group. Tim, it’s been a lot of fun, as always, with this episode and the journey, and looking forward to an awesome 2019.

Tim Baker: Same here.

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