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


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

Episode Summary

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

About Today’s Guests

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

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

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

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

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

Key Points from the Episode

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

Episode Highlights

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

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

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

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

Tim Baker  02:08

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

Tim Ulbrich  02:09

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

Tim Baker  03:14

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

Tim Ulbrich  05:58

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

Tim Baker  06:57

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

Tim Ulbrich  08:56

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

Tim Baker  11:24

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

Tim Ulbrich  12:26

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

Tim Baker  13:34

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

Tim Ulbrich  15:09

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

Tim Baker  15:50

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

Tim Ulbrich  17:45

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

Tim Baker  18:56

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

Tim Ulbrich  22:55

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

Tim Baker  23:30

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

Tim Ulbrich  26:01

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

Tim Baker  27:10

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

Tim Ulbrich  30:28

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

Tim Baker  30:41

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

Tim Ulbrich  34:19

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

Tim Baker  34:48

Yep, mentorship, yes, yes, all that. 

Tim Ulbrich  34:51

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

Tim Baker  35:10

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

Tim Ulbrich  37:18

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

Tim Baker  37:49

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

Tim Ulbrich  42:39

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

Tim Baker  42:59

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

Tim Ulbrich  45:16

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

Tim Baker  45:33

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

Tim Ulbrich  47:08

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

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

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


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

Episode Summary

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

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

About Today’s Guest

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

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

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

Key Points from the Episode

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

Episode Highlights

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

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

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

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

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

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

Tim Ulbrich  01:04

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

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

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

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

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

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

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

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

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

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

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

[DISCLAIMER]

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

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

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YFP 377: 10 Moves to Make to Become Financially Fit


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

Episode Summary

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

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

About Today’s Guest

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

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

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

Key Points from the Episode

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

Episode Highlights

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

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

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

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

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

Tim Ulbrich  01:25

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

Tim Ulbrich  04:22

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

Tim Ulbrich  05:48

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

Tim Ulbrich  10:11

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

Tim Ulbrich  12:15

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

Tim Ulbrich  16:36

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

Tim Ulbrich  18:54

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

Tim Ulbrich  20:17

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

Tim Ulbrich  21:25

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

Tim Ulbrich  21:37

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

Tim Ulbrich  25:06

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

Tim Ulbrich  29:14

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

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YFP 371: 5 Wealth-Building Strategies to Become a Seven Figure Pharmacist


Tim Ulbrich, YFP Co-Founder and CEO shares five wealth-building strategies to include in your own financial plan.

Episode Summary

In this episode, Tim Ulbrich, YFP Co-Founder and CEO, shares five wealth-building strategies you can incorporate into your own financial plan. Drawing from his own financial journey, these strategies have been tested, refined, and used by Tim and his wife, Jess.

From setting savings goals to tracking net worth monthly to increasing your financial IQ, Tim makes setting up your financial path for success more attainable.

About Today’s Guest

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

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

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

Key Points from the Episode

  • Wealth-building strategies for pharmacists with student loan debt. [0:00]
  • Financial struggles and debt repayment for pharmacists. [3:21]
  • Financial planning for pharmacists, focusing on strategies for success. [8:28]
  • Tracking net worth and setting savings buckets for financial goals. [12:33]
  • Financial planning, saving, and investing for pharmacists. [17:41]
  • Wealth-building strategies and financial planning. [22:33]

Episode Highlights

“And I had realized that despite the amazing opportunities that graduating with a pharmacy degree had offered, there was a little discussed truth among practitioners in the field. And that is that most pharmacists make a good income, but have significant student loan debt and feel like, hey, there should be more here; I shouldn’t feel as stressed and overwhelmed as I do with my financial situation.” – Tim Ulbrich [2:52]

“But it takes a lot of intention, time and effort to translate that income, to making sure that we’re actually progressing in our financial plan and finding the ever so important balance between saving for the future while also living a rich life today and investing in those things that are most meaningful to us.” – Tim Ulbrich [6:46]

“We learned a very important lesson that there is no such thing as arrived. When it comes to the financial plan, there is always an opportunity to grow and learn.” – Tim Ulbrich [7:25]

“These strategies are not overly complicated. It doesn’t have to include fancy spreadsheets and nuanced investment vehicles. It doesn’t take an exorbitant amount of time. And it doesn’t mean that you have to live on rice and beans. I did it and you can do it too.” – Tim Ulbrich [9:36]

“I want you to take a step back and ask yourself a few questions. What am I trying to accomplish? What’s the purpose? What does success look like? After all, money is a tool for living a rich life. And it’s up to you to decide what that rich life looks like.” – Tim Ulbrich [12:04]

“Resist the urge to try to do too much. And eventually getting to a place of frustration where you don’t make much progress at all. What is the one next move that you can make? This is a marathon, not a sprint, one step after another over a long period of time will yield big results.” – Tim Ulbrich [25:44]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey guys, welcome to this week’s episode of the YFP Podcast. I gotta admit, I’m pumped up for this one, I’m going to be talking through five wealth building strategies that you should employ in your own financial plan. No theory, no textbook stuff here. These are all strategies, all five of them, that Jess and I have tested, refined and used in our own financial plan. Now, before I get into these five wealth building strategies, I have two goals for this episode that I want to share with you. First, my hope and desire is to motivate and inspire you to take action. It is so easy to become overwhelmed, and fall into that paralysis analysis when it comes to the financial plan. So for those of you that are listening, that are feeling overwhelmed, or anxious, or frustrated, maybe stuck, or just this lingering, nagging feeling that there’s something more that could be done, I want to be a source of inspiration through sharing my own journey, and encouraging you on your journey as well. Now, that doesn’t mean it’s going to be easy. That doesn’t mean that you’re not going to have some mistakes and roadblocks along the way, there certainly will be. My second goal is to give you specific strategies that you can implement, starting today in your own plan; to take the motivation and to then take action that can yield results as you take steps in applying this to your own situation. 

Tim Ulbrich  01:25

Okay, let’s jump in. I’m going to start with my own story that really begins back in 2009. 2009. So at this point in time, I had just finished my PGY one residency, I was making a whopping $31,000. At the time, thankfully, residents make a little bit more these days. And I finally had reached the other side, right? Ready to cash in on the mystical, six figure pharmacist income that I often thought about during pharmacy school. Now, everything was looking good. Until I realized that I overlooked one very important minor detail. And that was that I was broke. No not broke, broke, but definitely high earner high income broke. My wife Jess and I were in spectacular shape on the surface. But underneath our lifestyle and this new six figure income, really our finances underneath that had a different story, we had over $200,000 of student loan debt that was almost all my student loan debt. Actually, the vast majority of that $185,000 or so was my student loan debt. We had a house at this point with almost no equity. We had very little in savings. And we soon had a growing family to support today we’ve got four boys, our oldest was born in 2011. So there was a lot of things that were going on and happening financially, perhaps some of you can relate to that. And I had realized that despite the amazing opportunities that graduating with the pharmacy degree had offered, there was a little discussed truth among practitioners in the field. And that is that most pharmacists make a good income, but find themselves in exactly the same boat that I’m describing, right. Earning a good income, significant student loan debt and feeling like, hey, there should be more here, they shouldn’t feel as stressed and overwhelmed as I do with my financial situation. Now, as I reflect on that journey, I am certainly grateful for the experiences I’ve had, and for what I have learned along the way. I also feel though, the fear and anxiety coming up when acknowledging that my perception of the six figure income and the reality of what it could be, were two very different things. Now it took me four humbling years, hopefully it won’t take you as long but it took me four humbling years to realize that this six figure income wasn’t all that it was cracked up to be. Now one book in particular, if you’ve listened to the podcast before, you’ve heard me talk about this book, but one book at this point in time 2012, 2013 hit me at the perfect moment. It was a wake up call that I needed. And that book was The Millionaire Next Door by Dr. Tom Stanley. We’ll link to that in the show notes. And that book taught me a very important lesson. And that lesson being that net worth, not income, net worth is a much better indicator of your financial health. Now more to come on this here and a little bit but understand for the time being that net worth is your assets what you own, minus your liabilities what you owe, and it paints a nice picture of what did or didn’t happen with your income, right, that’s earned. And after reading this book, I decided that it was time to put pen to paper and do our own calculation. Now when I did this, the assets column, right, on the left hand side of the paper, I had the liabilities on the right hand side of the paper and the left side was pretty blank. Didn’t have a whole lot of assets at that point a little bit in a 401K,little bit in an IRA, we had some value in the home that that was offset by the liability. But the right side the liabilities, what we owed, there was a laundry list of things that are highlighted by none other than that couple $100,000 of student loan debt that I mentioned, most of which was at a fixed interest rate of 6.8%. A number I will never forget. I know many of you are perhaps facing a similar situation. Now this calculation, this net worth calculation at the time, showed that just four years after graduating from pharmacy school, finishing up my residency, had earned about a half a million dollars of income. But I had a net worth, again, assets minus liabilities of negative $225,000. Ouch, right? Ouch. I was overwhelmed with student loan debt. I was confused about how to best save and invest for the future, I was frustrated by the fact that, hey, we’re making a good income. But we’re not progressing financially as quickly as we should be, or at least as I thought we should be. So if you are like most pharmacists that I talked with, perhaps your journey may include something similar. You might even be there right now, some of you have gone down this journey before or perhaps for students listening. It’s something that you’re thinking about in the future. And, you know, as I think about this, it wouldn’t be so frustrating if you didn’t do everything that perhaps you were told was the right quote, “right thing to do.” Right, you got the degree, you landed the high paying job, you started making some of those smart decisions, some of you have already purchased a home, you’ve been investing, maybe you got that reliable car, and you’re finally reaping the benefits of all that hard work. But it takes a lot more intention, time and effort to translate that income, to making sure that we’re actually progressing in our financial plan and finding the ever so important balance between saving for the future, taking care of our future selves, living a rich life today and investing in those things that are most meaningful to us.

Now, thankfully, for our story, there’s a happy ending. Three years after that point where we realize, hey, we’re making a good income, but the net worth is negative, it’s not showing, we decided through that time period to really get serious, to stop messing around, to take control of our financial future. And in the fall of 2015, we hit submit on the very last payment of that $200,000 of student loan debt. I still have the screenshot saved at the time. Navient was the loan servicer, it’s an image I’ll never forget. Now to get there. We had to sever self teach ourselves personal finance. This was what led to me starting the Your Financial Pharmacist Community shortly thereafter, in 2015. And we made several mistakes along the way. And I’m going to talk about some of those here in just a little bit. Now, at the time, no one in our sphere no one in our community is really talking about this. And it was hard. It was hard, but it was worth it. Now, a little bit more on this story, when we hit submit on that last student loan payment is the fall of 2015, it sure felt like we had arrived financially finally, right? That would be the first however, of many times that we would learn a very important lesson that there is no such thing as arrived. When it comes to the financial plan, there is always an opportunity to grow and learn. Once we had crossed the line from a negative net worth to zero, and eventually working towards positive, it was go time it was time to play offense. Right. Finally, we could begin to play offense with a financial plan. And through methodical savings, investing, diligent spending, planning, and working our butt off building a business, we would eventually cross a net worth of $1 million in 2020. That’s right, negative 225,000 in 2012, to a net worth north of 1 million and approximately eight years. And I want pharmacists like yourself to be fully armed and empowered with the knowledge and tools needed, again, to find that balance between living a rich life today. And tomorrow, you can get there. But in addition to your income, it’s going to require that you have the right mindset, some strategy, and you have habits and behaviors in place that will help you to achieve success, it can be done. And that’s why I’m excited to share some of these strategies with you. It’s not complicated or overly complicated. It doesn’t have to include fancy spreadsheets and nuance investment vehicles. It doesn’t take an exorbitant amount of time. And it doesn’t mean that you have to live on rice and beans. I did it and you can do it too.

Tim Ulbrich  09:56

I recently had the chance to talk with a group of pharmacists and I asked them to reflect on a question that was intended to help them clarify what matters most to them in their lives and how their financial plan can support those different areas. And here are just a few of the responses that I received. From that group of pharmacists, quote, “I would love to travel the world give generously, and fund my kids hopes.” Another was, “to take my kids to see the world.” Another,  “to have a home in space and time to host family and friends often.” Another, “to volunteer locally, spend time with family and learn new skills.” Another,  “To open my new business.” “Working part time without the fear of finances would allow me to volunteer more and do something more passionate about.” Another: “To create a community center for people who use drugs to help provide basic social needs and treatment.” Yes, yes. And yes. Notice what you don’t hear here. You don’t hear people talking about having a pristine, zero based budget. Yes, I think that’s important to help us execute, but that’s not what people are talking about. You don’t hear people talking about having a certain amount of money in the bank. You don’t hear people talking about having a complicated time intensive investment strategy. You don’t hear people talking about their 4.6% high yield savings account and how advantageous that is over another one that’s only 4%. You don’t hear any comments about how to optimize public service loan forgiveness or other student loan strategies. And while there’s nothing wrong with those things, right, I myself like a good budget, like a good student loan repayment strategy, things we talked about often in the show, it’s important to remember that these things aren’t the end goals and determinants of success, but rather steps that are along the way to support again, living that rich life today and tomorrow. So before I get into these five strategies, and before you go all Type A pharmacist on me and start making moves, hitting and checking things off that list, I want you to take a step back and ask yourself a few questions. What am I trying to accomplish? What’s the purpose? What does success look like? Right? After all, money is a tool for living a rich life. And it’s up to you to decide what that rich life looks like. Okay, so let’s jump into these five wealth building strategies, it’s time to take action. Again, none of that fluffy and practical stuff. I’ve implemented all of these in my financial plan. Step number one, you probably saw it was coming based on my discussion of net worth. Step number one is you have to be tracking your net worth. As I mentioned, and that book, The Millionaire Next Door, one of the quotes from that book from the author Tom Stanley is, quote, “one of the reasons that millionaires are economically successful is that they think differently.” And what he’s referring to is that those who build wealth realize that income is not the metric of success, but rather a tool for building wealth, right, and it’s worth repeating the calculation we talked about before, net worth what you own, minus what you owe, so your assets minus your liability. Net worth not income. But net worth is the true indicator of your financial health. And if you understand and respect this calculation, it will propel your financial plan. Discovering net worth was a mindset shift and a pivot point in our own financial planning journey. Now for Jess and I, we update a net worth tracking sheet once per month, which allows us to take a step back and see the overall trajectory and bigger picture, while also focusing on the short term goals. And I have this tracking sheet along with several other resources. I’ll reference throughout the podcast available in a Google Drive, a toolbox. We’ll link to that in the show notes. You can go to that toolbox to access those for free, you can make a copy, edit, customize, make it your own, and be able to implement it in your own financial situation. It’s a very simple spreadsheet. Again, nothing fancy, right, we have a list of all of our assets, all of our liabilities. So this includes things like our emergency funds, various business accounts, kids 529 accounts, all our retirement accounts, different real estate that we own, and so forth. All assets, all liabilities, once a month. This is the big view picture of are we tracking, are we trending in the right direction. So that’s wealth building strategy number one.

Number two, you’ve heard me talk about this on the show before is setting up savings buckets. I love savings buckets. All about intentionality. Once Jess and I are on the same page with our financial goals for a given year, it’s then time to write them down and prioritize them accordingly so that we can start to implement a plan to achieve them, right? Otherwise, it’s a hope, a wish or a dream. So for each goal that we have for the year, we defined several things. First, the amount that is needed to achieve that goal. So for example, if we were to say, hey, we want to refinish the basement, it’s a goal we’re working on here in 2024, we got to put a budget to that we gotta put a number to it. And we got to put eventually a timeline to it. So first, we have to have an amount needed to achieve the goal. Second, is we have to identify the current amount we have saved towards a goal, sometimes that’s a zero. Sometimes that might be a portion of the goal. The third thing is then the gap between the amount needed and the amount saved. Right? This is common sense stuff. And the fourth thing is the monthly contribution needed to close the gap. That’s the key. So we have to know where we’re going, how much do we need? When do we need it? What do we already have saved? What’s the gap? What’s the timeline difference and a monthly contribution that’s going to help us get there because then we can implement that, right, we can do something with that, to be able to put ourselves on track to achieve it. Now, I mentioned the tool box before, there’s another resource in there. I have our savings buckets spreadsheet that you can again, nothing complicated, you can download it, you’ll see it’s just a sheet that outlines different priorities, what the status is, what the goal is, what’s the current funding? What’s the amount, what’s the gap, and what’s the contribution needed to get there with some notes for each of those items as well. So once we have this from here, once we have a prioritized list of our goals, we can then work the budget, or the spending plan, whatever you want to call it to determine how much is available each month to allocate towards the goals and make any necessary adjustments. Now just to give you some context of things that we’re thinking about here, right, this would be items like home improvements, saving and retirement accounts, putting money away into an HSA saving for vacations, saving for a future car purchase, right? These are the types of goals and things that we’re working on. And once we have this prioritized list, and we can begin to weave it into the monthly spending plan, based on hey, we know what you’re gonna make, we know the fixed expenses, the discretionary expenses, we know what’s leftover, then we can allocate whatever is projected to be left over towards the goals we’ve already defined in advance. And this is where the buckets come in. Because once we do this work, we can set up savings buckets. Now we use Ally Online Bank, this is not commercial for Ally, you can do this with many other banks, or you can track it on your own, to have a bucket for each goal. Except for those things that go directly to outside accounts. Right. So I don’t want things like IRA savings, HSAs, 529s to be sitting around in a high yield savings account. But I want those to go to work as quickly as possible for us. But for everything else, right. I mentioned several of these: vacation, home improvement projects, saving for educational expenses, not for future like 529. But for us, that would be homeschool expenses and things that we know are coming throughout the year could be gifts, insurance payments. I said vacations, vehicles, etc. emergency fund savings, right. So when I log on to our Ally online savings accounts, I see all these buckets, which are really just virtual buckets within a high yield savings account that we can then identify and earmark. It’s so important that if we think we’re saving for something, let’s actually do the accounting for it and create the bucket that allows us to see the progress made. This can sound complicated, don’t let it fool you. It’s not complicated. This system took us about 15 to 20 minutes set up. Once we had already done the work right, which is the hard work is talking about the goals and prioritizing the goals. So that’s number two, setting up the bucket system. 

Tim Ulbrich  18:51

Number three in our list of five wealth building strategies, is creating a legacy folder again, something I have talked about in the podcast before. And while a legacy folder isn’t going to directly move the needle on your net worth, don’t underestimate what it can offer in terms of peace of mind. And knowing that in the event in an emergency, all your financial documents are organized and in one location. So think of the legacy folder as a one stop shop where you have all of your important financial information, records and systems such that if someone else had access, needed access in the event of emergency, something happened to you, they could quickly pick up where you left off. So our legacy folder is a combination of a shared Google Drive folder, and a fireproof safe at home. Right. So I think about things like passports, birth certificates, etc. copy of estate planning documents, those are going to be inside of a safe, and then we’ve got other things that are on a shared Google Drive. So our financial planning team at YFP has shared access to the Google Drive as well as family who would be caring for our boys in the event that something happened to us, and then we use One Password as a tool to share and store all of our passwords. You can access again in the toolbox resource I mentioned already, we’ll link to that show notes: YourFinancialPharmacist.com/toolbox, I have a legacy folder table of contents that we use that you can download, make a copy, modify and make it your own. 

Tim Ulbrich  20:25

Alright, number four on our list of five, upping your financial IQ. So here are just some of the questions I’ve received recently, from pharmacists in our community: how much should I save for retirement? How can I best save and invest for the future? What should my asset allocation be? Do I need a life or disability insurance policy? How can I optimize student loan or other debt payments?  Should I save and invest or pay down debt instead? If any of these sound familiar, this is real life stuff. And know that you aren’t alone if several of these questions are swirling around in your mind as well. And as I reflect on my own journey, I realized that knowledge, along with community and accountability, was a key missing ingredient early on. You know, despite being a personal finance nerd today, my financial IQ early in my pharmacy career was very limited. When I was just finishing up my pharmacy school training in 2008, residency 2009. At the time, I could not tell you the difference between a 401K and an IRA a stock versus a bond secured versus unsecured debt, unsubsidized versus subsidized loans, a tax credit versus a deduction, right, the list goes on and on. And my ignorance, my lack of financial IQ led to mistakes and really led to a delay in our progress. But that really wasn’t my fault as I reflect on the journey. Now, taking responsibility of that and learning those things. Certainly, there’s an opportunity there. But know that for many of us, we just don’t have that background. Right, that strong fine foundation and financial literacy, our K-12 system, to be frank does an atrocious job of prioritizing financial literacy. And while I’m grateful for my AP Calculus class, and how that saved me from having to take a semester of calculus in pharmacy school, I use very little calculus in my life today. But contrast that with personal finance, which I use in some form, or fashion every single day. So why do we invest so little time in financial literacy, knowing that its application will be wide for everyone? That’s a great question, right. And it’s a tragedy, but it’s one that we have to overcome, and we can take responsibility to overcome. And so the good news is that we can make progress here we can up our financial IQ if we’re willing to invest some time and energy and I’m not talking about an AP course level type of time, just a little bit of time invested is going to yield big benefits. I hope you continue to listen to podcasts, attend our webinars, read our newsletters, I think those are great ways that you can stay engaged and increase your financial IQ. 

Tim Ulbrich  23:04

Alright, number five on our list of five wealth building strategies is respect the power of compound interest and time value of money. If you aren’t in awe of that time value of money, you haven’t spent enough time nerding out on a savings calculators. As Albert Einstein is credited with saying compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t pays it. This quote should pique our curiosity about the power of investing, more specifically, the power of compound interest in time value of money. It’s one of those financial jargon terms compound interest, time value, money that we throw around, that we know is important, but may not be sure what it exactly means and why it matters. And simply compound interest is the process by which an investment grows exponentially over time, because both the original investment and the interest gain earn interest over time. So we save a little bit today, it grows and then the future growth is the initial savings plus the growth plus the growth plus the growth and we continue that over and over again. And you can use a simple compound interest calculator, we have one available on our website, we’ll link to that in the show notes. Just to see that what would it mean for you when it comes to savings and where you’re at and how much you have saved? And how will that project out into the future? So what we know, which is something we’ve all heard before is that the earlier we save, the less aggressive we have to be in saving, right? And that’s where we really start to see the magic of compound interest and time value of money do its thing. 

Tim Ulbrich  24:44

Alright, so those are five wealth building strategies that I think you can implement in your own financial plan. And it’s it’s your turn now, right and as you start to implement your plan, let me give you two words of encouragement First, avoid analysis paralysis by identifying what the next move the one next move you can make. Remember, this is a marathon, not a sprint, and I just talked about a whole lot of things. And some of you are probably gonna want to this long checklist and start moving things forward. Resist the urge to try to do too much. And eventually getting to a place of frustration where you don’t make much progress at all. What is the one next move that you can make? This is a marathon, not a sprint, one step after another over a long period of time will yield big results. That’s what Darren Hardy is talking about, in his book, The Compound Effect when he says that small, smart choices, plus consistency plus time equals radical difference, small smart choices, plus consistency, plus time equals a radical difference. So that’s the first note of encouragement. The second one is your journey will inevitably include mistakes, trust me, I’ve made my fair share. Here are just a few I’ve paid too much student loan debt, because I didn’t understand the different options that were available such as loan forgiveness and refinancing. Second, I bought a home to be frank by just a little bit too early, without having enough equity in that home and a renting situation would have been fine for a little bit longer. Third, delaying the purchase of term life insurance with young children. Fourth, delaying the establishment of estate planning documents. Fifth, cashing out a small but still a pre tax retirement fund. And finally buying a car that at the time, we really had no interest in buying. So since mistakes will happen, right? It’s part of the journey, we must learn to give ourselves some grace. You’ve got this, I’m cheering you on. And I hope that you will continue to engage with our community as you go through your own journey. If you have a question that you have, in the moment, a roadblock that you’re facing, a win that you want to share, just an ear to listen of something that’s frustrating you in the moment, send us an email. I would love to hear from you [email protected]. And for those of you that are listening, saying hey, I really could use some help one on one, and really moving the financial plan forward to take all these different priorities no matter where you are in your journey, whether that’s a mid career pharmacist like myself, someone who’s approaching retirement, someone who’s a little bit early in their career, we’d love to have the opportunity to talk with you further. To learn more about our fee only financial planning and tax planning services and to determine whether or not they’re a good fit. You can book a free discovery call by going to yourfinancialpharmacist.com you’ll see a link to do so there to learn more about the services and to again, see whether or not that’s a good fit for your own financial plan. Thanks so much for listening. As always, I hope you found this episode helpful. And we’ll catch you again next week. Take care. 

Tim Ulbrich  27:51

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

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YFP 358: Top 6 Financial Moves to Make as a Mid-Career Pharmacist


YFP Co-Founder and Director of Financial Planning Tim Baker discusses six financial moves for mid-career pharmacists, including re-evaluating the vision for the financial plan.

Episode Summary

Tim Ulbrich is joined by YFP Co-Founder and Director of Financial Planning at YFP, Tim Baker to discuss various financial planning strategies for mid-career pharmacists, including resetting the vision for the financial plan, prioritizing retirement planning and emergency funds, and reevaluating, reviewing and updating insurance policies.

Regularly reviewing and adjusting these funds to account for the various life changes ensures that policies align with current financial goals and circumstances. Tim and Tim also address the importance of having those uncomfortable conversations, such as end-of-life care and inheritance to avoid potential legal and financial issues in the future.

About Today’s Guest

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

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

Key Points from the Episode

  • Financial moves for mid-career pharmacists, including resetting financial goals. [0:00]
  • Financial planning, goal setting, and prioritizing life ambitions. [3:54]
  • Emergency funds and savings goals, including rechecking amounts and locations. [9:17]
  • Emergency funds and retirement planning for mid-career pharmacists. [14:34]
  • Retirement planning and nest egg calculation. [16:46]
  • Social Security benefits and retirement planning for pharmacists. [22:43]
  • Updating estate plans for mid-career individuals. [29:13]
  • Financial planning for aging parents. [33:39]
  • Financial planning for mid-career pharmacists, including insurance checkups and estate planning. [37:48]
  • Insurance planning for pharmacists, including long-term care and property casualty assessments. [41:17]

Episode Highlights

“And I think the other thing is that things change. I think checking up on your financial plan is really, really important.” -Tim Baker [5:08]

“I think it’s really important to kind of recast the vision, recast the organization of your financial plan and go from there.” – Tim Baker [5:52]

“I think one of the things that I would challenge people who are mid-career, from a goal setting perspective is, are you doing the things that make you whole or that you’re passionate about?” – Tim Baker [6:28]

“So, you know, I think being critical and actually like slowing down and saying, is this what I want to do. And then using the resources, the time that you have, the dollars that you have, to kind of right that ship, and because again, we’re here for a very finite amount of time. And it goes by quickly, and it sounds very cliche, but it’s true.” – Tim Baker [8:08]

“I typically say that the estate plan is really important, really, for anybody, But particularly for people that have a spouse, a house, or mouths to feed. So if you have those things, and you don’t have documents in place, I think that that’s probably the biggest thing that we need to look at.” – Tim Baker [32:58]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Tim Baker joins us back on the mic to talk through six financial moves to make as a mid career pharmacist, we discussed the importance of resetting the vision for the financial plan, how to determine whether or not you’re on track for retirement, gaps to look for in your estate planning and insurance coverage, and much more. For more information and details on each one of these areas, go to yourfinancialpharmacist.com/midcareer. That’s one word again yourfinancialpharmacist.com/midcareer. 

Tim Ulbrich  00:37

Before we jump into this week’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good income. But have you ever wondered, am I on track to retire? How do I prioritize and fund all of these competing financial goals that I have? How do I plan financially for big upcoming life events and changes such as moving, having a child, changing jobs, getting married or retiring? Or perhaps why am I not as far along financially at this point in my career as I thought I would be? The answer may be that your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox: your salary. But without a vision and a plan that good income will only go so far. That’s in part why we started Your Financial Pharmacist. At YFP, we support pharmacists at every stage of their careers to take control of their finances, reach their financial goals, and build wealth through comprehensive fee-only financial planning and tax planning. Our team of certified financial planners and our CPA works with pharmacists all across the country to help our clients set their future selves up for success while living their rich lives today. If you’re ready to learn more about how Your Financial Pharmacist can support you on your financial journey, visit your financialpharmacist.com/learn. Again, that’s your financial pharmacists.com/learn. Alright, let’s jump into today’s show. 

Tim Ulbrich  02:05

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

Tim Baker  02:07

Good to be back. Tim. How’s it going? 

Tim Ulbrich  02:09

Good. It’s been a while official congrats on the baby. I know you’re off for a little while. But we’re glad to have you back on the mic. 

Tim Baker  02:17

Yeah, thanks for thanks for hosting, it’s trying to get back in the swing of things with baby here. Sleep’s at a premium. So, it’s all good.

Tim Ulbrich  02:28

Well, this week, we’re talking about moves that mid-career pharmacists should be making things that they should be thinking about. And really whether someone is early in their journey, you know, these are things to be thinking ahead of or those that are actually in this season. Hopefully, this is more of a checklist type of episode where you can go through different parts of the financial plan, or perhaps tune up or look back at some of these items. Tim, it dawned on me though, as we’re preparing for this episode of like, that’s us mid-career, you know, it’s really that that phase where you start to feel like, Hey, we’ve kind of checked off some of those basic foundational items. But there’s this whole other set of issues and things that we need to be thinking about going into the future. So for better or for worse, here we are in the middle of our career, as well. And we’re excited to talk through these six moves that mid-career pharmacists should be making in each one of these we have covered at length, if not once, maybe twice, or three times on the episode before. So we’ll make sure to mention that when we get to these individual items and link to those things in the show notes as well. Tim, I think it makes sense that we start number one, really with the goals. You know, this is an opportunity, I think to reset the vision for the financial plan, there often is a lot of transition that can be happening at this phase, you know, this might be the time where people have kids are getting a little bit older, maybe beginning to think about them moving out of the house, we obviously have to be thinking about taking care of ourselves. Maybe we have elderly parents that we’re trying to prioritize as well. So just a lot of transition, I think an opportunity to take a step back and really look at the vision and the goals for the financial plan and how those have changed over time.

Tim Baker  04:05

Yeah, I would package these, I would actually package this together with like, what is the balance sheet look like? And then what is the vision going forward? So you know, we kind of look at this, you know, when we work with clients as a get organized and kind of a goal setting, you know, as a one two punch, and this is typically where, Tim, when a pharmacist asked me a question of Hey, should I do X or Y? I say it depends.  A lot of it depends on what is what is the financial picture look like for you? And then what does a wealthy life look like for you both today and in the future. And for everyone that’s going to be different. So, that to me is where that answer comes from. So yeah, like I think in prepping for this episode, Tim, I kind of learned you know, two things or realized two things that I think is really important to say out loud. One is just like a lot of stuff when I was looking at my you know, I was looking at my insurance stuff in my in my nest egg calculation, some of the things that we’ll talk about in this episode. It’s just a lot of moving pieces. And it’s a, and it’s changed a lot over the years. So that’s, that’s the first thing. And I think the other thing is, like, you know, this thing, things change, I think having, you know, checking up on this is really, really important. So, when we look at, like, the, when we look at the balance sheet, again, if you haven’t looked at your balance sheet in a long time, I think it’s really important, it’s not necessarily necessarily something that we feel in our day to day, yeah. But if you, you know, if you if you put your head down, and you’re working, and you’re raising a family or doing whatever you’re doing, and, you know, two or three years later go by, you can actually see the progress that, you know, has been made, right, so you can see, you know, how your assets, you know, been built up, how have you How have your liabilities been paid down? Or not, you know, do you have a different set of, you know, versus if it’s was it student loans in the past the past and now its a HELOC, or something like that. So I think it’s really important to kind of recast the vision recast the, you know, the organization of your financial plan and go from going from there. From the vision perspective, it’s, it’s laughable when you think about, you know, like, when I, you know, had these conversations with myself and my wife, you know, even three or four years ago, and then what that looks like today, like, like, and you don’t sense that, but like, when you when you actually look back, and you kind of memorialize, hey, in 2019 pre-pandemic, this is kind of our viewpoint, this is what we wanted to do. And then we look at that today, it’s vastly different. So I think, like, you know, one of the things that, that I would, you know, challenge people that are mid career, you know, from a goal setting perspective is, are you doing the things that, like, make you whole, or that you’re passionate about? You know, like, I was joking around with my team over the weekend that I kind of felt like an Uber driver, because I was driving to soccer practice and swim practice, soccer practice again, and swim practice again. Which is great, like, I love that I love you know, you know, you know, seeing my kids, you know, do well on their sports and their activities. But, you know, though conversation that I had with my wife over the weekend was like, are like, Are we are we good? Are we on like the track that we want to be on and kind of checking in with and sometimes that’s a check in with yourself, some that’s a check in with a spouse, sometimes it’s a check in with like, a close advisor, like a financial planner. And I think it’s really important to do that, because again, you can put your head down, and you know, live, you know, be living your life, but then, you know, you’re doing that vicariously through your kids or, or whatever, and not actually take the time to do the things that you’re passionate about. And sometimes, you know, again, your own goals. And ambitions are kind of taking a backseat to your kids, which is a it’s a natural thing. But at the end of the day, like there typically is enough to go around, like we can carve out time, we can carve out resources to do the things that you want to do whatever that is. So I think it’s really important, you know, as you are mid-career, and I think this is where, you know, people like to talk about, like a midlife crisis, because they kind of get caught in the rat race, and they’re like, this is not really the life that I want to live. So, you know, I think it’s that, you know, that self, you know, being being critical and actually like slowing down and saying, is this what I want to do. And then using the resources, you know, the time that you have, the dollars that you have, to kind of right that ship, and because, again, we’re here for a very finite amount of time. And it goes by quick, and it sounds very cliche, but it’s, it’s true. And I think you can I always talk about this, like, you know, that whole that sense of being on autopilot. I’ve worked at jobs where, you know, like, my commute to the office in the morning was in darkness, I would you know, I would drive there 30 minutes, I wouldn’t remember that drive, and then you back was in darkness, I would get in my car, and 30 minutes would go by and I’m home. And I don’t remember any of that. And that’s, that’s like an analogy for life is that if you’re not actually slowing down and think about is this what I want to do that’s important. So that’s just my life planning hat. You know, are we are we putting the first things first are we doing, you know, the things that we want to do and making sure that we’re, we have a plan and we’re being intentional for that. 

Tim Ulbrich  09:16

I love the example you gave of you know how for you and Shay, your family, right short period of time, the goals can look very different, and why it’s so important to be looking at these regularly and talking about them together to have a third party, you know, kind of help, whether that’d be a plan or someone else. I was even thinking as you shared that, you know, for Jess and I, when you did the planning with the two of us how helpful it was when we would get together to flash up the goals to say, hey, yeah, a year, a year ago, you guys said this is important. Like, is it still important? If so, like, what what are we doing? What are we doing to kind of move this forward? And ultimately, like, where are the funds, right? If it requires funds to do that, and that’s so important. You know, you and I had a very similar season of life where, you know, to the point you gave of the weekend and being the Uber driver We’re like, the days and the months are flying by to really have that mechanism to stop, pause, slow down and remind ourselves of like, are we running the path? Are we running the race that we want to be running? And we’re not gonna get it right all the time, right balance in every season of life, but to have some built in mechanism to not just set those goals, but also to refresh and to look at those periodically. 

Tim Baker  10:23

Yeah, absolutely. 

Tim Ulbrich  10:24

All right, number two on our list is savings. And we’re gonna talk about a few different areas. Here. We’ll talk briefly about the emergency fund, and an opportunity to recheck where we’re at with that, we’ll briefly talk about retirement. Again, we’ve talked about all these at length, we’ll reference other episodes, and then we’ll touch on some kids college stuff as well. Tim, let’s start with the emergency fund and a recheck. I just talked on Episode 357, last week about five questions that we need to be asking ourselves related to the emergency fund. So make sure you go back and check out that episode. But I think this is one of those areas that where we set the emergency fund maybe early on in our career, and then we don’t think about, wow, a lot has changed, we really got to relook at is the amount that we have there sufficient? And how does this fit in with the rest of the plan? 

Tim Baker  11:09

It’s one of those things where yeah, it’s kind of a forgotten, forgotten thing. And, you know, you know, what we really want to do is check in and make sure that you know, what’s in there is appropriate, and, you know, are there things that we can do to, you know, to, to improve it. So, you know, for for a emergency fund, what we’re looking for is three to six months of non discretionary monthly expenses. So these are expenses that are gonna go out the door, regardless of if we work or not. So things like, you know, a mortgage and insurance premiums and utilities and a food bill. So, unfortunately, we tend to get to that number, we have to actually look at spending data and understand like, what that looks like, and then, you know, we kind of look at, you know, what is what is discretionary? What are things that are non discretionary, and we add up all the non discretionary if we have, you know, two incomes, we multiply that by three, if we have one income, we multiply that by six for six months, and then and then that’s our number. For a lot of our clients. You know, it typically can be I think, in a, I would say, anywhere between 15 and $50,000 is what is what the number is, um, so I think like, you know, and this is something that that Shay, I looked at recently, and I think, for us, because of three kids and you know, daycare and all that kind of stuff, it’s, it’s crept up, and I’ve kind of tried to, you know, the interest that I that I accumulate in my high yield, or  I do, I do a combination of a high yield savings account. And then like, a laddered CD that I do every quarter, like a year CD for every quarter. So I have a q1, q2, q3, q4 that I just renew, and I kind of let those ride and I’m actually adding more money, both to the high yield, and the, and the CDs as we go here. But I, the only reason I knew to do that was to actually look at the spending, and it’s kind of crept up, you know, just because of family of, you know, probably the last time I did it, we were a family of three, now we’re a family of five. So I think that’s important to do. And again, like, there are so many people that I talked to that they’re like, Okay, this brokerage account, this, this taxable investment account, that is my emergency fund, that is not an emergency fund, it’s, it’s, you know, if you’re investing in it, and you can see volatility, that’s not what we’re trying to do. So I think having you know, the right amount, and then the location is going to be really important. And to get the right amounts, typically, looking at the budget where you’re at today, and again, like I don’t look at the kids swim or, or soccer or other activities as a discretionary as a, that’s, that’s a discretionary thing. So if times get tough, we, you know, try to try to cut that. So I think even, you know, examining what is, you know, what should be in there and what shouldn’t, is important, but, you know, to me, it’s, it’s a little bit of nails on chalkboard, right Tim, because I don’t want to keep cash, I want to get that into the market and get work. And so I need enough to get us through a tough spot. But then also know that, you know, for me, I want to get money into mortgage and a lot of people typically, you know, later in mid career and beyond, they’ll they’ll start because they have an asset like the house, they’ll even use something like a HELOC as like an even deeper reserve. Yeah. So to have access to a HELOC, or something like that is going to be important that I’ve seen people use as a mechanism to, you know, to safely and I wouldn’t say cheaply because of where rates are, but somewhat cheaply access cash if needed, and not necessarily tie up a ton of money in a checking error, high yield savings account, I should say. 

Tim Ulbrich  14:33

I like the hack that you mentioned. And yes, I do the same thing where you know, any any earnings on a high yield savings, we just kind of dumped back in the emergency letter, I let it ride right. And the idea being that’s going to help kind of keep pace at some level with inflation, maybe not fully, but to your point, it doesn’t cover those big jumps, right. So like now we’re a family of five instead of a family of three or, you know, we bought an investment property and we’ve got to be thinking about that or we moved homes and you know, mortgage payments went up and so those kind of big moves, where all of a sudden, you know, that emergency fund might go from that 15 to that 30, 35. Are we looking at that periodically.

Tim Baker  15:09

And for you, Tim is probably like your food bill, right? Oh, pre preteens? Like, like, that’s gonna that’s that’s like No, that’s no joke, you know like when you, even Olivia. Olivia is going to be 10 this year and she’s a swimmer. I mean, she eats I feel like as much as I do. And you know, when you when you think about that, that’s, that’s gonna move down quite a bit. So you know, it’s it definitely adds up. And at the end of the day, the emergency fund is there for that rainy day when, when when you need it and just making sure that’s properly funded is going to be important to kind of give you that peace of mind.

Tim Ulbrich  15:42

The second part of savings Tim, I want to touch on as we work through these six different moves for mid-career pharmacists is, you know, I think this is a natural time where we ask ourselves, Am I on track with retirement? Right? And, and this is a season where when we talk with pharmacists mid-career, you know, the visual I have is you’re getting hit in every direction, right? You maybe kids expenses, kids college has grown, we’ll talk about that a little bit. You’ve got this pressure facing you on retirement, you might be caring for elderly parents, you know, perhaps there’s debt still hanging around, we’re working through student loans or other things. There’s, there’s all these different pressures and headwinds, and naturally, that retirement piece made maybe wasn’t a top priority for a while. And all of a sudden, we get to this point where previously we couldn’t visualize retirement now we can start to and it’s like, Am I on track? And I know, we covered this in Episode 272. How much is enough? We’ll link to that in the show notes. So people can dig deeper, but just at a high level, you know, some some tips or some thoughts for folks that are asking this question of, Hey, am I on track? How much is enough? When it comes to retirement? 

Tim Baker  16:45

This is such a, this is such a hard one. Because like, I’ll ask like prospective clients, like, Hey, do you feel like you’re on track to meet like your goal for retirement? And if you’re talking to someone in their 30s 40s 50s? I would say even in your 50s, it can be somewhat nebulous anytime it’s like a decade or more out. And typically, that the answer I get is like, you know, Tim, I really have no idea. Which is, I think, problematic, especially if we’re trying to, like, you know, build out a plan. So that’s obviously something that we can fix. But also, it’s kind of that default of like, well, like the 401k, you know, company or the 401k that I have, they have a calculator that says I’m on track. And I’m like, I just don’t know how they calculate that. And I almost feel like, all the compliance things that, Tim, that we have. So it’s almost like irresponsible, yeah, to, again, they’re looking at it very much from it, but people don’t necessarily know that, you know, it’s very much a vacuum. I think that like, the problem with like, Am I on track for retirement is that there’s so many variables that go into it, there’s so much time that goes into it, you know, and I always talked about this, like, when we, when I first started working as a financial planner, I remember working with my previous firm, and it’s like, you know, we would do financial planning by hand, and we would do a time value money calculation. And we would say, Hey, Tim, hey client, you know, your, your, your, what you need for retirement is $3.1 million. And we’d be like this exact number. And then we’ll kind of go on to like, the next thing, I’ll make sure you’re doing this. And it’s like, it just never connected. It was almost like this disassociated moving, because you’d like to look at like what the client had, which might be three or $400,000. And you’re like, I need to, like 10x this in 20 years, or 15 years. And there’s so many people that come back to me that when they start and then they’re like four or five years, they’re like, like, damn, Tim, like, actually, my assets I’ve actually grown like, I almost didn’t believe you. And it’s still hard to even to see that, you know, the progress to get to that, that millionaire level. But I think it’s really important. And so like, I took that, as a financial planner, I would look at the clients, like their eyes would kind of like gloss over because they’re like, that doesn’t mean anything to me. And I can’t we build up this nest egg calculator that basically goes through. And I did it recently for Shay and I, you know, what’s your current age? What’s your target? You know, so how many more years do you have left in the workforce? How long do you expect to live? Which is again, that’s one of the hardest, you know, that’s one of the risks in retirement is like longevity risk, like, are you gonna live really long or not? So again, that’s a little bit of a crapshoot. So we kind of make make some assumptions there. Social Security kind of has an idea of when they think that you’re gonna pass away, what your current retirement savings is with kind of think of it as your present value and your time value money. And then what your current calculate your current income is and then what that kind of projects into what you need for retirement. So we make some assumptions on how is your current assets actually invested? So for a lot of people that I see at least it’s in my opinion, too conservative, especially mid you know, if you follow the rules of thumb of, hey, if you’re, you know, if you’re 40 years old, you take 110 minus 40, your equity, equity amount should be 70%. And then the other 30 should be in bonds, I think that is wrong. But then we do some, you know, asset assumptions when you’re actually in retirement, so might be more conservative. And that kind of gets down to the total need. And then you have to factor in things like social security. So I pulled my Social Security, I think we’ll talk about that in a second. And then like, what does that mean, in terms of what do I need to actually save today? So it’s, it’s the idea here is to take this big number, whether it’s 3.1, 3.6, 2 million, 4 million, and actually break it down to a number that I can digest. So like, if you say, if I’m, if I’m the client, and I say, hey, you know, if I’m talking to a client, I’m like, Hey, you’re putting in 10%, for you to actually get on track to retire by 65. To live to 95, whatever that is, you need to go from 10% to 15%. Like, I can track to that. And also, you know, so that actually is a tangible thing, that’s a, that’s a digestible thing that I can do versus just saying, we need $3.1 and we kind of just are like, it’s a hope and a prayer, right. So it’s not, it’s not a perfect system. Because like, when I look at my own nest egg calculation, you know, I’m maxing out my 401. K. And let’s assume that I’m going to be doing that for the next 29 years, if I retire at 70, which, that’s a, I don’t know, I don’t know if that’s going to be the case. I’m hoping that’s the case. But so there’s, there’s, there’s some assumptions that we have to make to make, to make it kind of come to life. And I think the next level of this, Tim, was kind of going through some simulations. So if I were to, you know, if I were to, you know, take part of my portfolio and purchase x, or if I were to, you know, go and go down to part time, or, you know, do something else, you could actually run scenarios, if I, if I buy my Mountain House 10 years earlier, there’s some Monte Carlo analysis that will actually affect, you know, show you how it affects your success rate with your with your retirement. And I think that’s kind of the next level stuff. But for a lot of people, it’s where am I at? What are the things that I’m that I’m doing today? How can I tweak those things to get a better outcome, and that could be contribution rate, that could be my allocation, that can be a variety of things. So I think that’s important to kind of break down and really see, you know, because the more the longer that we wait to kind of effect change here, especially if it’s negative, the steeper that gets, right. So when you’re, when you’re early in your career, you know, a tweak here there can really have monumental changes, the closer you get to that retirement, just the the steeper that climb is and the harder it is to kind of meet goals. And that’s where you have to start, then potentially taking a haircut on lifestyle and retirement, or you know, the amount of time that you have to work etc. 

Tim Ulbrich  22:43

What I love about the nest egg exercise is, you know, going through it for Jess and I, again, just a reminder, with all these things, we’re told it’s not a one and done, right. So if you do a nest egg when you’re, you know, 45, there’s assumptions, we’re building into all of these types of calculations, both in terms of the mathematical assumptions, but also what you want. And you know, you mentioned the different scenarios, and that can change and probably will change over time. So revisiting this periodically is so important, but it really moves I often hear people talking about retirement as like a hope, wish or dream, meaning like, I hope I can retire by 58, or 67, or whatever, or, you know, I would love if I could potentially work part time at some point in the future. And it’s like, hey, yes, those assumptions can change, many of them will change over time. But we can put a number to these into your point, let’s get it down to what do we need to be doing on a monthly basis, because these numbers do seem scary. And you can see, kind of the peace of mind that comes when you walk through these calculations with people when you start with those big numbers, three, four or 5 million. And then you get down to that monthly even if we don’t love the monthly number, when we factor in employer matches, other things, savings we already have. We’ll talk about social security here in a moment. It’s like, oh, okay, like, we can work with that, because we can put our arms around it and start to figure out, can we build that into the rest of the planet, a monthly basis. So, so important, especially for those who are mid-career listening. If you’ve done this before, you know, revisit this, you know, we’d love to have opportunity to work with you on the financial planning side, if you haven’t done it before need to revisit this as well. But something we definitely need to be updating. And looking at periodically. Let’s move to number three, which is really looking at our Social Security benefits and the projected benefits, which I think fits so well into the how much is enough calculation. And, you know, this is an opportunity to really look at our [email protected] to look at our statement, our projected benefits. I think a lot of people probably aren’t necessarily familiar with these tools that are out there. And to begin to figure out and build some assumptions of, hey, if I have social security benefits, what might those be? And then certainly we can project down if people are worried about the future of the benefit. I’m sure you’ll talk about that as well. But thoughts here on on kind of revisiting or looking at the social security piece? 

 

Tim Baker  24:57

So if you go to ssa.gov Like if you have haven’t done this, I would encourage you, especially if you’re mid-career just to kind of see what your social security statement looks like. So to me, that’s really important to kind of get a sense of, and again, like, I think a lot of people, when they, when they think about security, it’s kind of an eyeroll of like, uh, that won’t be there, when I’m when I’m ready to retire, or it’s going to be greatly diminished. You know, I would, what I believe is that, you know, Social Security is one of those things where so many people rely on it to actually survive in, you know, it’s kind of a hand, um, you know, unfortunately, we’re kind of like a hand to mouth in terms of like, a lot of people don’t do a great job of saving themselves, especially, you know, no offense to Baby Boomers, where there was pensions and things like that pensions, and Social Security could go a long way, in terms of retirement, that day is done, you know, so when we moved away from pensions, and more to 401k, the onus has really shifted from the employer to the employee, to make sure that we’re doing what we need to do. And again, social security still there. But there’s lots of, you know, press about, you know, will be viable, and, you know, will it go bankrupt? My sense is that, you know, it will be there, Tim, when we retire it at 70. But it’s kind of one of those things where it’s, it’s unknown what that benefit would be, and again, maybe when we retire, you know, it’s not 70, it’s 75, or something like that, because of a variety of reasons. But the I think the big thing here is to pull your statement. And then when I look at mine, it actually shows me, you know, what my personalized monthly retirement benefits would be, if I started from age 62. So right now, my my benefits $2,076 or if I wait until age 70 and actually get the, you know, credits $3,777. The big thing with Social Security that doesn’t get enough play is that it’s inflation protected. So when we had that big jump into inflation the year before last, yeah, everyone’s payment went up, I think 8.9% or whatever it was your over a year, that’s huge. Because if you’re thinking about, you know, building a retirement paycheck, most of the things that you have, most of the income streams are not inflation protected. So every time, you know, we go through bouts of inflation, you’re you know, you know, the checks, the checks that you have running it coming in, are not going to account for the fact that, you know, your your grocery bill went from 100 bucks per month to $140, just because of where that’s at. So Social Security, you know, plays a part in that. So I think the big thing here is to try to check, you know, when you pull your statement, you can actually see your work year, and what your earnings tax for security were from, you know, I’m looking back from, like, 1991 to present day. So I think to make sure that that’s accurate, that’s, that’s going to be a big thing. And again, like, I think the sooner that you can kind of look at this and kind of get a sense of where you’re at. And then and then look at the you know, look at the the the retirement calculator that’s there, you know, if you if you retire early, versus if your full retirement age, you know, for us, it’s going to be 67. Or if you delay it out to age 70, which to me, I think a lot of people should really look at doing and if you have a plan, you know, before the kind of the knee jerk was like, get the money when you can get it, but that’s a that’s a mistake. And a lot of people are understanding now that it is a mistake. So doing a proper analysis. Again, it’s kind of a microcosm of your of your financial plan is, you know, inventory. So get organized in terms of what does the statement look like? What are the goals in retirement, and then how to properly deploy this, this inflation protected income stream, I think is going to be a big part. Now, for pharmacists, you know, your it might be 25%, 20% of your retirement paycheck, whereas, you know, the typical American it’s, it’s north of 50%. So but I think making sure that we’re positioning ourselves from, you know, to ensure that the income is correct. And then the basically the way that we collect the benefit is going to be in line with your overall retirement picture and financial plan.

Tim Ulbrich  29:13

And I think once we have that number, and again, we can adjust up or down, as you mentioned before as we’re running assumptions, but we can then build that into the nest egg calculation as well and see how that impacts where we’re at on a on a need for a monthly savings. Number four, Tim, on our list of six mid-career pharmacist moves to be considering would be the estate plan. We’ve talked about the estate plan in detail on the on the podcast episode 310. dusting off the estate plan. We’ll link to that in the show notes. But this time well, you and I were just talking about this last week. You know with your new baby in the house right there’s an opportunity to update documents we haven’t yet done our updates with with our youngest who soon to be five, so we’ve got to make sure his name is present, although he’s covered in language, but his actual name isn’t present in the documents. So I think again, and talk to us through why there’s an opportunity mid-career to really be updating these documents or perhaps for some even even establishing these for the first time. 

Tim Baker  30:10

It’s probably, you know, I can say this being a ginger, but it’s probably the redheaded stepchild of like the financial plan. It’s, it’s ignored. And unless you’re military, a lot of the clients that are coming through the door really don’t have an estate plan in place. And one of the things that we implemented to kind of really combat this and really supercharge our ability to support clients is we have a an estate planning solution now that we, when we work with clients, if you don’t have a will, a living will, and well trust, if that’s needed, we can actually get those documents in place for whatever state that you live in country, which I think is awesome. So you know, it’s one thing to kind of, you know, say, Hey, Tim, this is what you need something to actually like, walk side by side with you and get the documents in place to make sure you’re covered. So I look at this really from a from from to, you know, to? Well, I would say it’s one big perspective, just change, right. So like, you know, if you think about, you know, maybe when you were, you know, early career to where you’re at now, for some people like could be different relationships, like there’s horror stories about people that are leaving money to like an ex. So I think it’s really important to kind of do a beneficiary check to make sure that the money is going to the right people, you know, Shay is going to be my primary beneficiary for like, a lot of the things that I have. But then right now, it’s like, Liam, my, my, my, or Olivia, my daughter, and Liam my son who are the contingent beneficiary, so if something were to happen to both, it likely would go to the kids, so like Zoe, or our newest baby has to kind of be in on that. Or it could be to like a trust, you know, a trust that is for the benefit of the kids, which is probably the better way to go with minor children. So to me, it’s more of again, looking at the the relationships, whether they’re, you know, out with the old in with the new, or, you know, brand new in terms of kids to make sure that the documents that you had in place clearly reflect your wishes today could even be things about, you know, bequesting, or, yeah, hey, I want to leave, you know, money to my alma mater, or to my cousin Fred, or things like that, that that’s a really reflects the things that you want to do. But also, you know, to, to ensure that from a protection perspective, you know, if you have dependents, they’re there, they’re taken care of, in a sense that, you know, if you were gone, or you can speak for yourself, the documents are that are in place, do that justice. So, for a lot of people mid career, it is adjusting what they have, or it could be it says that, that thing that’s been neglected that you’re like, I’m gonna get to it, I’m gonna get to, I’m gonna get to it, and you have it. You know, what, when I’m talking when I’m talking to prospective clients, and I bring up the fact that we can do this, that like, perks them up, because I know, it’s important. They know, it’s like, uh, I gotta find an attorney, or I gotta find some sort of solution. We got that covered. And to me that alone, I think, especially if you’re, you’re, if you’re a family, or if you you know, I typically say that the estate plan is really important, really, for anybody, particularly, particularly for people that have a spouse, a house, or mouths to feed, right. So if you have those things, and you don’t have documents in place, I think that that’s probably the biggest thing that we need to look at. You know, it’s important to get, you know, a plan for debt, it’s important to get your your nest egg and a plan for your assets and retirement planning. But this is really going to be important to shore up and make sure you’re good to go in the event that something were to happen to you. And again, it’s one of those things like, oh, that won’t happen to me, it will happen to somebody else. And then eventually, you’re going to be that that’s someone else. So not to be morbid, but you know, I think it’s important to cross those t’s and dot the i’s with regard to the state plan. 

Tim Ulbrich  33:39

I mean, the reality is just like we’ll talk about in the final item number six on the insurance side, like it’s not fun to think about, right? So it’s easy, but been there myself, it’s easy to kind of drag your feet and let this be the call to action to either update, take a fresh look at those or get those documents created. Number five on our list of six mid-career pharmacists moves to make tip is probably one that a lot of people maybe aren’t thinking about, again, not necessary, the most comfortable thing to be doing would be some of the financial conversations with aging parents, you know, I think it’s common that we see mid-career pharmacists that are entering into a new stage of caring for elderly parents sometimes that, you know, could be a time investment that they need to factor in, that could be a financial investment. And for some, you know, that might be Hey, this is an expense that we need to be thinking about caring for our elderly parents or others. It might be, Hey, do they have the documents, the right documents in place that we just talked about? And do we have an awareness, understanding and transparency into that information? Which admittedly, is a very hard and awkward conversation to have no matter which way we’re looking at it. So thoughts here on some of the financial conversations with aging parents? 

Tim Baker  34:44

So I think this can be both from an estate planning perspective, but also like a retirement perspective. So it’s very common for you know, our clients, you know, maybe who are you know, first generation immigrant that you know, they basically Say, Tim I am the retirement plan for my my parents. Right. So I think like building that into their into the our clients plan is gonna be really important because that’s, that’s part of their culture. That’s part of the goal. That’s I think that’s important. I think beyond that, you know, is more of the estate planning stuff. So I look at this as we have to, we have to secure our own estate plan. So our clients estate plan, but then what are the what are some of the things that can negatively affect, you know, and I’m talking negatively in terms of like financial, and maybe some of the legal and logistics, it could be the your parent, like elderly parents that don’t necessarily have a sound estate plan. So whether that’s, you know, we’ve talked about this, what’s the book “Mom and Dad, We Need to Talk” about some of those some of those conversations or some of those instances where, because of a lack of estate planning and foresight foresight, it’s negatively affecting the child’s plan or finances or time because they’re, they’re suing for conservativeship or you know, there, there’s just things that you’re don’t expect. So this is a tricky thing, because again, like I grew up in a household where we really talk about money that much, so it’s kind of a touchy subject. So how do you how do you go about having those conversations, and have, you know, have access to the detail that you need, but not being respectful, and not necessarily prying where you know, that it were, your parents made me feel uncomfortable, but they’re adult conversations that need to be had, because if you wait too long, then again, you’re you’re putting yourself in a position where you either can’t care or provide, you know, the support that you need to a parent, and it can ultimately, you know, negatively affect your own plan in terms of your, you know, financial resources, but also time. So, I think this is one of these things where, again, whether this is a family conversation around the holidays, or it’s a, an email or a letter, or it’s, Hey, this is a shared document, even give me passwords, and you know, I’m not going to access it until the time is needed to be able to do the things. But, you know, if something were to happen to your parents today, like, Do you know how to log into their different accounts? And what is the what’s the plan, and that can be a very uncomfortable conversation for some people, and for some people it’s not, like this, what it is, so I think, just to have that conversation, and understand where to go, what are the proper documents? What are the accounts? I think if you can do that before, you know, there’s capacity issues, or whatever, I think that’s gonna be really important. So that’s, that’s the big thing here. 

Tim Ulbrich  37:47

And that’s one of things I appreciate so much, Tim, about Cameron Huddleston book, you mentioned, “Mom and Dad, We Need to Talk” is, it does provide a nice kind of third party and she’s got some great suggestions in that book of specific questions to ask, how to ask them how to ignite the conversations. And, you know, I think having that third party resource, even if you’re referencing that of, hey, I read this book, and you know, got me thinking that we should have a conversation and, you know, likely it’s not gonna be everything addressed in one conversation, but it opens up the door. Sure, it’s gonna be uncomfortable, but for, as you mentioned, for some people, maybe not depending on how they grew up around money, but so important that we understand, you know, what, what is the potential financial impact, as you mentioned earlier, for some if that means caring financially for the parents. And even if that’s not the case, there’s just a lot to consider in the estate planning process that we want to make sure that we’re honoring the wishes and aware of what’s going on as well. So number six, our final item on the six moves to consider for financial moves for mid-career pharmacists, Tim, is an insurance checkup. Again, not the most exciting part of the plan to be thinking about here, I’m talking about term life insurance, long term disability, perhaps beginning to think about long term care insurance as well. I know we’ve talked about term life, long term disability, even long term care extensively on the show before. Is this an opportunity to reevaluate those policies, you know, I’m thinking of this situation just as one, where let’s say somebody in their early 30s, bought a 20 year term. Now they’re at the end of their late 40s. And they’re looking at that saying, hey, the terms coming up here in the next, you know, five, six years. So talk to us about how we might look at the insurance part of the plan here as a mid-career pharmacist. 

Tim Baker  39:25

I think like, in the absence of like, a, like an actual insurance calculation, you know, a lot of people will use a rule of thumb for term insurance of like, 10 to 15 times income, which again, that could have changed over the years. If, you know, if you have a 20 year policy, and you bought it in early 20s or 30s and now you’re you know, 40s 50s, like, what does that look like, you know, going forward? So I think like, I think, you know, and I think the other thing, too, is are there other wrinkles in your financial plan, i.e., hey, if I were to pass away, one of the questions I would ask myself is like, do I want to be able to send like, do I want to do I want Shay to have to worry about the mortgage or paying for the kids education? Right. So maybe that’s something that, like, I built into my, my plan going forward, and I didn’t have that, you know, 10 years ago. But now I do. So like, the other thing, too, is like, you know, again, mid-career, if you’re, if you maybe bought a house and moved out of the house, and now rented it, like, what, what happens from an insurance perspective? Like, do you want that property to be paid off? So I think like, I think, yeah, there’s there’s this renewal period, potentially, like, what do you need? And again, maybe it’s not, you know, maybe maybe you buy a 10 year term policy to kind of bridge it maybe don’t need another 20? Year? Maybe you do. But I think there’s also things that you can, in a proper calculation, say, Okay, this is important to me, this is not important to me, and then reflect that in insurance. So, obviously, I think the the life insurance is going to be really important. For some people, even getting it in place, which people just like the estate plan will drag their feet on that long term disability again, that’s one of the things I’m not really worried about short term disability, I think without it, I would just plus up the emergency fund, but from a long term disability, you know, again, how is your income changed over the over the course of the years, you know, if you’re, if you get it through a group policy, that’s going to typically be a function of what you earn. But, you know, if you have your own policy, should you  supplement that policy? Because your earnings have continued to climb? You know, does that make sense long term care, we typically, you know, the our thought here is that we want to, we want to support the client as much to age in place. So so much of the science or so much of the studies show that the longer that you can be in your own surroundings and age in your own home, whatever that looks like. So that typically means bringing in some help as you age, you know, that’s going to be important. So what can we do to buy a long term care policy to meet that minimum, and then again, different parts of the country, that’s going to be a different, different amount per month. But we typically want to look at this, believe it or not, in our late 40s, early 50s, because there’s a sweet spot of, you know, if you’re too early, it doesn’t make sense. If you’re too late, it doesn’t make sense in terms of the availability of the of the policies. So what does that look like? So, typically, late 40s, early 50s, is when we want to have that conversation. And again, a lot of people, they kind of just like security, they kind of blow this off, like this is not for me, but you know, I think more and more of of, you know, the the industry is trying to support clients as best they can, to, you know, age in their home residence, and you know, and do it versus going into a facility or something like that. So long term care is going to be really important. And then the last one, I would mention, Tim is property and casualty. So doing an assessment here, holistic plan, which is our tax tool, has this deliverable that we’re testing out now that looks at homeowner’s auto and an umbrella policy. And what it does is try to find gaps in coverage. And if you think about homeowners, if you haven’t dusted that off in a while, like what your home was, you know, if you bought a home at 35, and now you’re 40, over the last five years, your home has appreciated a lot. So are you underinsured in that regard? You know, do you have enough assets? Or is there is there a risk there that you should have an overarching umbrella insurance to cover risk if something were to happen, or if you were to get sued? So these are kind of, again, next level things to kind of consider and just doing a checkup from an insurance perspective, do you have the proper life, long term disability? Is Long Term Care something on the horizon? And then from a property and casualty perspective, are there risks there that we don’t know about that we should have kind of, you know, a circling back to make sure that the coverages that we that are currently in place are, you know, suitable for what you’re currently at in terms of, of risk?

Tim Ulbrich  43:53

Yeah, that’s a good call on on the property casualty just for the appreciation you know, is a good good reminder for me as you mentioned, I was thinking about we had a fire of a house in our neighborhood it’s probably been sitting now for over a year and a half note no movement on the home and all I can think of is it’s probably some type of insurance issue going on trying to work through the process but you know that that’s exactly the question that came to mind right of hey, you know, what, what is the replacement coverage that you have? What’s the timeline of that replacement and given the appreciation and the cost to rebuild a fresh look at those policies, you know, is certainly warranted.

Tim Baker  44:27

I mean, I just I just got a picture here from Shay- fire in the next neighborhood. Fire started in the garage with a lithium battery charger catching on fire. So this is like as as we’re recording here, this is the picture from Shay so like, this stuff is important. Again, if we haven’t dusted that off in a while you’re leaving yourself open, you know, to risk that we don’t and I think it’s a somewhat of an easy fix to mitigate that.

Tim Ulbrich  44:53

Well I hope all was good there. Thanks again for great, great stuff, Tim, as we look through these six mid-career for pharmacist moves. For more information and details on each of these as a reminder, go to yourfinancialpharmacist.com/midcareer. Again, midcareer is one word. And for those that are looking to work with one of our certified financial planners at YFP on your individual financial plan, which would certainly touch these six areas as well as many more, make sure to head on over to YFPplanning.com. Again, that’s yfpplanning.com. You can book a discovery call. We’d love to have the opportunity to talk with you to see whether or not our services are the right fit. Tim, thanks so much and we’ll catch up again here in the future. 

Tim Baker  45:32

Thanks, Tim. 

Tim Ulbrich  45:34

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

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YFP 357: Emergency Fund Check-Up: Five Questions You Must Answer


Tim Ulbrich, PharmD (YFP Co-Founder & CEO) covers five questions that you should ask related to your emergency fund to determine whether or not it is adequately funded and optimized.

This episode is brought to you by First Horizon.

Episode Summary

This week we’re diving deep into a financial fundamental that often flies under the radar: the emergency fund, also known as the rainy day fund.

Saving for unexpected expenses isn’t easy. It requires discipline, patience, and a leap of faith to stash away money for something you can’t predict. Especially when other financial goals, like paying off debt or investing, are competing for your attention.

In this week’s episode, we explore why having an emergency fund is crucial. From unexpected medical bills to home repairs or sudden job loss, life throws curveballs when we least expect it. But having a well-stocked emergency fund isn’t just about having the dollars to cover these surprises; it’s about gaining peace of mind and confidence.

Join host, Tim Ulbrich, PharmD, as he covers 5 questions you should ask related to emergency fund to determine whether or not it is adequately funded and optimized.  Remember, when life throws you a curveball, your emergency fund will be there to catch you.

About Today’s Guest

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

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

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

Key Points from the Episode

Episode Highlights

 

Links Mentioned in Today’s Episode

Episode Transcript

 

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YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.

$750*

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≥150K = $750* 

≥50K-150k = $300


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Variable: 4.99%+ (with autopay)*

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YFP 356: Love and Money: How to Successfully Navigate your Finances with a Partner


Tim Ulbrich, PharmD (YFP Co-Founder & CEO) digs into how to successfully navigate finances with your partner and shares 25 questions you can use to frame conversations around money.

This episode is brought to you by First Horizon.

Episode Summary

On this episode, we’re talking about love and money! Discussing finances with your spouse, partner or significant other can be tricky sometimes. Tim Ulbrich shares 25 financial discussion questions to help you navigate these important conversations along with a free resource you can download to help get you started. From reflecting on your “money classroom” and the way you were raised to understand money to how you feel about debt, savings, and other important goals, Tim guides you through these important conversations. There is no one-size-fits all to managing finances in a relationship – but sharing the same vision and goals with your partner can set you up for success. This episode is brought to you by First Horizon.

About Today’s Guest

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

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

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

Key Points from the Episode

  • Navigating finances with a partner, identifying money personalities, and setting goals. [0:00]
  • Financial planning for pharmacists, merging money personalities in relationships. [1:49]
  • Money personalities and setting financial goals. [5:50]
  • Financial goals, budgeting, and spending plan for couples. [10:39]
  • Financial goals, debt management, housing, transportation, and children’s education. [14:57]
  • Financial planning with a partner, including goals, investing, and retirement planning. [20:04]
  • Financial planning and management strategies for couples. [24:32]

Episode Highlights

“I think it’s really important that we spend time to reflect on and identify our money personality and how this does or does not match with our partner. For some of you that have been at this topic for a while, you know how emotional and how behavioral this whole topic of managing money can be. And so it’s important we spend time to reflect on and to get curious about what our money approach is.” – Tim Ulbrich [4:13]

“It’s really helpful that we reflect upon what is the approach that we have surrounding money? How might that have been influenced by the money classroom that we grew up in? The more we can understand that about ourselves, as well as our partner, and how we bring those characteristics into the relationship can be really helpful as we set a plan going forward.” – Tim Ulbrich [8:03]

“Is everything merged when it comes to the finances? Might we have some things separate? Some things merged? Of course, that’s an individual decision for everyone. But ultimately, on some level, we want to have a shared vision, even if some of those items might be separate.” – Tim Ulbrich [8:38]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody Tim Ulbrich and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week we’re talking love and money how to successfully navigate your finances with a significant other spouse or partner. Easier said than done right? During the show, I discuss how to identify with your money personality and how this does or does not match with your partner strategies for setting and achieving goals together 25 financial questions and discussions that every couple should have? Hang with me. I’ll give you a resource and a link to download those questions and advice from the YFP community on what has and has not worked for them in their own journey, navigating this important topic with their partner. 

Tim Ulbrich  00:45

Now before we jump into this week’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good income. But have you ever wondered, Am I on track to retire? How do I prioritize and fund all these competing financial goals that I have? How do I plan financially for big upcoming life events and changes such as moving, having a baby, changing jobs, getting married or retiring? And perhaps why am I not as far along financially at this point in my career as I thought I would be? Well, maybe the answer is that your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox: that’s your salary. But without a vision and a plan that it good income will only go so far. That’s why we started Your Financial Pharmacist where YFP we support pharmacists at every stage of their careers to take control their finances, reach their financial goals, and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners works with pharmacists all across the United States and helps our clients set their future selves up for success while living a rich life today. If you’re ready to see how YFP can support you on your financial journey, you can learn more by visiting your financial pharmacist.com/learn again, that’s your financial pharmacist.com/learn. Alright, let’s hear from today’s sponsor First Horizon and then we’ll jump into the show. 

Tim Ulbrich  02:16

Does saving 20% for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. For several years now we’ve been partnering First Horizon who offers a professional home loan option AKA a doctor or pharmacist loan that requires a 3% downpayment for a single family home or townhome for first time homebuyers, has no PMI and offers a 30-year fixed rate mortgage on home loans up to $766,550 in most areas. The pharmacists home loan is available in all states except Alaska and Hawaii, and can be used to purchase condos as well. However, rates may be higher and a condo review has to be completed. To check out the requirements for First Horizon’s pharmacist home loan and to start the pre-approval process, visit yourfinancialpharmacist.com /home-loan. Again, that’s yourfinancialpharmacist.com/home-loan. 

Tim Ulbrich  03:20

Hi there, Tim Ulbrich here flying solo this week as we talk about love and money: how to successfully navigate your finances with a partner. Now first things first, this is a heavy topic right? And I do not have all the answers. When it comes to our financial plan for Jess and I we have found the system- keyword system -that works best for us. But we are far from perfect. We’ve made our fair share of mistakes. We haven’t always been on the same page. And it certainly has required compromise and grace on both sides. So this is not a preach and teach episode. That would be very helpful. Rather, the intent is to give you some things to think about and conversation starters, to find the system that works best for you. Because at the end of the day, that’s going to be what matters most.

Now, before we jump into some of the tactical strategies, and some of the questions and conversation starters, I think it’s really important that we spend time to reflect on and identify our money personality and how this does or perhaps does not match with our partner. Right for some of you that have been at this topic for a while, you know how emotional and how behavioral this whole topic of managing money can be. And so it’s important we spend time to reflect on and to get curious about what is our money approach? What is our money, personality? What is our money classroom that we grew up in the household that we grow up in financially? And how does that perhaps shape how we manage our money today and ultimately how we merge two of those money personalities together as we try to work and get on the same page. So some questions to think about here as it relates to the money personality. Do you approach money in the same manner that you were raised? Have you reflected upon the money classroom that you grew up in? And maybe what worked and didn’t work? Was money in your household an open conversation? Was it a closed conversation? Was it stressful? Was it calm? What was the emotional tone surrounding money? Was there transparency around money? Or was it a taboo topic? What were the spending habits, what was said? And what were some of the unsaid lessons that you learned along the way? And how did all of this potentially contribute to the money personality and the habits that you employ today that you ultimately bring into your relationship? Right, good and bad. Probably true for all of us.

If you want some guidance on this, there’s a great resource, we’ll link to it in the show notes. The Money Couple has five different money personalities, they have a book and an assessment if you want to really dig in and go further on this topic. And they in that resource they referenced five money personalities, those five personalities are number one, the Security Seeker. Number two, is the Saver; number three is the Spender; number four is the Risk Taker; and number five is the Flyer. Now, anytime we do these assessments, right, we’re running a risk a little bit in terms of bucketing ourselves into one of these approaches, when often we may have a little bit of more than one of these. And that’s one of the things I like about this tool is they combine two of these, what they call a primary and a secondary to come up with your money profile. So for example, let’s say that you identify as a saver/security seeker. Okay, so just some quick definitions here a saver, pretty much their outlook is that as they share in their own resources, A penny saved is a penny earned. You make things happen by getting the best deal, right, you can often be someone that’s very thrifty. Characteristics of a saver would be someone who’s trustworthy organized with money, they also would have some real challenges potentially, including maybe obsessing over money, having a hard time letting go. And they would rarely spend compulsively, they really liked the plan. And they really liked that good deal. Now a Security Seeker, which here was the secondary personality, they have an outlook that better safe than sorry, right protection and security is the definition here. So these individuals make things happen by planning for the future. And they’re often very well prepared. So some defining characteristics here would be they can investigate things thoroughly do a lot of research challenges, of course, could be, you know, some of the potential and again, letting, letting go. And maybe finding that balance that we often talk about in the show of living the rich life along the way. Certainly also trustworthy with their finances, they want to make decisions by confirming that there’s a plan, right? So they’re not, they’re not gonna be very spontaneous, and they’re spending money like to have multiple options. This is just one example, one assessment. But it’s really helpful, again, that we get curious that we reflect upon what is the approach that we have surrounding money, how might that have been influenced by the money classroom that we grew up in, and the more we can understand that about ourselves, as well as our partner, and how we bring those characteristics into the relationship can be really helpful, as we then set a plan going forward.

Tim Ulbrich  08:27

So once we really think about some of those money, personalities, you know, I think it’s then that we want to really figure out how can we set and achieve goals together? Now we’re gonna get into a little bit about, you know, perhaps is it everything is merged when it comes to the finances? Might we have something separate? Some things merged, completely separate. Of course, that’s an individual decision for everyone. But ultimately, on some level, we want to have a shared vision, even if some of those items might be separate. And I think it’s so important, I’ve talked about this on the show before, that we start with the vision, and not necessarily start with the budget or the spending plan, right? Not start in the weeds, but really start on what is the dream that we have financially? What does success look like for us collectively as a unit? And can we agree upon that vision, that direction, that dream that we have for us financially, right? That’s a much, I say, easy but easier conversation than getting into the individual decisions. This is also the place where we really want to get all of those goals, all of those ideas out of our heads onto paper, we want to see what overlaps what doesn’t overlap. Obviously, there’s gonna be some compromise here along the way, but once we get them to be shifting from unsaid to said, right, so Jess can share her goals, I can share my goals, we can see what what is similar, what’s different, and then we can begin to start to compromise and prioritize those. That’s really where we can start to then begin to implement and execute on that vision. So for us, I’ve shared this before on the show, typically what we do is want once a year we’re looking at, hey, what does success look like for us over the next 12 months? Right? Keeping the bigger vision in mind? What does success look like for the next 12 months? And what are those things that we want to focus on spending? You know, so we’re looking at, hey, are we on track with savings goals for the future? And retirement planning? If not, what are some things that we want to surplus in the following year? What do some of the experiences look like for us in terms of vacations, home projects, things like that? What are the giving goals for the year right? These are the things that we need to begin to, again, get out of our heads onto paper so we can start to set a plan. Now, I think it’s really helpful here, especially if you have two individuals that are on completely different pages that this is really really where a third party can be very helpful. I know for Jess and I, our financial planner at YFP has been really helpful in getting us to have conversations not only together when we’re in the room with a financial planner, but also in between those meetings to make sure that this is an open conversation as we can possibly have. Now, I have some questions here that I think are good conversation starters. Right? I started the episode by saying this is not about telling you what you should do. This is really about helping to start conversations, stimulate some discussion so that you can figure out what the system is that works best for you. So I’ve organized these questions into different areas. And I have 25 of them, I’m just going to mention them briefly. And we have a one page resource that you can download for free that will have a list of these questions. You can go to yourfinancialpharmacist.com/25 – two five again, yourfinancialpharmacist.com/25.

Tim Ulbrich  11:43

 Okay, so in the spirit of starting conversations, here are 25 financial discussions that I think are worth having. And let’s start with the first bucket, which is setting goals, budgeting and just the overall approach to managing the finances. So the first question is, have we discussed and agreed upon our short term, midterm and long term financial goals? Now you can define these differently, I think of short term goals is within the next 12 months, next year, mid-term, one to three years in long-term greater than three years. Obviously, you can determine the timeline that makes the most sense of you. And then furthermore, how can we best set, review and update these on a regular basis? So there’s that initial exercise, and then how often are we going to be reviewing these so that we can make sure we are able to implement those in the plan? Sounds simple, right. But everything starts with the vision and getting to some level of an agreement on the shared goals.

Second question here is have we developed and agreed upon monthly spending plan, budget, whatever you want to call it, that accounts for all of the income and all the expenses? And does this spending plan, budget, again, whatever you want to call it, does it represent and include the goals that we just worked through in the first question? Now, again, for some individuals, and I’ll share some data here in a little bit from our community, for some individuals, everything is merged. Some they have some separate, some is completely separate. So obviously, you have to work through this as it relates to how you treat the merging or lack thereof of the accounts. But do we have representation within our spending plan, approach, whatever that looks like lots of different ways to do that. So that the goals, there’s an actual plan to implement and achieve those goals.

Question number three, does one of us take more of the lead than the other when it comes to managing the finances? And if so, are both of us aware of our overall situation? How do we ultimately make sure that both parties are aware of the progress if one person is taking the lead. I have seen that that often, not always, often is the case where one person may take the lead. So if that’s the case, what’s the plan? What’s the strategy? What’s the structure so that both parties are aware of what’s going on? And the overall progress? Right, the overall situation?

Number four, I’ve alluded to this a couple times is the desire to merge all of our finances; to keep some separate, some merged; or to have everything completely separate. Now for Jess and I, we’ve made the decision that everything’s merged, I’m not here to tell you that you should do that, or that’s the only way. But really having that conversation of what’s best for us, is it all merge is a little bit of both, or is it everything that would be completely separate. Number five, do we need to check with one another before spending any money? If so, is it a certain amount? What’s the criteria for this? How do we determine this. Some, you know, couples might have a large purchase or something that would trigger hey, we need to have a discussion about this. So what are those criteria, if any exist when it comes to making some of those bigger purchases? So that’s the first group of questions around setting goals. budgeting and your overall approach. 

Tim Ulbrich  15:01

The second group of questions is around debt management. Debt Management. So question number six here on our list of 25. is how much debt have we acquired thus far? Right? Do we know? Do we know the numbers? Is everyone aware of the debt that’s that’s accrued? And what will be our plan to pay off the debt? Do we both understand each other’s debt position and the feelings perhaps just as important, the feelings towards the debt? Right, for some people, I’ve talked about this on the show before for some people, there can be a significant aversion to debt? Others maybe that’s not the case. So if you have two individuals where you have opposite feelings on debt, that’s an important conversation to have. Are we treating this as our debt? Or is this separate debt? Right? When you think about things like credit card debt, student loans, car payments, or other things that especially may have been existing coming into the relationship. Number seven, again, on debt management, how comfortable are we with having debt? And I would encourage you to break this down further to different types of debt, right, including student loans, credit card, mortgages, car loans, etc. So not just a blanket debt good or bad, but how do we feel about different types of debt? And then final question on debt? Number eight on our list is do we view each other’s debt as our debt? Or is this your debt? Right? And how does that potentially approach how we pay that off? All right, third group of questions is around housing and transportation. So question nine on our list is how do we feel about renting property versus owning a home hot topic right now, given where the housing market is at, given where home prices are and where interest rates are at? And if we already own a home, are we okay with the current situation? Or is there potentially a desire to move? Right? Again, we want to get a lot of these questions and maybe things that we’re thinking about making sure we have an opportunity to discuss with one another. So if we don’t own a home already, how do we feel about renting versus owning a home? What’s that timeline? Like if we already own a home? Are we thinking we’re set? Or is there a potential or desire to move? Next question around housing transportation, number 10 on our list, if currently renting, and there’s a goal to own a home, do we agree on the location, on the purchase price, and the amount of downpayment that would be needed, right? That’s gonna have a big impact on the budget. And again, if things are separate, and not merge, how are we both contributing to that downpayment? And getting ready for that purchase? Number 11, as relates to transportation? Do we view our cars as a necessity? Is it a luxury where we lease? Are we gonna buy our cars? If we buy our cars? Are we paying them outright? Are we going to finance part of it? How do we view the transportation part of the plan? And again, let me pause here and reinforce what I was saying towards the beginning. I don’t really think there’s a right or wrong answer here. The goal is to really get you thinking about, hey, how do we feel individually? How do we feel collectively as a unit? You know, as I think about this question here on transportation, it reminds me of Ramit Sethi’s book, I Will Teach You To Be Rich. I’ve referenced that many times on the show before and one of the things he talks about he starts the book is this concept called Money Dials. And what he’s referring to there is identifying those things that derive the most significance and meaning for you as a part of the financial plan and have a plan to spend money, what he’s referring to is the dial, dial that up. And alternately for the things that you maybe don’t care as much about financially, dial that down, right. For some people, you know, transportation cars may be something that’s has significant value, and for other people, not so much. 

Tim Ulbrich  18:35

Alright, next group of questions relates to kids, children. So number 12 on our list is how do we feel about one of the biggest expenses we often see in the financial plan – daycare? What’s our budget for this? And how does it fit in with other financial goals? Number 13, how do we feel about public versus private K through 12? education? You know, again, this might certainly link back to the home purchase and the location and and where you’re looking for home based on schools. And if it is private education is the goal, how will we plan for this and prioritize it with other financial goals? Number 14, again, in this area of children, how do we feel about paying for our kids college? This is a hot topic, right? You often see maybe people that are split on this. And how do we plan for this? Are we hoping to pay for it in its entirety? A partial amount? Are we banking on you know, scholarships or other funding other family to help taking on debt? What’s the plan for that? And then last question, as it relates to children, what ideas and strategies do we want to employ to teach our kids about managing money? Right? We started this episode talking about the money classroom we grew up in. And for those that have children in the home that you’re raising now, they’re obviously growing up in their own money classroom in your house. And so what strategies are we employing and how are we approaching teaching kids about money? What’s our philosophy about behind that, right.  So this this gets to things like, you know, our philosophy around alarm allowances, and giving, and how we’re going to teach some of those lessons to our kids. And at what ages are they ready for those lessons?

All right, next group relates to saving, investing, and retirement planning. So question number 16, when it comes to the emergency fund, are we comfortable with three months? Right, your general rule of thumb recommendation three to six months of essential expenses? Are we comfortable with that? Three months, six months, something in between, something different? Have we discussed that? Again, are we on the same page with that?

Number 17, what financial goals are we trying to achieve by saving or investing? What does success look like, right? So we often talk about the importance of saving and investing for the future. But for what? What are we trying to achieve? And what does success look like? Number 18? What does retirement look like for both of us? Are there similarities? Are there differences? What’s the desired age? Right? What are the activities? What what are we working on? Which is the next question: what activities are we engaged in during retirement? What are we doing together? What are we doing separately? Right, beginning to envision so that we’re approaching that retirement phase with intentionality.

Next question, how much should we be saving and investing for retirement each month? And how do we balance and prioritizes with other goals? And then final question here on saving investing in retirement planning? What is our risk tolerance for investing? And again, if we have two different risk profiles? How are we approaching that as we’re saving, investing and planning for the future?

Final set of questions as a group, I’m just calling miscellaneous questions. Got four left on the list here. Number 22. How does each of us feel about giving? How much? How often?Where? How will we plan for this? And what priority? Are there certain things that we have to have achieved before we do this or not? Number 23: Do we plan to do the financial plan ourselves? Or are we looking to hire a professional to assist? Are we on the same page about this? If the goal is to hire someone, what are the criteria we’re going to use that will help us find the right fit? Who’s taking the lead in this conversation? What does that look like for us as a unit? When it comes to assisting family financially, whether that be caring for elderly parents, maybe that’s supporting a family member need or some other situation, how do we feel about this? Right? How do we feel about this financially, and the impact that it can have in other parts of our financial plan? And then finally, question number 25? How will we strike that balance between saving for the future and living a rich life today? What does it mean to us to be living that rich life today? And how are we prioritizing that in the financial plan?

So again, that’s 25 conversation starters, there’s a lot there, right, the different categories we talked about, you can download that list again, yourfinancialpharmacist.com/25. I hope you’ll reference that maybe print it off, and have some of those discussions with your partner. Next, I want to give some input not just from me, but from the YFP community on what has and has not worked for them in their own journey of navigate navigating this topic with their partner.

So I recently posted a poll on LinkedIn asking the following question, that for those that are working with a significant other spouse or partner on their finances, which of the following best describes your situation: is everything merged or all the finances merged? Are some things merged something separate? Or is nothing merged? In essence, everything is separate. And what we saw from that data was just shy of 50%- 49% responded that all of the finances were merged. 42% responded that some were merged and some are separate. And 10% responded that nothing was merged, and that everything was separate in their accounts. Now, some of the comments and advice that I thought were helpful to pass on and again, some some different perspectives here. Kelly had this to say lots of systems can work. But it all starts with transparency. It’s not uncommon for one person in the household to do the bill pay, and thus see more of the transactions. Periodic money dates can help facilitate conversation. A favorite topic in our house is identifying mutual goals and where we want to prioritize funding for the year, sometimes their goals are not aligned. And that is important conversation, as well. So Kelly, comes transparency. Having that open conversation having those periodic money does it dates and sometimes those goals aren’t aligned, and important conversation to get on the same page. Tracy said that we have a joint household account, where we contribute an equal amount each month to cover our household expenses, and some minor rainy day savings. We tossed around percentage based on income but landed on equal flat dollar amount. We also have separate personal spending accounts for ourselves, so we don’t feel like we have to justify personal spending to one another. We’ve divvied up who contributes and covers what to each savings bucket and who does the insurance via their paycheck all this to say after typing this that our marriage is basically a business. I thought that was some humor to add in there as well. Cassidy said my husband, I follow the 50-30-20 budgeting process right now. We have a joint account where 50% of our income goes towards household expenses and joint purchases, a joint high yield savings where we both contribute 20% of our paycheck for larger goals. And then 30% goes in our fun money personal checking accounts. So far it’s working great ensures that we’re both contributing an equitable portion of our income.

Final one that came in is someone shared just got married in summer of 2023. My husband wanted to keep our finances separate, except for one joint checking to pay utilities out of. This came from seeing his parents get divorced about six years ago and had always fought about money. He did not want that to be us. So going into the marriage, we plan to keep our own savings. I that’s a great example before I go further with this one of how that upbringing, right, how that money classroom can impact how we approach our money today. She goes on to say that we’re now nine months married, and we’re getting ready to buy a house with the need to pay the mortgage, we’re rethinking finances and will likely be combining more of our money. He prefers a separate checking account for each item, such as utilities and mortgage, we still plan to keep the money we had pre-marriage as our own stock savings, mutual funds, etc. We have a joint credit card for joint expenses and groceries that’s worked well. We still have separate credit cards. Being upfront about money has been so important to us. We’ve had several long conversations about money, pre-marriage, and within the last few months to get us set up for success. So it sounds like here, there’s even some transition, as they’re getting ready to purchase a home. They’ve been married now just shy of a year, maybe perhaps more that’s moving into the joint accounts, but a system that they’re still working through.

So I appreciate all of those that contributed providing different ideas. So again, the spirit of this right is to identify that system that works best for you. Right works best for you and your partner, really accounting where we started with reflecting on and getting curious about what is the money mindset? What’s the money personality approach that I have? And do I have a good understanding of that for me, as well as my partner? Really coming up then with those shared goals? That vision we talked about? What does success look like in the short, mid and long term, and then beginning to work through those individual areas of the financial plan.

Tim Ulbrich  27:19

Well, certainly last but not least, as many of you know, we have a team of Certified Financial Planners at Your Financial Pharmacist that we offer fee-only financial planning and tax planning, we work with pharmacists all across the country. And certainly we’d love to have the opportunity to work with you. And we’d love to have an opportunity to talk more to see whether or not the services are a good fit. You can learn more about our fee-only financial planning services again at yourfinancialpharmacist.com/learn. Again, that’s your financial pharmacist.com/learn. I think, as I mentioned a couple times that third party, right, that third party can be so helpful to facilitate some of these conversations and to begin to execute on the different aspects of the financial plan. Well, thanks so much for listening, and have a great rest of your week. 

Tim Ulbrich  28:05

Before we wrap up today’s show, I want to again, thank this week’s sponsor of the Your Financial Pharmacist Podcast,  First Horizon. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists and the YFP community have taken advantage of First Horizon’s pharmacist home loan, which requires a 3% downpayment for a single family home or townhome for first time homebuyers and has no PMI on a 30 year fixed rate mortgage. To learn more about the requirements for First Horizon’s pharmacist home loan, and to get started with the pre approval process, you can visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan. 

Tim Ulbrich  28:51

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

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YFP 355: 5 Financial Moves to Make After Graduation


Sponsored by YFP+, YFP Co-Founder Tim Ulbrich shares five key elements for building a strong financial foundation after graduation.

Episode Summary

On this episode sponsored by YFP+, host Tim Ulbrich outlines five key elements for building a strong financial foundation. Whether you are a pharmacy student looking ahead, a soon to be 2024 graduate, or a resident, fellow, or new practitioner trying to find solid financial footing, Tim shares what it means to build a strong financial foundation, no matter where you are in your career.  

With the average pharmacist facing staggering student loan debt and often lacking financial knowledge, Tim shares practical strategies to help pharmacists to begin to navigate debt management, investing, insurance coverage and retirement planning.

About Today’s Guest

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

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

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

Key Points from the Episode

  • Financial moves after graduation, including debt management and investing. [0:00]
  • Financial planning for pharmacists, including student loan debt and income management. [3:52]
  • Financial planning for pharmacists, including assessing current financial state and setting long-term goals. [8:28]
  • Proactive budgeting to prioritize financial goals. [13:50]
  • Investing early and often for financial success. [18:24]
  • Investing for pharmacists, including retirement accounts and tax-advantaged savings. [23:39]

Episode Highlights

“Without a plan, pharmacists certainly may be income rich, but net-worth poor.” – Tim Ulbrich [6:48]

“I saw firsthand how good decisions early in the career could certainly accelerate the financial plan, as I now look back nearly 18 years as well as how some of those bad decisions had a lingering effect in our financial plan. That’s part of the reason why I’m so passionate about teaching this topic to pharmacists at all stages of their career.” – Tim Ulbrich [8:08]

“At the end of the day, money is a tool. And we’ve really got to strike this balance between making sure that we’re taking care of our future selves, making sure that we’re putting this foundation in place today, and also living a rich life along the way.” – Tim Ulbrich [12:21]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast for each week we strive to inspire and encourage you on your path towards achieving financial freedom. On today’s episode, I’ll be covering five financial moves to make after graduation. Whether you’re a student looking ahead, a soon to be 2024, grad, or resident fellow or new practitioner trying to find solid financial footing, this episode is for you. We’ll be talking all about what it means to build a strong financial foundation, including practical strategies that you can implement in your own plan. 

Before we jump into today’s show, I have two exciting announcements. First up, make sure to sign up for our next YFP webinar on Thursday, April 25 at 8:30pm Eastern, where pharmacist and real estate agent, Nate Hedrick, The Real Estate RPh, co-host of the YFP Real Estate Investing Podcast, will be presenting on your checklist for buying a home in 2024. During this free webinar, Nate will walk you through how to know if you’re ready to buy a home. We’ll discuss the current state of the housing market and give valuable insights into the home buying process. You learn more and register at yourfinancialpharmacist.com/webinar again, yourfinancialpharmacist.com/webinar. 

Second announcement last year we launched a nonprofit YFP Gives that aims to empower a community pharmacist to give to alleviate the indebtedness of the PharmD students and graduates, to help enhance the financial literacy within our profession, and to support other pharmacist-led philanthropic organizations and efforts. We’re thrilled to announce that our first round of the YFP Gives scholarships is now live! We’ll be giving out three $1,000 scholarships and applications are due on April, 30 2024. For those eligible for the scholarship include PharmD students and new practitioners within five years of graduation. You can learn more and apply at yfpgives.org/cholarship. Again, yfpgives.org/scholarship. 

Alright, let’s hear more about our new online community YFP Plus, and then we’ll jump into today’s episode.

Do you ever feel like you’re trying to figure out this money stuff all on your own and aren’t sure where to turn? Maybe you’re overwhelmed with determining how to tackle your student loan repayment. Or perhaps you’re living paycheck to paycheck despite making a six figure income. Maybe you have a negative net worth and aren’t sure how to climb out of debt or make progress on your financial goals. Trust me, I’ve been there. When I finished my residency, I was starting at $200,000 of student loan debt and confused about how to best navigate the transition to new practitioner. I had a great income, but was living paycheck to paycheck and felt trapped. The good news is that you don’t have to continue feeling that way. At Your Financial Pharmacist, we want pharmacists to have the education, resources, and support they need to get a plan in place so they can stop feeling overwhelmed and they can use their six-figure income in the best way possible. That’s why we created YFP Plus an online membership community that empowers pharmacists to gain the knowledge and skills necessary to take control of their financial well being. Inside YFP Plus you have access to exclusive on demand courses. Like the prescription for student loan success, you have access to the right capital financial planning tool so you can track your debt assets and net worth to view your financial progress. You’ll have access to exclusive live events, monthly themes and challenges, a space to ask questions to YFP financial planning and tax professionals, and a community of like minded pharmacists on a similar financial journey as you. If you’re ready to get started inside YFP Plus to take control of your finances, visit yourfinancialpharmacists.com/membership. And if you sign up today, you’ll get a 30 day free trial. Again, that’s yourfinancialpharmacist.com/membership. 

Hi there, Tim Ulbrich here welcome to this week’s episode of the YFP podcast. Excited to be talking about this very important financial transition, whether it’s going from student to new practitioner or resident or fellow to new practitioner, critical five year window, where we need to really be thinking about how we can best optimize the financial plan and get on some solid financial footing. So in the next several weeks, we’re about 12,000 pharmacy students that are going to be awarded the doctor of pharmacy degree joining them of course in the workforce will be those completing postgraduate training, whether that be residents, fellows, graduate students, and these graduates on average are gonna make about $120-$130,000 a year of course, depending on where they live in the area of employment they choose. And if we assume that they work a 40-year period with an average raise cost of living about one to 3% they’re going to earn approximately six to $9 million throughout their careers. Let me say that again: about six to $9 million of gross income throughout their careers. 

Now if we assumed that about 30% of that income would be eaten up by federal income tax, FICA tax, which is Medicare and Social Security, state income tax, health insurance premiums, and a small contribution to an employer sponsored retirement plan, that leaves about four to $6 million of take home pay. So again, we start with about six to $9 million of gross income, we’re left with about four to $6 million of take home pay. Now I know that’s imperfect math, right? There’s a lot of assumptions that are in there, but just Just stay with me for a moment. We can debate how far a six figure income does or doesn’t go. But let’s agree that a pharmacist income on average, is about $50,000 above the average household income in the United States.

So if we look at the average household income in the United States, it’s about $75,000 per year, it was the average pharmacist’s income according to the Bureau of Labor Statistics, that’s about $130,000 per year, right. So by all intensive purposes, pharmacists make a good income. And if it’s managed wisely, it should be more than enough. So what’s the problem? Well, I’ve talked with hundreds of pharmacists who make a great income but feel like they aren’t progressing financially. They feel stuck. And yes, student loan debt is a big contributor, but it’s certainly not the sole culprit. And I know that because we recently had three-plus years worth of a pause on federal loan payments starting back at the beginning of the pandemic, and those feelings of making a high income, but not progressing financially didn’t go away during that time period. The main reason I see pharmacists experiencing financial stress is the omission of having an intentional plan in place that includes clear goals, and a system that prioritize and funds those goals on a monthly basis. It’s proactive, intentional planning. Without a plan, pharmacists certainly may be income rich, but net-worth poor.

That’s really what today’s episode is all about. It’s about having an intentional plan, and building a strong financial foundation early in one’s career. Now, I know the importance of this because I lived it. 

So as many of you know, I graduated from pharmacy school in 2008. I did a year residency, in 2009. Came out of residency entered an academic position. And I remember vividly having that feeling of, wait a minute, I make a good income, but I don’t feel like I’m progressing financially. And the main reason for my journey for our journey as a family is that early on, we were navigating through a sizable amount of student loan debt, a little over $200,000 of student loan debt. And we would eventually get that paid off in the fall of 2015. That was a big milestone for our journey, certainly one that I’m excited about and excited and teaching others about as well.

However, we made that journey more difficult than it needed to be. I didn’t understand terms like Public Service Loan Forgiveness, there wasn’t great information out there. We paid more interest than we had to in the journey. We perhaps, weren’t looking at how other parts of the financial plan fit together while we are also pursuing that debt repayment. And because of that, I saw firsthand how good decisions early in the career could certainly accelerate the financial plan, as I now look back nearly 18 years as well as how some of those bad decisions had a lingering effect in our financial plan. That’s part of the reason why I’m so passionate about teaching this topic to pharmacists at all stages of their career. Here, we’re of course talking about those that are making that transition. Now let’s talk about what I mean by having a strong financial foundation. 

So through my own experience, and in teaching 1000s of other pharmacists on this topic, I’ve come to appreciate really five key elements that are critical to building a strong financial foundation. Now let’s be clear, this is not five things that once we check the list, this is the finish line, right? Think of this as literally the first couple blocks that we’re putting in place on the foundation of our financial plan so that we can grow and thrive in the long term and do so with confidence. So let’s talk through what these five areas are. 

Number one is completing a financial vitals check. So I believe the starting point is to complete an honest self assessment of where you are today with your personal finances as a pharmacist, right. no need for judgment, no need for shame. Where are we today? Because before we can implement a plan, right, we have to have a good idea of our progress made thus far and what are some of those opportunities that we could potentially improve upon.

So here are just a handful of questions to really help you consider areas of the financial plan that might require your attention. Number one, do I have an emergency fund in place, approximately three to six months worth of essential expenses? Number two, do I have any revolving high interest rate credit card debt, right? I’m not talking about the credit card charges that you pay off each month but that revolving debt that’s accruing. Perhaps 20-25% interest. Number three, do I have an optimize student loan repayment strategy? Critical as we look at many new practitioners and the average debt load that folks are carrying, this is often a key piece of the financial puzzle that we have to put in place, and then build around it. Do I have sufficient own occupation, long-term disability insurance that covers about 60% of my income in the event that I’m unable to work as a pharmacist? A few more questions. Do I have sufficient term life insurance to care for loved ones who depend on my income? If that’s applicable. Do I have adequate professional liability insurance? And do I know my retirement number? Have I thought about, certainly far away, but what is that number that we’re shooting for in the future? Am I on track? If not, how much should I be saving each month to ultimately achieve that goal? We have a lot of information, and resources in each one of these areas available at yourfinancialpharmacist.com.

We certainly have talked through many of these topics at length on the podcasts and the blog, so make sure to check out those resources. Furthermore, if you if you want to go through some of this in more detail yourself, we have a really neat tool available called the YFP Financial Fitness Test. We’ll link to that in the show notes. It’s a really fun interactive quiz that will take you through essentially conducting a vital check in and help identify some areas that you perhaps can improve upon, and that you might want to implement as you look at setting goals for the future. So that’s step number one, completing a vitals check

Number two. Step number two is setting the vision setting the vision. So after we reflect on the current state, right, the current situation, the Financial Vitals Check. It’s time to really establish a vision for the future. Now, this is the area where I think it’s really helpful that we let ourselves dream a little bit right, we just perhaps bogged ourselves down and kind of looking at the current state and the reality, maybe that didn’t bring the greatest feelings of joy. And so this is our opportunity to really let ourselves dream a little bit. Spending time reflecting on questions like what does it mean to be living your rich life? What brings you the most joy? As it relates to the financial plan? Are there experiences such as traveling, giving spending time with family and friends or something else? Right, at the end of the day, money is a tool. And we’ve really got to strike this balance between making sure that we’re taking care of our future selves, making sure that we’re putting this foundation in place today, and also living a rich life along the way.

One more final question to reflect upon, if you were to find yourself in a position where you were financially independent, the find that you are no longer required to work. How would you be spending your time perhaps for some of you? The answer is, hey, exactly like I am is great. Right? This is meant to help us identify what are those things that derive and give us the greatest significance, and meaning in our lives. And for every person, this certainly can look different. So that’s number two. Step number two, letting ourselves dream setting the vision, before we start to chart the path forward. Alright, step number three, is to develop the spending plan to develop the budget to develop the system that’s going to help us bring this vision to reality. Right. So in step number one, we identified what are some of the opportunities, what are some of areas that we might want to focus on. Step number two is really about the vision of where we want to go. 

Step number three, is now about making that come to life. Now, while one spending plan method, budgeting method, whatever you want to call, it will never be right for everyone, I really believe that the zero-based budget is a great place to start, especially for those early in their career, those that are looking to get back on track. Reason being is that with a zero-based budget, you give every dollar you earn a job before the month begins. This is a proactive planning process. Now, I’m not suggesting this as a method that you stay with forever. This certainly can feel onerous at times. But as we’re looking at defining how we’re spending our income, making sure that we’re allocating income towards our goals, and that we have a good track on what that income is and how it’s being spent. This system is really going to help us shine a light on that. So the goal is again, we’re doing this proactively is to spend your paycheck essentially down on paper to zero, and to ensure that your financial goals can be funded rather than hoping you have money leftover at the end of the month.

Okay, so for example, let’s say that after step one, which again, step number one was completing the vitals check, and step number two is really setting that vision. Let’s say you identify three goals that you want to focus on over the next year, just as one example. Let’s say goal number one is to save $500 per month for an emergency fund, and up until it’s fully funded at $25,000. Let’s say that you want to save $300 per month in a Roth IRA to supplement your retirement savings. And finally, is the third goal. Let’s say that you want to save $300 a month and a travel account to fund one trip per year. Okay, so in that vision setting, you determine that travel was a was an item that was really important. So in this case, with these three goals, right, we have some money set aside in earmark for the emergency fund some for retirement savings in a Roth IRA, some in a travel account, when you go to work the budget through the budgeting process, you want to have those three areas represented just like any other expense, so that you prioritize these before the month begins.

Again, we’re working proactively really important, rather than hoping we’ve got something leftover at the end of the month. So just like we account for a mortgage, or rent payment, or utility payment, or a car payment, right, we want to think about our goals in the same sense, and making sure that we’re building our plan accordingly to prioritize and fund those goals. In my experience, and in talking with others, so much of the stress, so much of the feelings of overwhelmed and confused around the financial plan comes from having all of these competing priorities swirling in our minds, without necessarily a plan for how we’re actually going to achieve them. Right. And so what we need to do, and what we’re trying to do here in step number three is get those ideas out of our head onto paper. So we can list them down, we can prioritize them, and we can start to put a plan in place to actually achieve those goals and to see the progress.

Now, sometimes we realize that, hey, in this season, or in this moment, we’re not necessarily going to get to all of those goals. That’s certainly normal. But at least we have an expectation of what’s happening. And we’ve been intentional with proactively planning how we’re going to work through those different goals. Now, if you’re ready to try this out yourself, we’ve got a free budgeting template you can download, we’ll take you through this process that I’m referring to here. You can download that at yourfinancialpharmacist.com/budget, we’ll link to that in the show notes as well. Again, your financialpharmacist.com/budget. Alright, that’s step number three, developing the spending plan. 

Step number four, is automating your plan. Now I’ve talked about this several times on the podcast, and I’ve referenced that this has really been one of the most transformational things that Jess and I, over the last 15-16 years since I graduated, have really evolved into that has had a significant impact on our own plan. So once we do the work in steps one through three, right. Once we’re able to complete that vitals check to identify what are some of those gaps, what their progress once we’re able to set the vision once we implement the spending plan. Now it’s time that we make sure we execute, right we actually achieve these goals. And that’s really what automation is all about. I

n his book I Will Teach You To Be Rich , Ramit Sethi says that automating your money will be the single most profitable system that you ever built. And I agree automation is so apparent, so effective, so easy to implement, yet vastly under utilized. It involves essentially scheduling the transfer of funds to the predefined goals, right? We just talked about that in the previous steps and doing so confidently knowing that we’ve already accounted for these in the budget, right, because we were proactively planning during that process. Sure, it takes a bit of time to set up. But once it’s set up, it provides a long term return on your time benefit. And perhaps equally, if not more important peace of mind knowing that you’ve thought about prioritize and have a plan working for you to fund your goals. Right. I just mentioned a couple moments ago that so much of the feelings of stress and confusion, overwhelmed come from that uncertainty come from the unknown. So this step is all about bringing it into the known and executing on the plan that we set.

Tim Ulbrich  18:54

So in terms of operationalizing this, one example certainly not the only way, my wife Jess and I, we have a high yield savings account. We use Ally Online Bank for all of our accounts. And inside of that high yield savings account, we essentially have several different buckets. And those buckets are named according to the goals that we’re working on. Right. So one bucket, for example, is an emergency fund. Another bucket might be for a vacation that we have earmarked, you know this summer or next year, one bucket is for the next car purchase one bucket might be for something related to the boys’ education or to the activities that they’re involved in. So all of that rolls up into one high yield savings account. So it’s liquid, it’s accessible, we can get it we can move it to our checking account if we need it. However, the key there is it’s earmarked and defined for the goals that we’re trying to achieve. Now. Just like I said, a little bit of a go, you know, this may not be a forever system that you have to develop. We have found it to be something that’s beneficial ongoing because it’s a visual reminder. It’s the visual aspect of hey, we set those goals, here are the actual buckets, right named for the goal that we worked on. And it allows Jess and I, I’d have some really good conversations. And of course, transparency into the system that we’re working on. This system it took us about 15 minutes to get set up. And again, you could just as easily achieve it through perhaps your own bank that you already have, or through tracking these in a simple spreadsheet. So, as I mentioned, the buckets are simply a visual representation, it really is just sitting in one high yield savings accounts. And it’s then earmarked to these different buckets. So that’s step number four is automating the plan. 

Step number five, again, as we’re on this journey, towards building a strong financial foundation, is investing early and often. Investing early and often. Now, Albert Einstein is credited with saying whether he said it or not, compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t, pays it. Right, regardless of whether he actually said it’s really good advice, the time value of money is real. And the earlier you save, the less aggressive you’re going to have to be. Now easier said than done, right? Considering many competing priorities that new practitioners are facing. And I remember well, in my journey after graduating 2008, not only was it the student loans that were staring us in the face, right, it was a potential home purchase, it was the emergency fund, it was building up some additional reserves, and of course wanting to enjoy some things as well during that transition. So there’s a lot of things that are coming at you in this season of life. And shortly thereafter, we would start our family and certainly new expenses that would be there as well. 

Now let’s take a look at an example of how powerful early investing can be. Okay, early investing. So if we assume and you can run your own numbers using a number of calculators, we have several on the YFP site as well. But if we assume a pharmacist is making, let’s say, $126,000 per year, if we assume that their incomes gonna go up on average, about 2% per year could be a cost of living adjustment could be a performance adjustment, a combination of both, we’re gonna assume that they’re going to put away 15% of their income. And we’ll assume that there’s an average annual rate of return on that investment of 6%. Now, we know the markets don’t work like that in terms of a clean 6% every year. But for the sake of the calculation, we’ll go with that we’ll assume no match from the employer, and that they have a planned retirement age of 60. Okay, so pretty normal situation. So I’m gonna make an average pharmacists salary that’s putting away about 15% of the year and they want to retire at the age of 60. Now, what we see is that if they start at the age of 25, saving 15% of their income with these assumptions, when they get to the age of 60, the math tells us they’re gonna have about $2.6 million. Now, is that enough is a whole another question, right, we’ve talked about that. On the show before we’ve done an episode on how much is enough, we’ll link to that in the show notes as well. So 25, if they start, we’ve got $2.6 million at the age of 60, a coordinator these assumptions now if we wait to the age of 30, right, because of student loans, because life’s expensive, there’s a lot of things going on that 2.6 turns in $1.8 million. An $800,000 difference already. If we wait to 35, we’re down to $1.2 million. If we wait to 40, we’re down to $800,000. Right. So that’s the power of time value of money. That’s what Albert Einstein was talking about with compound interest in  really the value of investing as early as we can, knowing that the earlier we invest, perhaps the less aggressive we’ll have to be the later we invest, the more that we’re going to have to do to catch up. 

So naturally, then the question is, well, where do I save? Right? And that depends, of course, there’s lots of different options. Everyone’s investing journey is going to look a little bit different. We have to really assess what’s the risk tolerance, what’s the risk capacity, what are the goals, but many pharmacists are going to be focused early on, especially in their career on tax advantage, retirement accounts, tax advantaged savings accounts. So these would be employer sponsored accounts like a 401k or a 403B offered through your employer. Of course, as the name suggests, there’s both Roth and traditional versions of those anytime you hear traditional thing pre tax, anytime you hear Roth and post taxt. There would also be opportunities to save and something like an IRA stands for individual. So these are not through your employer. Again, there’s a Traditional and Roth version of those. Lower contribution limit in 2024 $7,000 versus in the employer sponsored accounts $23,000. And then the other one I typically think of in this bucket would be an HSA or health savings accounts, which again, we’ve talked about on the show at length before we’ll link to those episodes in the show notes as well. So those are the five foundation and steps and I would encourage you with each one of those to learn a little bit more. Right and as I think about and zoom out here for a moment we think about being on this financial journey throughout your career. Right. So important. Remember, here we’re talking about laying the early bricks of the foundation. Again, this is not the finish line where we start to check these boxes off, but rather, it’s that strong foundation upon which we can then build and hopefully build wealth throughout our career and live confidently knowing that we’ve done some of the hard work early on. So just a quick recap, step number one, we talked about completing that vitals, check the self assessment. Step number two, we talked about setting that vision step number three, developing the spending plan. Step number four, automating that plan, right, that was all about the execution. And then step number five is investing early and often. 

So let me wrap up by sharing some advice that I got from the YFP community. I recently reached out to the YFP community to say hey, what are some of the things what are some of the things that you think would be helpful as you reflect back on your journey, going from student to new practitioner student to resident to fellow to a new practitioner that you wish you would have either learned or you wish you would have followed that advice and let me just share you a handful of those response.

One person in the life he can be said it’s worth it to learn how to budget early even on a resident salary you can save. 

Another person said there’s one financial hack I wish someone had whispered in my ear my own graduation, house hacking with a high value short term, or midterm rental model. We’ve talked about house hacking on the show before referring there to essentially living in a unit can be a single unit duplex, triplex quad and then renting out a portion of a single family house or if you have multiple units renting out other units.

Another person in the YFP community said I wish I would have learned about the different student loan payment options and how to lower my taxes as a W2 employee. 

Another person share this advice don’t put off paying your loans if you’re not going down to forgiveness pathway, tackle them head on, and get them done with. Financial life only gets crazier down the road with the addition of a spouse and kids. Looking back, I wish I would have lived as a student resident lifestyle for two years or more and paid extra to knock out those loans early. And then finally, someone else said if you do income based repayment for your student loans, don’t do forbearance during residency, your payments will be low, and you’ll be finished a year earlier.

So just a few pieces of advice from those in the YFP community that I’ve made that transition. I hope you enjoyed this episode. Thank you so much for listening on a regular basis. Again, we have several of these topics we talked about before we’ll link those into the show notes. And I hope you have a great rest of your week. Take care.

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

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YFP 353: Avoiding the Trap of House Poor: Evaluating Cost of Home Ownership


Nate Hedrick, The Real Estate RPH, discusses how to avoid the trap of becoming house poor, the ever-lively debate of renting vs buying a home, the costs of buying a home, and how to determine how much house you can afford. This episode is sponsored by Real Estate RPH.

Episode Summary

In this episode sponsored by Real Estate RPh, host Tim Ulbrich chats with pharmacist and real-estate agent Nate Hedrick, CEO and founder of Real Estate RPh, all about the costs of home buying. Beyond the initial down payment and monthly mortgage payment, there are a lot of expenses with home ownership. Some expenses can be expected and planned for, others can catch you by surprise, as Nate and Tim have both learned.

Hear valuable insights and resources for pharmacists looking to purchase a home, covering topics such as down payment assistance options, planning for those unexpected expenses, and creative ways to help achieve the goal of home ownership.

About Today’s Guest

Nate Hedrick is full-time pharmacist by day, husband and father by evening and weekend, and real estate agent, investor, and blogger by late night and early morning. He has a passion for staying uncomfortable and is always on the lookout for a new challenge or a project. He found real estate investing in 2016 after his $300,000+ student loan debt lead him to read Rich Dad Poor Dad. This book opened his mind to the possibilities of financial freedom and he has been obsessed ever since. After earning his real estate license in 2017, Nate founded Real Estate RPH as a source for real estate education designed with pharmacists in mind. Since then, he has helped dozens of pharmacists around the country realize their dream of owning a home or starting their investing journey. Nate resides in Cleveland, Ohio with his wife, Kristen, his two daughters Molly and Lucy, and his rescue dog Lexi.

Key Points from the Episode

  • Home buying costs and webinar sign-up. [0:00]
  • Real estate market trends and industry news. [2:32]
  • Financial impacts of home ownership and student loan debt. [5:27]
  • Home affordability and financial planning. [11:07]
  • Budgeting and financial planning for homebuyers. [15:11]
  • Homeownership and financial planning creativity. [19:39]
  • Homeownership costs beyond mortgage payments. [23:25]
  • Homeownership costs and surprises. [27:00]
  • Home buying options and resources. [32:59]

Episode Highlights

“I live this every day, just as another pharmacist also owning a home, right? You have to kind of account for all those costs. And it can feel like you get to the end of the month, and every bucket has been taken up by something. And you’re like, okay, how many, you know, how many pennies do I have left to rub together?” – Nate Hedrick [11:08]

“So I like tools that have that much more broad look, rather than trying to silo things out and saying 10% should go towards your car and 20% toward your house, because I just don’t think they work for everybody.”- Nate Hedrick [16:00]

“Like that’s the biggest thing with homeownership is – it nothing is consistent, every month is going to be different no matter what you do. And building in some of that margin building in that that error is just a great way to de stress that whole process.” – Nate Hedrick [29:18]

“I think what we’re really trying to prevent is, you know, as we talk about the theme here of avoiding the trap of being house poor and really evaluating all these costs that we don’t achieve one goal at the expense of a bunch of others.” – Tim Ulbrich [29:31]

“I think most people assume or think that they’ve got to have 20% down to buy a home. The reality is, there’s a ton of different programs out there and you don’t need anywhere near 20% down.” – Nate Hedrick [33:50]

“But there are a number of awesome programs out there that can help with down payment assistance, that can lower the downpayment that’s required and still have a competitive interest rate”. – Nate Hedrick [34:14]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week our resident homebuying expert Nate Hedrick joins the show to answer the question how much house can I afford? We discuss how to avoid the trap of becoming house poor, the ever lively debate of renting versus buying, and what costs to consider beyond the down payment and monthly payment, which includes principal interest, taxes and insurance. Whether you’re a first time homebuyer or already own your own home. Our hope is this episode will help you evaluate how home ownership fits as one puzzle piece in the rest of the financial plan. Speaking of homebuying, Nate will be joining us for a free webinar coming up on Thursday, April 25, at 8:30pm/Eastern titled, Your Checklist for Buying a Home in 2024. During this webinar, Nate will share what you need to know about purchasing a home in 2024. And we’ll walk you through important steps to take in your home buying journey to make the process easier to navigate and understand. You can sign up for this webinar by visiting yourfinancialpharmacist.com/homebuying2024. Again, that’s yourfinancialpharmacist.com/homebuying2024. All right, let’s hear from today’s sponsor the Real Estate RPh and then we’ll jump into the show. 

Tim Ulbrich  01:20

Are you planning to buy a home in the next year or two? With the state of current home prices and mortgage rates the home buying process can feel overwhelming. But what if you can leverage the knowledge and ongoing support of someone who has worked with dozens of other pharmacists through their home buying journey all at no cost to you? I’m talking about Nate Hedrick at the Real Estate RPh. Nate is a pharmacist who has been a partner of YFP for many years now and offers a home buying concierge service that can help you find a high quality agent in your area and support you throughout the entire process. So head on over to RealEstateRPh.com or click on the link in the show notes to schedule your FREE 30 minute jumpstart planning session with Nate. 

Tim Ulbrich  02:05

Nate, welcome back to the show. 

Nate Hedrick  02:07

Hey, Tim, always good to be here. 

Tim Ulbrich  02:08

Well, this is the time of year where things start to really heat up on the home buying the home selling side of things, although you know, we continue to be in this in this unique cycle that is a little bit of an out-of-whack of supply and demand. We’ve got obviously interest rates still where they’re at. So as you go into the spring season, what’s normal, what’s not normal for you this time of year?

Nate Hedrick  02:32

I guess the only normal thing is that it is it is getting busy. My schedule is quite busy right now in the spring with a lot of buyers, a lot of sellers, which is great. I mean, it’s it’s great for our business, but it’s still a bit of a weird time, right, we’ve got interest rates in kind of a weird spot, still have a lot of low inventory out there. So people that are trying to find the right home, it’s more difficult. And then we’ve got things going on with the industry in general that that are just making it a bit of a weird, weird market right now.

Tim Ulbrich  03:03

Absolutely. And before we get too deep into the topic, Nate for any of our listeners that are, you know, in the moment, looking to buy a home, looking to sell a home, wanting to make sure that they get out in front of this, or maybe even those for those that are listening to saying, Hey, this is a three month thing, a six month thing, we you and I both know how that goes. Things can move quickly. You know, we want to make sure they get connected to you and your services, what you offer through the Real Estate RPh concierge service, they can do that by going to yourfinancialpharmacists.com. We’ll talk more about this as we go throughout the episode at the end as well. Click on home buying and from there, you’ll see an option to find an agent get connected with eight and beyond your way for for this big decision. Certainly that that it is we want to make sure that they have the resources available to make a good decision.

Nate Hedrick  03:49

Yeah, it’s funny, we even I got an email just this morning from a client that they met with me in late January, we match them up with an agent within a couple of days. And within two weeks, they were under contract and they just closed. So like I mean, it was just, it’s lightning fast when you’re in that in that space. And even if you’re three months out, it all of a sudden those three months get eaten up. So better to schedule that early and get on the horn with us so we can get you in the right spot. So yeah, definitely check that out. 

Tim Ulbrich  04:14

Nate, I’d be remiss if we didn’t ask you big news that came out this week settlement by the National Association of Realtors. Obviously, you as a real estate agent, if our listeners don’t already know that, potentially something that’s going to impact you impact the industry at large. There has been news flying around all about this headlines everywhere. And I think it’s one of those things. It’s hard to really assess like what actually is going on? What’s the impact right now? And what’s the potential future impact? And I know you and David just covered this on the Real Estate Investing Podcast, episode 118. We’ll link to that episode in the show notes so folks can dig deeper on this topic, but give it give us the Cliff Notes of what’s going on and where we’re at.

Nate Hedrick  04:55

Yeah, I think it’s definitely worthwhile to try to get away from the media noise for a second on this because what I’m seeing out there is all the headlines are speculating what this is going to do to the industry rather than what’s actually occurred. So the very brief version is that several months and even a couple of years ago, there was a lawsuit against the National Association of Realtors, by some parties that are part of a consumer advocacy group. And essentially, what they were alleging was that there was there’s some sort of price fixing going on that basically sellers were told, you had to offer a commission to buyer’s agents. And if you didn’t offer them 3%, or whatever, then like you couldn’t work together, right. And that’s, that’s not really true. And the NAR has basically said, like, we’re not admitting that we did that, because we haven’t been and they’re even in the settlement, they’ve admitted no wrongdoing at all. But essentially, that’s the allegation. And what is what they decided to do is, rather than continue to go through expensive litigation, the NAR has decided to settle and to make some changes, so they’re gonna pay out about $418 million dollars over the next four years to consumers. And then they’re gonna make some big changes in terms of how agents and the MLS can advertise and for, for commissions, so they are no longer able to advertise for buyer agent commissions, and buyers are going to have to work with and this is the big change for buyers out there, buyers are gonna have to work with an agent under a contract, you’re gonna have to have a contract in place with that agent. Gone will be the days of just showing up, writing an offer with whatever agent and then like figuring out the contract stuff later, like that is not going to work anymore. You’re going to have to be established with somebody, if you want to work with an agent, because the way we get paid is going to change basically. So it’s a lot of shake up. We don’t know exactly what’s going to happen yet. But some of those details are starting to come forward here and we’re at the end of March already. And it’s it’s, it’s heating up.

Tim Ulbrich  06:46

So for those that are listening, whether it’s you know, people that are looking right now or thinking about buying the spring or summer, you know, how much of that is going to impact them right now? Are we still in this wait, wait and see pattern of when some of the changes you’re talking about are going to take place? 

Nate Hedrick  06:59

Yeah, so a lot of these changes will not go into effect until probably July and even beyond. That’s really the deadline they’ve established for this. I keep in mind again, as you and I sit here and record this, the court has not even accepted the settlement yet, right. The NAR has basically said this is what we’re interested in settling on, the court still has to accept that settlement. So a lot of this is to be determined anyway. But if it all shakes out the way that they’ve proposed, then July is when this will start to make a difference. And again, if it goes, if it goes the in a bad direction, I guess for buyers, I’ll put it that way. What will likely happen is that buyers are just going to have to be a little more savvy about about that early conversation with their agent. Who is paying, how am I paying? Am I paying? Is the seller paying? Like how are we negotiating that? And how does it affect my ability to put in offers because those are all things that are going to change in in some capacity here in the next couple of months. 

Tim Ulbrich  07:52

So again, you and David covered this on episode 118 of the YFP Real Estate Investing Podcast, deeper dive, we’ll make sure to link that in the show notes. And of course, we’ll keep the community up to date, as we have more information that is rolling out. And you know, we get past some of the short term news and the headlines and actually start to see some of the implementation of some of these things. So today’s theme, Nate is: Avoiding the Trap of House Poor: Evaluating the True Costs of of Home Ownership. And, you know, as you and I were planning for this episode, we were talking about, hey, for those that are looking, this is a good opportunity to make sure that that homebuying, that big rock that is a part of the financial plan, is put in the right context, right, about their goals that we’re trying to achieve, so that we have the room to do those things. But also for those that own, already own. You know, I talked with pharmacists on the regular that, you know, maybe they’re three years in, five years in, 10 years in, whatever it may be, and just over time expenses have increased. Maybe they’re perhaps still paying on student loans or other things, trying to save and invest more for retirement and really feeling like in that home, they’re in the situation where hey, I don’t have a whole lot of margin, I’m feeling house poor because of that. So whether someone is a hey, I’m going to buy or they currently own I think they’re gonna find this episode helpful. Now, I want to get your take on five things that I see on the regular that are financially impacting, you know, especially new graduates, but I think it transcends even beyond that in a much greater way than when I graduated back in 2008, than when you graduated as well. You know, first student loan debt, we’ve talked about that at length on the show. When you look at what graduates are coming out with is in terms of an average and what that means for a monthly payment. You know, that can be standard 10 year repayment on an average debt load, we’re looking at $1800 to $2,000 per month.

Second, of course, housing costs we’re gonna dig deep into that on today’s episode, but, you know, we’ve seen the rise in interest rates and the rise in home prices. We see the impact of that on a monthly payment. You put those two together, right, that’s a big portion of one’s take home pay. You know, we also see the third thing I’m thinking about is just car loans and interest rates on the car loans. Of course inflation is the fourth thing, although we’re starting to see that, you know, tamper down a little bit, and then five, I think one that we don’t talk enough about is childcare costs. And, you know, you know that well, and just the costs that come from, you know, daycare and other costs associated with with children and growing family. And so, you know, at the end of the day, what I want to get your take on is do pharmacists make a good income? And the answer is yes, objectively they do. Right? If you look at the median household income in the US, pharmacists make on average $50,000 or more above that. So objectively speaking, yes. However, when you start to add these things up, right, when you start to look at student loans, and housing costs, and childcare costs, etc, that’s where we often run into the situation of, hey, I make a good income, but I don’t feel like I’m progressing. I don’t feel like I have a whole lot of breathing room, because of some of these big pieces of the puzzle that can have an impact on the financial plan. So thoughts from your seat individually living this, and then certainly working with many pharmacists that are in that position, looking to buy trying to figure out how the house budget fits into the rest of the plan? 

Nate Hedrick  11:06

Yeah, I mean, you’re spot on, right? I live this every day, just as another pharmacist also owning a home, right? You have to kind of account for all those costs. And it can feel like you get to the end of the month, and every bucket has been taken up by something. And you’re like, okay, how many, you know, how many pennies do I have left to rub together? Right? It’s just, it can feel like that, right? Especially if you’ve not set yourself up for success. And so I definitely feel that on my own personal finances, but then I also see with clients to where they will I see this all the time where someone will look at a neighborhood or look at an area of the country. And they don’t even ask the question about budget, they just say we need three bedrooms. And where I’m looking at $800,000. And the question is not, can I afford an $800,000 house. It’s just, that’s what we need. And so that’s what we’re gonna buy. And I think that’s really easy to get into, right? Like we love where we live. And that’s not unreasonable. But rarely do we step back and evaluate? Okay, am I okay with paying more to live in this particular location? Or, you know, should I consider a relocation? Or should I consider sizing down and having the kids share a bedroom? Like, all those things are not questions that I often hear. It’s usually, how can I push this? How can I lower that down payment? How can I get away from this expenses now and push those push those things down the road? So I think we’re kind of geared toward that. And having these conversations like you and I are having is how you start to reset that that metric a little bit.

Tim Ulbrich  12:33

Yeah. And I think one thing that I hear there, Nate, which is hard to implement, is just some of the mindset around these decisions. No judgment here whatsoever. Remember, Jess and I talked at length about, you know, we had an expectation coming out that we’re going to buy our first home, at the level which my parents took 20, 25, 30 years to get to, like, you know, and that was where our mindset was, and we made several decisions and some mistakes along the way. And, you know, we probably purchased before we were ready, not sure we really had enough, you know, down in the home, we ended up paying PMI that I didn’t understand how that was structured in a loan. You know, if we had more time, I could give you the list. Right? But but the point being, is I think there is a mindset component here. And you know, sometimes we don’t necessarily like the outcome or the decision when we look at the numbers. But what we’re trying to do, as we talk about this, is really take a step back and say, hey, how does the home purchase fit as one piece of this bigger puzzle, and human behavior, myself included, I think you included as well, as we want to go into the silos and make financial decisions. And especially when talk about home purchase, it’s exciting. It’s emotional, right? There’s a lot of things that are involved. But when we’re talking about a rock that we’re going to put in place that might take 25, 30, 35, 40% of our take home pay, and we’re fixed in that for 30 years, okay, we’ve really got to do due diligence, so that we make sure when we look at other parts of the financial plan, right, saving, investing for the future, pursuing other financial goals, making sure we’ve got breathing room, making sure we have margin to experience and to give and to do other parts of the plan. And so naturally, Nate, the next question is, well, if we’re talking about trying to prevent this, what is that affordability calculation? Like as you think about it, in your own plan, or in working with, you know, other buyers as well? How do you think about what what is that number? You know, is it is it a percentage of take home pay, is it you know, obviously, the what the individual thinks it is versus what the bank thinks it is, can be two very different things. Talk us through that a little bit further. 

Nate Hedrick  12:34

I think that you could Google, “how much house can I afford?” and get 72 different answers, right,  with all these calculators and metrics and back of the napkin math ideas, and the answer is there is no answer. However, you hit the nail on the head a minute ago and said, avoiding thinking about this decision as a silo, right? I think it’s very easy for people to say, well, I read, you could get 25% of your money toward housing. So we’re just going to do that. And that’s our number. And that’s it. Right? Or 30%, or pick, pick your favorite number, right? Where I think that becomes a problem is that especially like ourselves, right? When I, when I came out of school, a ton of student loan debt, those numbers are not accurate for somebody with a ton of student loan debt, they’re not accurate for a ton of credit card debt, they’re not accurate. If you’ve got, you know, childcare expenses that are going to be cropping up down the road, like all those things can can drastically affect those numbers. And so what I like to do, or what I advise my clients do, is to do something like the 50-30-20, which I can cover in a second, but but something that it doesn’t matter which one it is, as long as you’re taking all of your expenses as a as a bigger piece, right? So what I like about the 50-30-20 rule is that 50% of your money goes toward needs; 30% toward wants and 20% toward net worth building. And what I like, especially about that, is that that big piece of the pie that 50% It’s all your needs, food, car, medical expenses, childcare expenses, like whatever those things are, if you have to have them, then you have to include it in a number. And if all those numbers are already big, like what if your need is student loan payment, right, I have to pay that every single month, I can just avoid that. So it gets factored into that. And it can adjust those housing numbers down rather than just picking a flat 25% or whatever. So I like tools that have that much more broad look, rather than trying to silo things out and saying 10% should go towards your car and 20% toward your house, because I just don’t think they work for everybody. And I think they’re too they’re too broad.

Tim Ulbrich  16:39

Yeah, and I think to your point there, Nate, you know, obviously, everyone’s situation is different. And even, you know, let’s take two, two student loan borrowers, right, both have $200,000 of debt, how they pursue their loan repayment strategy could drastically impact the cash flow they have, right? If one person says, hey, I want to aggressively pay these off in five, seven years, the other person is on a public service loan forgiveness strategy on an income driven repayment plan, where they’re trying to maximize tax free forgiveness- night and day of what are they actually putting out towards the student loans in terms of cash flow? And what what do they have available? You know, other things I think about in terms of where are they at in terms of savings and retirement plans and goals? You know, so is, is pharmacy a second career, and they’re trying to play a little bit of catch up on retirement? Are they thinking early retirement? And maybe you need to save a little bit more aggressive, right? So so many factors that go into this equation, but I think using something like you’re suggesting is a good place, because it helps us figure out, okay, how does this payment fit into that bucket into that 50%? And I’m guessing we often get that number, we’re like, hey, we don’t like it. We don’t like what, you know, the budget is going to support it. And I think that that’s really where the rubber meets the road. But what’s helpful about that is 99 out of 100 times when you’re running your own numbers and trying to figure out what is that housing cost within that 50%. Typically, the banks can approve you for much more than that. Right. And so they’re the the take home point being is that they’re not concerned about your 50-30-20 budget in the same way that the individual would be correct. 

Nate Hedrick  18:13

Spot on. Right. I never forget the first time that Kristen and I got approved for a mortgage. And the bank was like, Well, how much house you want to buy? And we’re like, I don’t know, how much can like, what will you give us? And they just do this, this quick math. And it’s like, here you can afford $600,000. And I think our budget at the time was like $250. But like, they don’t care, right, they’re looking at the numbers very differently. They’re just looking at some of the debts that you have, they don’t care if you have $0 leftover at the end of the month, the goal is to make sure that you can make those payments and just make those payments. And so that’s how they’re going to set it. So you have to be your own advocate when it comes to setting that budget and not letting the bank do it for you.

Tim Ulbrich  18:51

Yeah, I always say Nathan, the bank is looking out for themselves have a foreclosure risk? They’re not looking out for are you on track to achieve all your other financial goals? And how does this purchase, that’s an ill intent, that’s just the way the way the system is set up, and then them mitigating the risks that they need to mitigate. So you know, I think the natural follow up then, Nate, and here we are, you know, we probably should have started here that, you know, we’re not having to buy a home in 2024 where homes are at the prices they are and interest rates are where they are so different time right then when we bought a home and it’s worth saying, but the natural counterpoint is, well, I don’t want to rent either, you know, rent has been going up we know the what the data has shown in terms of rent prices going up over time and you know, I feel like I’m I’m just throwing money down the drain. I’m not building equity, right. I’m not building equity if I don’t have a house. So what do you say to that person who really feels like yeah, I hear you. Like it’s too much in terms of the percentage of my take home pay are within that budgeting system you just described, but also feel like it’s not like wrench deep. Right. And I really feel like I’m not necessarily building any equity as we continue to rent. 

Nate Hedrick  20:01

I think it’s tough because some of this, at some point comes down to more of an emotional decision, right? Like, it’s just I’m sick of renting. Even if financially like, you still need to stay in that boat for a little bit, while longer just if you do the math, it’s hard to make that decision, right? I mean, I absolutely get that and I was in the same boat that you were like, we probably bought sooner than we should have. We just wanted to buy, we kind of made it work, right. But at the same time, we kept our budget very reasonable, so that we could do that, right, there are ways to mitigate that risk. If that’s the choice you want to make, right? You, you can do it, if you aren’t pushing everything, right, you’ve got to take some compromises somewhere else. So if you’re looking at it, you’re saying, look, we have to be in a home, I don’t want to be renting anymore, well, then you gotta choose an area where the home prices are affordable. I mean, just that’s all there is to it. Right? If you are a new practitioner in downtown San Francisco, and the homes are $1.5 million and above, like, it’s just not as viable as Cleveland, Ohio, where I’m from right or something like that. So you have to be able to take some sort of compromise. If you sit there and say, look, the the overall goal is to be in a home that we own. And you have to find a way to do that. It’s not just in it has to be in this market and has to be six bedrooms, and it has to be 400,000 square feet and all this right, it just you have to be able to adapt, and then do the there are other ways to get creative, too, right? Think about house hacking, for example, buying a property that you can have somebody else renting out with you, then you can mitigate some of those costs. Or looking for down payment assistance programs that are out there, right? There are a ton of grant programs for new graduates that help with down payment assistance, like you can get creative. You just have to go out and do that. Right. I think the old Rich Dad Poor Dad adage, it’s not I can’t afford a house. It’s how can I afford a house? And sometimes you have to get creative how you do that.

Tim Ulbrich  21:50

I think that, you know, it’s the creativity is an important part of that. I think this comes back to mindset you know as well. I think there’s a script that many of us have been told, I know that I don’t remember my parents saying this, it was just something I always believe, which is rent is bad. Homeownership is good. And, you know, as with most things, right, there’s, there’s more than option A and B. And when we look at homeownership, depending on your situation, depending on the part of the country you’re living in, depending on cash you have available for down payment depending on rent rates, right, you know. Ramit Sethi talks a lot about this on his podcast living in I think he’s in New York City, where it’s like, doesn’t make sense, like, you know, continuing to rent in certain markets, like, yeah, it does make sense. And you’ve got to figure out to your point, other parts of the plan, we’re sure maybe he’s not building, you know, equity in the home, which for many people becomes one of the greatest assets they have as a part of their financial plan. But for him, and for others, in higher cost of living areas, you adjust and pivot, you know, and figure out what that looks like. 

Nate Hedrick  22:45

It’s funny, you mentioned that I was even just talking to a pharmacist two weeks or three weeks ago, and he rents right now, he wants to buy his first house, but he wants it to be an investment property. So he’s buying in a different location continuing to rent, so you can build equity in a home, just not the home that he’s living in. So he’s still getting into the real estate game, but not doing in a way where he’s making a bad decision just because of where he wants to live. Right. So there’s, there’s a lot of ways to get creative, I wish that we could just do it all up front, but you have to kind of pick and choose when it comes to your financial plan.

Tim Ulbrich  23:16

I like that, Nate. Creativity, I feel like it’s something we’re often lacking in, in the financial plan, right, because we see a path maybe that our parents had or others had, and it’s option A option B. But typically, there’s there’s more than than just those two. Let’s talk about some of the about surprise, but maybe costs it often gets overlooked or underestimated, especially for people that are going through this, you know, the first time you know. I remember vividly, I’ve shared on the show before Jess and I bought our first home and these numbers are laughable now saying them out loud in today’s market, but 2008/2009. So then post residency, we were paying rent $1,100 a month, I remember writing that check every single month for a townhome. We were looking to buy a home and you know, I went did the principal and interest calculations. I don’t think I factored in taxes, insurance. Maybe I did. And I remember seeing it was going to be somewhere right around there actually a little bit less. And like that was the end of my analytics. It was like buy, buy buy. And you know, I think that that’s very common, you know, that you look at, hey, what’s going to be my monthly payment, principal interest. Maybe people are thinking about property taxes and insurance. But that’s really the table stakes. Right? That’s the starting point. But talk to us about maybe those other things, either short term or long term that tend to catch people off guard, where sure, maybe that payment starts at 25% of take home pay but we quickly realize if it’s all in cost, it’s actually a lot lot more. 

Nate Hedrick  24:43

I mean, I think you nailed it with the insurance and taxes. I did the exact same thing you did. I ignored them and pretended like they weren’t there and then also the bill showed up I’m like what was I thinking? But you’re right there are a number of other things. I’ll never forget we moved into our our very first his house. And one of the one of the reasons they moved again, this is why home buying is emotional. One of the reasons we moved is we wanted to space for our dog. We had a one year old dog wanted some space for her, wanted some space for ourselves. And so we’re like, oh, let’s get this big yard. Well, the very first thing we did when we moved in was like, shoot, we need a fence. And so we’re like, well, we got a fence in the whole thing. And we have, we’ve over like an acre, we have actually almost two acres. And so we wanted to fence in an acre and all of a sudden it was like a $10,000 fence. And it’s like man – nowhere like that would have covered rent for a whole year at the old place. But we didn’t even factor that in because you just it’s just the stuff that you don’t think about. So it’s everything like that. I mean, I think it’s this the surprises, the things you don’t anticipate. But it’s also the regular stuff, you know. Stuff breaks, water heater goes down, a washing machine, dishwasher, and all those things, you don’t have a maintenance department to call anymore. You have to you know the landlord to check in with right you have to fix it yourself and get it taken care of. So I think I think those are the some of the big things. The other thing that I think creeps up and it’s on top of mine right now for me because we do this thing here in Cuyahoga County in Cleveland, Ohio, where every three years, the county assessor will come out and they’ll reassess property values, and then they’ll adjust your taxes as a result. Super nice. Not not like that everywhere. Some places, they lock you into that lower rate, but we get reassessed every three years. And so every three years, my property taxes go up in some fashion. And sometimes it’s more, sometimes it’s less, but it’s always on the up. So even if we did that math nine, almost 10 years ago, right? It all worked out, then things have gotten more expensive, right. And so it’s, it’s all those little things that start to creep up over time that you don’t have the backup plan for. Now, I will say this, rent has also been increasing. So it’s not like everything’s immune to that, right. You might have started renting a place for $1,000 a month, or $1100 dollars a month. And now it’s 15. Right. And so that that’s, that’s still there as well and has to be factored in. But with a home, it just feels like all of it is on your shoulders. And it’s really just when it comes down, you have to be the one to take care of it.

Tim Ulbrich  27:00

And I had the same thought. We had a reassessment, actually, both on the commercial property, which was outrageous, but on the primary home, it was not as bad, but it got me thinking the same line of thinking you are, which is the tendency when we buy and even again, no judgment when we bought our second home here in Columbus, you know, I remember those conversations where Jess and I were kind of looking at, okay, where where do we want to be monthly payment wise, that we really feel like we’re comfortable within the budget, but you’re thinking about it in that moment in time. Right. And, you know, hopefully, incomes are going up to help offset this. But this is one of the challenges we’re seeing, I think in some sectors of our profession is that they’re not or if they are and you factor in inflation and other costs, maybe they’re not to the degree that we actually think they are even if that number is going up. And so you look at things like property taxes. Homeowners insurance is something that’s kicked up here in the last couple years more significantly, and I think we’re going to continue to see that. And then you highlighted well, you know, the fence example that’s given. We did the same thing. We didn’t have that big of a fence. But you know, I remember it was a fence, it was repairing the deck, it was the lawn maintenance, it was because we never owned a home before, you know, all of the lawn equipment, things that you had to get for the first time and, you know, obviously furniture, you look at the home and you’re like, Oh, it’s fine. We like it. And then you get in and it’s like, well, you know, what about this? And you know, what about that, and those things seems small. But you know, those add up quickly. And it goes back to the theme of where we’ve been going throughout the episode, which is, hey, will you go back to your 50-30-20 or whatever type of budgeting system you’re using, you know, margin breathing room, knowing that up is going to be the trend, whether it’s property taxes, homeowners insurance, upkeep, remodeling the home, a roof, hot water, tank, AC, whatever, it’s gonna go up, and we want to have margin to be able to plan and save for those expenses. 

Nate Hedrick  27:01

If you want a way to ensure that you’re financially less stressed, build in that margin upfront. It just makes it so much easier when you have that surprise, like if you have $1,000 water heater that needs to be replaced, but you’ve built in $1000 extra dollars in your budget every month. It’s just a blip. Like you don’t have to have this emergency fund that you’re cracking open and like it just it feels so much easier to have those those bumps because it’s not consistent. Like that’s the biggest thing with homeownership is – it nothing is consistent, every month is going to be different no matter what you do. And building in some of that margin building in that that error is just a great way to de stress that whole process. 

Tim Ulbrich  28:53

Yeah, I think what we’re really trying to prevent is we you know, talk about the theme here of avoiding the trap of being house poor and really evaluating all these costs that we don’t achieve one goal at the expense of a bunch of others. So you know homeownership has a ton of value. We’ve talked about it on the show before. We’re both big believers in homeownership and that it has tremendous value but also we don’t want to be in that home and then like hey, we were stressed about taking the trip or the vacation or stressed about you know not being able to stay on track with retirement or other goals along the way as well. Utilities, Nate, is another one I was just thinking about our utilities keep creeping up. And it feels like that’s another one that you look back two three years and you’re like, wait a minute, what’s, what’s the heating bill? Compared to what it was?

Nate Hedrick  30:14

I have a good story about that, too. I don’t know if I’ve told this on the podcast before but early on, when we lived in our house, the water company wanted to install this wireless water meter. And I got like one letter about it. And it was like, hey, call us schedule a time for us to come out install this wireless reader that way we can see remotely like what your water usage is, and like, we’ll come out and install it. It’s free, just let us know. And I ignored it because I was busy and everything else. And so we stopped getting water bills. And I didn’t notice. And then about a year and a half in of like that, that notice coming? I was like, Man, are we even going to water bill No, in a while. So I logged in. And I cannot believe to this day, I cannot believe that didn’t stop our water. We were over $1,200 behind. I think my agenda is we just I hadn’t been paying attention to it. And it wasn’t an auto bill. And so like one of those $1,000 bumps that just showed up. So I mean, again, I’m shocked they never turned off our water. But that was that was an example of that creep from the utility company for sure. 

Tim Ulbrich  31:16

Surprised they weren’t knocking on your door. 

Nate Hedrick  31:17

I know, right? 

Tim Ulbrich  31:18

So speaking of…you made me think… hey, this is good story hour when Nate and Tim, but as we’re talking about cost of home ownership you don’t expect. I don’t know if I told you this one – a few years ago. So in our basement, we’ve never had a water softener system. So and, and full disclaimer, I am inept, completely inept when it comes to anything. So just keep that in mind for anyone who’s judging me as we’re talking about this. So never had a water softening system. The boys- we’ve got four boys are constantly down there throwing balls or whatever. Well, for those that have one, you know, there’s a backwash valve that will come on periodically to flush the system. Well, they had hit the backwash valve. And I don’t know you’re not down there enough? I’m not paying attention. I don’t even know what this thing is. Is it doing you know, whatever. So come to find out like it had turned on. It’s just been running. I don’t know for how long it’s been running. So I realized this, and then sure enough, like, I might have been a week, 10 days later, I get a bill for $4000. And I call it the and for those that have looked at your water sewer bill. Any water usage you’re using, you’re doubling up as sewers. So I call the Franklin County Department of sanitary engineering and I’m like, hey, listen, this is what happened. You’re not gonna believe it. I get it. I’m an idiot. And I was like, hey, I’ll I’ll write a check tomorrow, if you let me pay $2,000. And they were like, super gracious. 

Nate Hedrick  31:21

Wow, cool. 

Tim Ulbrich  31:27

Yeah. And so again, write things that come up that you’re just like, I never thought that this expense might actually exist. Jess and I have a running mental log of all of the damage slash expenses that have happened as a result of the boys.

Nate Hedrick  32:59

You can present that to my graduation, like oh great you owe me this now. 

Tim Ulbrich  33:03

And here’s the opportunity cost. Another thing I want to acknowledge as we’re talking about affordability of home, we’re talking about some more of those ongoing costs. But also, not all downpayments, right, are created equal depending on the loan type. And not that we need to get into all the different types of loans. We’ve talked about it before in the show. But I just want to emphasize this, especially for the for the first time homebuyers, you know, there’s a range from 0% to something more conventional on 20%. But when you’re talking about a three, four or $500,000, home or more, there’s a big difference in terms of house affordability. So any thoughts or wisdom you’d have there to share based on your your conversation with clients and what they’re expecting maybe coming in of a down payment? And then as they learn to navigate this a little bit further? 

Nate Hedrick  33:50

I think the most people that they’ve talked to especially like their parents, right, I think most people assume or think that they’ve got to have 20% down to buy a home. The reality is, there’s a ton of different programs out there and you don’t need anywhere near 20% down. And you can still do that lower down payment without too much of a penalty, right. There are certainly situations where you’re going to have to pay a little more in terms of either interest rate or private mortgage insurance, things like that. But there are a number of awesome programs out there that can help with down payment assistance, that can lower the downpayment that’s required and still have a competitive interest rate. The real trick I guess, at this point is to one talk to an agent that actually knows what they’re doing, working with these types of clients that can help with with finding a good lender. Or talk to a lender that knows these products inside and out. There’s a lender that I work with regularly that has like a lineup of programs that he can push people into of like, Hey, you’re a nurse, awesome. You get you qualify for the Ohio Heroes program. Let’s get you into that. Or you’re a firefighter you get you know, Ohio Heroes. You’re a recent graduate. Great here you qualify for this new grad program. It gives you $5,000, no questions asked. Like so there are programs out there there are things to help with that. And I think a lot of people just go in assuming, well, I gotta find 20% down, or I’m gonna pay a ton of money. And that’s my only choice. And there really are a lot more options out there. 

Tim Ulbrich  35:09

I think to your point, you know, that relationship with an agent, that relationship with a lender, really important. Options is what I hear there too, right? I think it’s easy to get sucked into a option without kind of looking across the board and making sure you’re looking at everything. Down payment is a factor, obviously, competitive interest rates, there’s a lot going on with points and things right now making sure that you’re actually really looking at the full aspect of the product. And that is transparent, because sometimes it can be hard to compare apples to apples, you know, some offers, I’ve seen this a lot, where people in one case are looking at a rate and it has point reductions and other cases it doesn’t, and they’re not necessarily, you know, seeing the comparison and difference there. I sprinkle this into the beginning, I’m gonna come back to it again, for those that are, you know, looking to buy now or in the future. We’ve partnered with you and your real estate concierge service now for many years, and love what you’re doing to help out homebuyers. Tell us more about what is all involved in that and where folks can go to learn more? 

Nate Hedrick  36:07

I mean, all of a sudden we’ve been talking about right? It’s it’s a lot to wrap your head around, and we’re only scraping the surface of all the stuff there is to know and things to navigate and everybody’s situation is unique. Right? You might be sitting there listening to this right now and thinking, well, we’ve got this and you don’t even talked about that, like what what do I do, right? And so having somebody on your team, I think is really important. And that’s that’s why we created the concierge service to begin with is to have that sort of team mentality around it, and give you somebody in your corner that that has experienced helping navigate whatever it is. So the way the program works is that you basically go to my website, we’ve mentioned that before. And you can sign up for a free call with me, do a 30 minute jumpstart planning call where we can ask and answer a lot of those questions that you have, get you connected with a fantastic agent, gets you connected with a great lender if you need it. Whatever we need to do to get you off and running in the right direction, right. And that might be that you’re ready to buy now. And you’re like, hey, we just have been popping on Zillow help us out. Or it might be that you’re nine months down the road, and you’re just starting to plan things out. Both of those are great times to connect with us. So it’s a completely free service. We don’t charge anything for that. We just again, try to offer a way to help people navigate this very complicated process with somebody that’s experienced it and lived and breathed it for several years now.

Tim Ulbrich  37:26

Great stuff, Nate. Two ways you can get there, you can go directly to realestaterph.com. We’ll link to that in the show notes. You can also go to yourfinancialpharmacist.com. You’ll see an option for home buying at the top, and then you click on “Find an agent” and we’ll get to that same exact place and then you can book a call with Nate to continue that discussion. Nate, great stuff as always. I look forward to having you back on the show throughout the year. I know we’re do some webinar stuff as well. So to our community, make sure you be on the lookout for information we’re gonna have forthcoming as it relates to some home buying materials, webinars and future episodes as well. Thanks, Nate. 

Nate Hedrick  37:57

Thanks, Tim. 

Tim Ulbrich  37:58

Nate and I have covered a ton of information in this podcast. So imagine working with Nate one on one through your home buying journey and having his support to give you much needed peace of mind. We know many pharmacists want to feel confident about big financial decisions, including a home purchase. So if you have fears of being house poor, concerns about the impact a home purchase might have on your other financial goals, Nate and his home buying concierge service can help all at no cost to you. You can visit realestaterph.com or click on the link in the show notes to schedule your FREE 30 minute jumpstart planning session with Nate. 

Tim Ulbrich  38:36

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

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YFP 351: Legacy Planning 101: How to Build Your Legacy Folder


Tim Ulbrich discusses the importance of creating a legacy folder to organize essential financial documents for access during emergencies and peace of mind.

Episode Summary

In this episode, YFP Founder and CEO, Tim Ulbrich, delves into the critical aspect of establishing a “legacy folder” to efficiently organize essential financial documents and accounts. This folder serves as a vital resource in emergencies, streamlining access for loved ones and averting confusion or delays. Drawing from personal experience, Ulbrich shares how he and his wife maintain their financial plan and essential documents in a shared electronic folder and a secure physical safe at home, ensuring accessibility and peace of mind during unforeseen circumstances.

Tim explores the contents of the legacy folder, which encompass a comprehensive checklist, electronic copies, and hard copies of vital papers such as birth certificates and social security cards and other critical documents like insurance policies and estate planning materials.

Learn how to proactively organize your financial affairs to safeguard against unforeseen events, ultimately fostering financial peace of mind and security.

About Today’s Guest

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

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

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

Key Points from the Episode

  • Building a legacy folder for financial peace of mind. [0:00]
  • Creating a “legacy folder” for financial documents. [2:36]
  • Important documents, insurance policies, estate planning, and car titles. [6:50]
  • Organizing financial documents for emergency situations. [14:59]

Episode Highlights

“So when it comes to why having a legacy folder is important. Getting organized with your financial records plays a significant role not necessary in terms of moving the needle on your net worth but in making sure you and others have access to all the information that you need to make informed decisions.” – Tim Ulbrich [2:24]

“Now, what is the legacy folder? So essentially the idea of a legacy folder, whether it’s a physical copy and electronic copy, or combination of both. It’s a place where you have all of your financial related documents. So in the event of an emergency, others will be able to quickly assess your financial situation and get access to all of the documents and accounts that pertain to your finances.” – Tim Ulbrich [4:07]

“Don’t underestimate the peace of mind and the clarity that can come from having this information collected.” -Tim Ulbrich [5:25]

“Once you get organized with your information, you’re going to be walking from that point of confidence, you’re going to feel prepared in taking action on other parts of your financial plan.” – Tim Ulbrich [16:49]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRO]

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week I’m talking through Legacy Planning 101: How to Build your Legacy Folder and why it’s important. To assist with implementing this important step and your own financial plan, make sure to download the YFP Legacy Folder Checklist at yourfinancialpharmacist.com/legacy. This checklist includes a list of 15+ financial related documents that you can have a record of in your legacy folder. It helps you identify key parts of your financial plan that you may or may not have in place but need to get started. And it helps give you peace of mind knowing that in the event of an emergency, all of your financial documents are organized in in one location. Again, you can access that free checklist at yourfinancialpharmacist.com/legacy. 

Tim Ulbrich  00:51

Now before we jump into today’s episode, I have a hard truth for you to hear making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good salary. But have you ever wondered, am I on track to retire? How do I prioritize and fund all these competing financial goals that I have? How do I plan financially for big upcoming life events? Whether that be moving, having a child, changing jobs, getting married or retiring? And why am I not as far along financially at this point in my career, as perhaps I thought I should be? The answer your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox your salary, but without a vision and a plan that good income will only go so far. That’s in part why we started Your Financial Pharmacists back in 2015. At YFP we support pharmacists at every stage of their career to take control of their finances reach their financial goals and build wealth through comprehensive fee only financial planning and tax planning. Our team of professionals including certified financial planners and a CPA, work with pharmacists all across the US and help our clients set their future selves up for success while living their rich life today. Ready to see how Your Financial Pharmacist can support you on your financial journey? The next step is to book a free discovery call with our team by visiting YFPplanning.com Again, that’s YFPplanning.com Alright, let’s jump in today’s episode.

Tim Ulbrich  02:18

Hi there, Tim Ulbrich here. Welcome to this week’s episode of the YFP Podcast. I’m flying solo this week to discuss legacy planning 101: how to build your legacy folder and why it’s important. Now this episode is going to be a brief one. But I hope you can walk away with a specific action item or to relate it to your own financial plan. Whether that be to create a legacy folder if you don’t already have one or if you do to make sure that you look at it and update that information if it’s been a while. So when it comes to why having a legacy folder is important. Getting organized with your financial records plays a significant role not necessary in terms of moving the needle on your net worth, but in making sure you and others have access to all the information that you need to make informed decisions. Think for a minute about all the various financial accounts, documents, records, insurance policies, tax returns that you have right, the list quickly grows to be one that is overwhelming. And the more you operate in your own system, the easier it is to navigate for you. But unfortunately harder for others to unravel, should they have to do so in the future. Right? Think of a situation where in the event of an emergency, you have this beautiful system you’ve created, you know where all your accounts are all your files, all your passwords, but unfortunately, others aren’t able to readily access that and to make sense of that information. 

That’s where the legacy folder concept comes in. I actually first heard of this idea, it’s not my idea, I first heard of it when taking Dave Ramsey’s Financial Peace University class, this was probably 15 years ago through our local church. And I remember walking away thinking, wow, that is so obvious, yet so important. And something that Jess and I hadn’t yet done at that point in our financial plan. Now, what is the legacy folder? so essentially the idea of a legacy folder, whether it’s a physical copy and electronic copy, or combination of both, which is what we have, and I’ll share more information about that. It’s a place where you have all of your financial related documents. So in the event of an emergency, others will be able to quickly assess your financial situation and get access to all of the documents and accounts that pertain to your finances. We just went through updating this – Jess and I did in our own financial plan, shifting everything to an electronic version with the exception of a couple things that we keep in a safe at home, so that in the event of something happening to Jess or I or both of us, those caring for our boys along with our financial planning team at YFP readily have access to all the necessary information that they would need. 

So when I think of the importance of this, you know, it really is peace of mind but there’s a secondary part that we often don’t think about, which is it forces you to get organized right? When you go through this process, and I’ll talk about the different sections of our own legacy folder. When you go through this process, you quickly might realize, wow, I’ve got some areas of the plan that I need to clean up, I need to gather some information. And this like many other parts of the financial plan, sure, it takes a little bit of time to get set up. But once you have it set up, right, we’re then in that update or maintenance mode. And again, don’t underestimate the peace of mind and the clarity that can come from having this information collected. So what’s included in the legacy folder? Well, I mentioned our checklist before and if you didn’t already download that make sure to download the YFP legacy folder checklist, you can access that again, at yourfinancialpharmacist.com/legacy that will give you a good guide. 

There’s no one right answer to this. So I’m going to talk through what we have in our legacy folder. And you can see maybe some of that makes sense. Or maybe you have other documents and sections that you would want to include. So here’s how we have it organized in a combination of a Google Drive a shared drive, and a safe at home with the password the master password to our One Password, which is the the password account that we use the password management account that we use, I have the master key password in a safe at home, along with some hard copies of some documents like birth certificate, social security card, etc. Those things are in the safe, everything else is stored electronically and anything that’s in the safe as referenced as such in the electronic documents so so keep that in mind to combination of an electronic folder we used to have this all in a paper copy it was in a blue folder, we used to joke with our my parents and our in laws that hey, if anything ever happens to Jess or I – get the blue folder! For obvious reasons, having everything in a hardcopy wasn’t ideal in terms of updating that as well as making sure that the integrity of documents stay in place. 

Okay, so section one is what we call important documents. Okay, so these are birth certificates for Jess, for me, for our four boys, these are our social security cards for us and the boys, this is our marriage certificate. These are our passports. And these components, we keep in a fireproof safe at home, obviously, because the hardcopy is important to have. So that’s section one important documents. 

Section two is insurance policies, and information. So this is something that we have to update. Some of these we have to update annually, others not so much. So for example, long term disability policies or term life policies unless something changes with those policies, you know, we’re not updating those on a regular basis. But this includes things like auto insurance policies, homeowners insurance policies, or umbrella insurance policy, or health insurance policies, long term disability insurance policies, and our term life insurance policies. And we have a couple of different term life policies and long term disability policies. So all of that is included here in section number two. Now, what I have done typically in the electronic version, is I’ll list these out. And then I have the the actual policy hyperlink. So it can be easily reference to get to the actual policy, right, whether that’s a term life, disability, or another type of insurance policy. So that’s section two insurance policies and information.

Section three is estate planning documents. So we have an electronic copy on the Google Drive folder, the shared folder, and then we have a hard copy of these as well, because of the wet signature that’s needed on these and each state is different. Ours is a wet signature with a note notarized copy. So we have a hard copy in the safe at home. So these include our revocable trust agreements, this is our healthcare power of attorney, this is our living will, our last will and testament, et cetera, a lot of work to be done here. Now, if you’re hearing those terms, and thinking, Wow, maybe I need to get my estate planning documents in place. We’re gonna be talking more about that on the podcast, but I would reference you back to Episode 222. We’ll link to that in the show notes, when we brought on a couple of attorneys to talk about why estate planning is such an important part of the financial plan, as well as Episode 310, when Tim Baker and I talked about dusting off the estate plan, so this is not a you set it and you’re done. 

Again, most of the work is upfront. Sure, there’s an investment of time and money to get these documents created. Again, the value is in the process of getting these created. And then you’ll have to update these periodically. So Jess and I often joke that our youngest son, Bennett, he wasn’t named individually in our documents when we created the so I guess that’s how it goes right when you’re the fourth son in the family. So he’s represented –  it does address future children. But it’s just funny that he’s not called out individually. So we’ve got some updating to do there. So that’s section three – estate planning documents. And again, we keep a hardcopy in the safe. And then we have an electronic version of that available as well. 

Section four is car titles. Now I’m not sure how valuable these are based on the current conditions of our minivan and our other vehicle, but, you know, calling these an asset would be a stretch but nonetheless, they have some value. Okay, so we have the car titles, readily available in section four so that someone could quickly sell or transfer the title of the car if need be. That’s section four car titles. 

Section five is all documents related to our homeownership, okay, this is the deed on our home. This is the HELOC that we have open in the event, essentially, we have this as a backup emergency fund or if we need to tap into some of the equity in the home. So this is the HELOC documents. This is another copy of our homeowners insurance just to have it all in one place as well. So any important document related to the home, obviously, information about the mortgage, all of that is here in Section Five. 

Section six is probably the biggest document I think, or close to the biggest section, which is a summary of all of our financial accounts. It’s our net worth tracking sheet, which I’ve talked about before on this show. And it’s all of our social security statements. Now I was just talking with a group of pharmacists last night that I was presenting to and I was talking about, hey, how many of you have pulled your Social Security statements to see your projected benefits, and I kind of got this impression that it was very few if any, right. So if you haven’t done that, it’s a good action step you’re going to do if you go to ssa.gov, to look at your Social Security statements, it’s got good information on there on projected benefits, and you can see your work credits. It’s pretty cool.

But this is a section where I have a table of contents that explains every account we have, right. So at Ally Bank, we have our high yield savings account, we have our checking account. Here’s where we have our Roth IRAs. Here’s where we have our 401 K’s. Here’s where we have a Roth 401 K. For every single financial account that we have, what is the account name? What is the institution? Where’s the link to that account? And what are we using that account for. And then as I mentioned before, we use One Password to store all of our password information and shared between Jess and I and the master key to that Password account is inside of our lock safe at home. So essentially, in the lock safe, you get to the One Password document through that you can then access all the individual financial accounts. 

Now I know I’ve talked about this before, but I really believe in the value and the importance of not only having a good idea of the summary of all of your accounts. But this is a good place to also be tracking your overall net worth and your trajectory of your financial health. Right net worth is your assets what you own minus your liabilities, what you owe. Tom Stanley talks about the importance of tracking your net worth in the book, The Millionaire Next Door, and he talks about those that develop and build wealth over time they think differently, right? What he’s talking about there is that they realized that their income is a good tool. But their income is only a tool if they’re applying that to building their assets and paying down their liabilities, which ultimately is translating into their net worth. 

So Jess, and I track our net worth on a monthly basis. It’s a very simple spreadsheet. If you want to see what that spreadsheet looks like I have that in the toolbox, yourfinancialpharmacist.com/toolbox along with a couple of the resources that I use, you can make a copy of that make it your own, very simple- every financial account we have, it’s the value of the asset. It’s the amount of liability assets minus liabilities we track that month over month, I think about that as the 20,000 foot view of kind of where we’re progressing financially, of course, the real work to be done is on a much more granular level. So that’s Section six, summary of financial accounts, net worth tracking sheet, and social security statements. 

Section seven is our tax returns, this is our tax returns. On the personal side, this is a tax returns on the business side. So for us that would be the business, Your Financial Pharmacist as well as the business YFP Tax. And then for the property that we own, we have a separate LLC for the property as well. So for any business filings or extensions, or important communications, documentations. Obviously, it’s important to retain your tax records for everyone. But here to have those readily available, as well whether it’s needed in the event of an emergency, or if you’re working with a tax professional or someone you need to reference that information that’s good to have. So that’s section seven tax returns. 

Section Eight is all information related to business records. So this is a summary of the business entities, I have a quick summary of what are the different entities and then of course, all of the legal documents, including the incorporation documents, the operating agreements, the buy/sell agreements, really important that you not only have these in place, but you have these readily available and accessible in the event of something happening. So any important document related to the business is there. And then as I mentioned, I kick off this section with a quick summary. So that in the event that someone needs to look at this, they can quickly understand what are the entities, what’s my ownership in the entities, and then what are the important documents within each entity that’s included in the legacy folder. 

Section nine is just a miscellaneous section. So this could be utilities information or other information that is not easily fit into one of the other buckets in the first eight sections. Pretty simple. Right? So yeah, it takes time. And I think even recently, when I went through a pretty major update of this, I want to say it took me you know, three, four or five hours just to update documents, things that I had to scan to get electronically and making sure I had the right setup, creating some of the explanation in the summary documents. But not only as I mentioned, is it helpful for whoever is looking at this information? Hopefully that never needs to happen. But it’s also helpful for you as you go through this to identify like, oh, maybe there’s some gaps in here in the financial plan that we could use as an opportunity to make some adjustments or changes as you’re looking at goals for the next year. 

So in terms of who has access to this, of course, Jess and I have access. Also, my in-laws have access to this who would in our state planning documents become the caregivers of our boys in the event of an emergency so important for them to have access and awareness of it, as well as our financial planning team at YFP right. So I know that in the tragic instance, if Jess and I were to get in an accident tomorrow, and something terrible would happen, I know that instantly my in-laws, who would be in charge of the boys and I know our financial planning team who would be helping them and making decisions, they have access to all of this information. Now, it doesn’t mean it’d be easy. There probably are still questions, maybe things that I’ve missed or haven’t thought about. But it’s a really, really good start again, gives us peace of mind knowing that we thought through this in great detail. 

So in closing, right, simple yet effective, simple, yet effective. And that’s so true for so much of the financial plan. Sometimes we overthink this, we overcomplicate this, yeah, there’s work to be done. There’s professionals to be hired, certainly on the financial planning side, on the estate planning side, on the tax side, but the gathering of documents and information. This seems like a bigger mountain to climb than it actually is. And I think for obvious reasons, right? Who likes to think about, you know, some of these circumstances that might be tragic, where someone would need to access your information. It also might expose areas of the plan really like ah, I don’t really like the progress that we’ve made, we’ve got opportunities to improve. So for those reasons, it seems like a bigger mountain to climb. But I promise you that as you go through the process, it likely is easier than you think. And once you get organized with your information, you’re gonna be walking from that point of confidence, you’re gonna feel prepared in taking action on other parts of your financial plan. If you have questions on this episode, as always, feel free to reach out to us [email protected]. Again, make sure to download the YFP Legacy Folder checklist. As you follow along in this episode, you can get that at yourfinancialpharmacist.com /legacy. Thanks so much for joining this week. We’ll catch you next week. Have a good one.

Tim Ulbrich  17:17

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

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