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YFP 120: 5 Ways to Finish 2019 Strong

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5 Ways to Finish 2019 Strong

Tim Ulbrich talks through 5 ways to finish 2019 strong. These 5 strategies will help you enter the New Year with a sense of momentum and accomplishment, setting yourself up for an awesome 2020.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I’m excited that you are joining me as we talk about five strategies that you can employ in 2019 to finish the year strong. So last week, we heard from one of our Certified Financial Planners, Christina Slavonik, where we did our first episode of a new segment that we will be rolling out going forward called, “Ask a YFP CFP.” Of course, CFP standing for Certified Financial Planner. We had some great questions that we answered from you, the YFP community, and we’d like to tackle more of your questions in the future. So if you have a question that you would like to have featured on the show and answered by one of our fee-only Certified Financial Planners, please do us a favor and shoot us an email at [email protected]. Again, that’s [email protected].

OK, so today’s episode, five strategies, five things that you can employ in 2019 to finish out this last quarter of the year strong. The theme across all five of these strategies is intentionality. The theme is slowing down for a moment and getting out of the month-to-month rush to ask yourself, what am I trying to achieve? Or maybe to remind yourself what am I trying to achieve? To ask yourself, what progress have I made thus far? And to ask yourself, what are some strategies that I can do for this last quarter, this remaining three months of 2019 to finish the year strong and to start 2020 with a bang? You know, I’m a big believer in momentum and running into the new year with some wins. And I think this is a much different situation than just waiting for 2020 to roll around, waiting for the new year to roll around so that you can hit the reset button and get a fresh start on your financial plan on the financial year. Now, don’t get me wrong. I think hitting the reset button every once in awhile can certainly be refreshing, and it does serve a purpose. But choosing to be intentional, choosing to be intentional in this final three months, in this final quarter of the year, and digging in, that’s a growth mindset. And that is putting yourself in a position of playing offense rather than playing defense.

So let’s jump in: Five strategies that you can employ to finish 2019 strong. Now, what would an episode of the YFP podcast, what would it be without us talking student loans? So No. 1 here is reevaluating your student loan repayment option. Or maybe for recent graduates, maybe it’s just evaluating your student loan repayment option for the first time. You know, when I started Your Financial Pharmacist back in 2015, I noticed there were only a handful of pharmacists that were spending the time, the time that is necessary to navigate all of the student loan repayment options that are out there and to determine the one best option for their own personal situation. This takes work. This takes effort. This takes digging into the unknown. This takes really understanding all of the variety of the repayment options and the confusion that could come along with that. And after I graduated from pharmacy school in 2008, I defaulted into the standard 10-year repayment plan because I didn’t know what else was out there. And at the time, that was the easiest path forward, right? It’s the standard, it’s the default repayment plan. The problem was is that I could have saved significant amounts of money by either pursuing Public Service Loan Forgiveness, PSLF, as I did work for a qualifying employer, or refinancing my loans to a lower interest rate because many of my loans at the time were at a fixed 6.8% interest rate, and I certainly could have done better than that if I weren’t pursuing PSLF, which I was not. So don’t get me wrong, while I’m grateful that I eventually got them paid off, I’m grateful that Jess and I were able to work through this journey, I think we learned lots through this journey, but not knowing all of the options that were available to me and just defaulting into the standard 10-year repayment plan certainly cost me big. Thankfully, there is now a lot more resources out there in terms of helping borrowers navigate the maze of student loan repayment. And in the pharmacy space — of course, disclaimer, I’m biased here — there is no better student loan repayment piece for pharmacy professionals than the one put together by our very own Tim Church. And that is the ultimate guide to repayment of student loans. You can get that post and all of the details and all the information for free at YourFinancialPharmacist.com/ultimate. Again, YourFinancialPharmacist.com/ultimate. We’ll link to that in the show notes.

Now, for students that are listening, the question hopefully you’re asking yourself is, you know, you’re note reevaluating repayment options, you haven’t yet evaluated them, and maybe you haven’t even thought about this yet for the first time. After all, this seems like it’s off into the distance as something you need to be thinking about into the future. And so my encouragement for the students listening is to begin to learn about these options that are available. Certainly you’re going to graduate, you’re going to have the grace period, you’re going to have some time, but that’s going to come quick. You’re going to have lots of competing priorities, you’re going to be studying for the NAPLEX, you’re going to be studying for the MPJE, you’re going to be starting a new job or residency or training program, and it may seem like that’s something to worry about in the future. But I think now is really the time to start listening to episodes like this or reading blogs or other resources that are out there to understand these terms, understand what an unsubsidized versus a subsidized loan is, understand what different types of loans are in terms of consolidation and refinancing and loan forgiveness and having the vocabulary, having an awareness that when you need to choose that option, you’re in a position that hopefully does not feel as overwhelming.

I would also encourage the students listening that I think you’ve heard me talk about before on this show, I think it’s easy as a student, myself included when I was a student, to fall into the trap of worrying about this in the future, to fall into the trap of it just feels like Monopoly money, it doesn’t feel real. So I would encourage you to inventory your loans, to log on, to look at your balances, to look at the interest rates, to see how that interest is accruing, to ask yourself, what are some things that I can do, especially on my unsubsidized loans, to lower the interest that is ultimately going to be accruing while you’re in school for your unsubsidized loans and, of course, capitalizing and growing beyond that?

And then students, the other thing I would encourage you is to begin to develop a relationship with the financial aid officer at your institution. Again, really building that relationship. Now having these conversations early as possible to begin to understand the terms, understand the options that when you need to make that decision, you’re ready to be in that position of action.

Now, for recent graduates, here I’m talking to the class of 2019, this could be those that are pursuing residency or those that are out in practice already, you know very well that you are in the grace period. You have the grace period, you’re living it right now. And here we are, that grace period is going to come to an end very soon. So now is the time if you have not already done so to evaluate and compare your options. I think for myself as was true for many others probably listening to this, it’s a rude awakening when you get that statement out of the blue to say, by the way, in the standard 10-year repayment option, you need to pay about $1,800 a month for 10 years to get these loans paid off. And so now is the time, before you get that notice, to evaluate, compare your options, understand income-driven repayment, understand some of the nuances between those plans, understand loan forgiveness, understand what are your options in the refinance marketplace so that when you go into active repayment, again, you’re in a position to make an educated decision.

Now, just a separate word for residents, you know, I think the common thing among residents is an automatic decision to defer. And my question for you to consider is is deferment the best option? Have you really thought about that? Have you really determined what’s going to happen to the interest on your loans while you’re in residency? What’s your makeup of subsidized versus unsubsidized loan? And I know, it’s a busy time. It’s a busy time. You finished your orientation, you’re active in your research experiences. Many of you are probably also teaching, balancing patient care and staffing responsibilities. I understand that you’re busy. But now is the time to really dig in and understand these options. And for those that are in active repayment, my question to you is maybe you’ve never sat down and intentionally evaluated all the options that are available to you. Or maybe you at one point refinanced, but you haven’t reevaluated rates. Or for those of you that are pursuing loan forgiveness, maybe you haven’t yet submitted your employer certification form. So my challenge for those that are in active repayment is have you confirmed, have you spent time to determine that the repayment strategy that you’re in right now is really the best option for you?

And I think as we are certainly here in October 2019, we’ve seen interest rates come down, we’ll talk about that here in a moment with refinance, when it comes to student loans, that means we often see the interest rates on a refinance become a greater differentiation or separation from the interest rates that you’re going to get offered through your federal loans. Now, we’ve said many, many times before, refinance is not for everyone. There’s certain considerations and benefits that you have in the federal system that you may not have in the private system, although that gap has closed. And certainly if you’re pursuing Public Service Loan Forgiveness, absolutely you do not want to pursue a refinance. But for those that have decided that is the best option for them, I think now is a good time to check rates. Certainly if you’re just getting initial quotes, it’s a soft pull on your credit, and that’s not going to have an impact until you actually go through the full application. You can learn more at YourFinancialPharmacist.com/refinance to learn more about the refinance process, who we think it’s for, who we think it is not for, and ultimately to check and compare rates. Again, YourFinancialPharmacist.com/refinance. So that’s No. 1 is reevaluating or evaluating your student loan repayment options.

No. 2, it’s hard to think about the holidays here in October, but if we’re going to finish 2019 strong, we need to set a budget, have a plan, and save for the holidays. And that’s No. 2. Now, we talked about this in detail all the way back in Episode 023. That was a long time ago, and I don’t know about you, but I know that I could use a reminder, and I’m guessing that’s the same for you, that we could all use a reminder about by the way, we’ve got to be thinking about the holidays and the impact that has on your financial plan. So of course, ideally, we’re saving throughout the year, that’s the thing we should be doing. But if you, like me, find yourself looking up at the calendar as we roll into October saying, ‘Is it really time for the holidays again?’ then we need to develop a plan as soon as possible to avoid the stress and the debt that often comes along with the holiday season and impacts how we start the new year. After all, the data shows that on average, on average, those who take on debt accrue approximately $1,000 of new debt from the holidays alone. So if we’re going to be in an offensive position going into the new year, we cannot let the holidays derail our financial plan. So the question here is, how can you have a painless financial holiday season?

So I think first thing that you can do is list all of your holiday expenses. Now, I’m talking all of your holiday expenses. And I know, here we are, it’s October. It’s not even Halloween yet, and we’re talking about later in the year holiday expenses. But this is important, right? Because it sounds easy. But from my experience, I’m sure from your experience, a lot of frustration comes from understanding what really are the true expenses when you reflect back on it. And I think we often underestimate these true expenses. So you know as well as I know it’s not just the gifts for family and friends, although that’s where we typically stop and end with the budget for the holidays. It’s the gifts we often buy for coworkers, it’s the gifts for those that are hosting parties we attend, it’s the gifts and the things associated with various work outings. It’s the expenses associated with hosting family and friends. Of course, it’s the travel, it’s the house decorations, it’s the cards and the postage, and the list goes on and on and on. So I think where we start is listing each item, holding true to that, and hopefully eventually coming up with a budget for each line item to come up with in sum, what do we need to be planning for the holiday season?

Second, for each of those categories, once you get everything down on paper, you know, begin to think about and identify are there some ways that since here we are planning well in advance, are there some ways because of your preparation and because of your diligence that you can be more intentional and save money during the holidays? For example, perhaps an electronic letter with a photo compared to printing cards or shopping in advance to be more intentional and to give yourself time to price shop around and compare. Or maybe it’s taking up those gift cards that have been unused or cashing in on travel or credit card points to help fund gifts or putting a cap on gift amounts with family or friends. And again, the list goes on and on. But the point is if we can plan here in October as we talk about finishing 2019 strong and we don’t wait until the last minute, we can be much more intentional and I think reap the benefits of that going into next year.

Now we have a guide we developed all the way back in Episode 023 if you want more information to help you think about this further and even start to work through the budgeting process of this. Head on over to YourFinancialPharmacist/holidays to get started. Again, YourFinancialPharmacist.com/holidays. So that’s No. 2: Set a budget, be intentional, save for the holidays. s

No. 3, evaluate a mortgage refinance. So for those of you that currently own a home, you know, here we are at the time of this recording, early October 2019, and we have seen a significant reduction in mortgage interest rates compared to this time last year. And I think there’s even talks of further reduction in Quarter 4 of 2019. So as an example, this time last year, my wife Jess and I moved down to Columbus from northeast Ohio, and interest rates on a 30-year fixed loan 12 months ago were north of 4.5%. So 12 months ago, we saw interest rates on 30-year fixed loans be above 4.5%. We actually closed on a loan at 4.625%. Now, today, we are seeing rates, a year later — depending on credit scores, of course if you buy points in the process and other factors — we’re seeing 30-year rates that are below 4%, high 3’s, and we’re seeing 15-year rates that are in the low 3’s. And I’ve even seen some offers in the high 2’s, especially if you’re buying points in the process. Now, it may not seem significant, but when you talk about a percentage, percentage and a half, even three-quarters of a percentage, depending on your mortgage, depending on where you’re at in the repayment process, this can be significant, especially over a 15- or 30-year term. So what I encourage you to do is take a moment to stop, look at the interest rate, look at the current market of rates — you can look at that without having to impact your credit score — and calculate a break-even on what this would mean if you would refinance your home. How much would you save relative to how much you would cost, how much you would spend in the closing process? So pretty simple, you can run a calculator. We’ve got some great resources on our site. If you go to YourFinancialPharmacist.com/calculators, we’ve got lots of resources that can help you here. But essentially, you do a simple calculation to say OK, if this is my current balance on my loan, here’s my current interest rate, here’s the rate I’m assuming in a refinance, how much would I save per month? And obviously, you have to make this as close to an apples-to-apples comparison as possible because if you currently have 26 years left on your mortgage and you’re going to refi to a 30-year, obviously you need to account for that time difference. There’s certainly calculators that can help you do that. So once you calculate the savings over the life of the loan, then you want to ask yourself, well, how much are you going to pay in closing costs, in fees? And this would include things like bank fees, title costs, third-party costs, appraisals or attorney fees, escrow charges and so forth. What’s your total cost to close? And based on your monthly savings, when will you get to a break-even? And typically, what you see like in the situation where Jess and I are in right now, if we had a 30-year mortgage that we just closed on a year ago of 4.625% and we can get a 30-year in the low 4’s or the high 3’s, then certainly we’re going to see a significant return on investment in a fairly short period of time. So that’s No. 3 is evaluating a mortgage refinance if you haven’t looked at that in awhile.

Now, No. 4 is one that’s near and dear to my heart, and it’s something I’m becoming more and more passionate about as I really understand the power and value in continuing to have a mindset of professional development and learning and learning and learning. No. 4 is making a commitment to read at least one book per month. Some of you may already be doing that, some of you that may seem a stretch. It’s just a place, a recommendation of where to start. Now, where does this come from? My wife and I are recently watching the Bill Gates documentary on Netflix, which is fantastic, by the way. It’s called “Inside Bill’s Brain,” and one of the things you’ll notice in that documentary is he just carries around this sack of books. He’s constantly reading and reading a wide variety of things. And his passion to learn, his desire to learn is so evident as a part of the fabric of who he is as a leader. And we’ll link to in the show notes, he actually has a summer books 2019 reading list, a suggestion of books if you’re looking to get started. But he’s reported to read approximately 50 books per year, and he’s quoted as saying, “You don’t really start getting old until you stop learning.” And when you look at some of the most successful people that are out there — and here I’m defining success by a combination of both net worth as well as the impact they have had and the work that they’re doing. This could be business related or philanthropic related, which certainly Bill Gates would fall into both of those. And what you see among these people is a common thread of a quest for knowledge, a deep desire to learn more and the humility to accept that what they know is only a fraction of what there is to learn, no matter where they are in their career. And so this just got me thinking, why is this so for such famous, successful people like Bill Gates, Oprah Winfrey, Warren Buffett, all of whom are worth billions of dollars, extremely busy, have lots of competing priorities? How in the world do they have time to read, time to learn more? And why is that such a significant priority for them? In many of these leaders what you see, as I’ve already alluded to, is that despite being extremely busy, they set aside at least an hour a day, five hours a week, over their entire career, or at least most of their career, for activities that could be classified as deliberate practice or learning. And this has been written about, it is known as the “Five-Hour Rule,” this five hours a week, and there’s a 2016 article that was written by serial entrepreneur and bestselling author Michael Simmons, and he quotes these individuals as exhibiting these behaviors and habits: Warren Buffett, for example, which is referenced in the Bill Gates documentary as well, spends 5-6 hours per day reading five newspapers and 500 pages of corporate reports. Not sure how he stays awake for that, but he does. Bill Gates reads 50 books per year, I already mentioned that. Mark Zuckerberg reads at least one book every two weeks. Elon Musk grew up reading two books a day, according to his brother. Mark Cuban reads more than three hours every day. Arthur Blank, co-founder of Home Depot, reads two hours a day. Dan Gilbert, self-made billionaire, owner of the Cleveland Cavaliers, reads 1-2 hours a day.

So my encouragement to you is to start making a habit of reading and learning more, whether that is the old-school book-in-hand method, maybe it’s a Kindle, an audiobook, podcast. Make this commitment to learn more of a priority. Set a goal for the number of books — I gave you an example as we started here point No. 4, one book per month — but set a number of books that you want to read for the remainder of 2019 and do the same for 2020. So we’ll link in the show notes to Bill Gates’ Summer of 2019 reading list if you’re looking for a place to get started. And I hope that you will share with the YFP community and our Facebook group what you’re reading and what you’re learning. And of course, if you’re looking for a good financial book to get started, I have to mention “Seven Figure Pharmacist,” I have a bias for that. Also I will throw out there, “I Will Teach You to Be Rich” by Ramit Sethi, “Rich Dad Poor Dad” by Robert Kiyosaki, “Friend of a Friend” by David Burkus, which we recently interviewed on the podcast, and one if you want to get ready for an interview you’re going to be doing in the future is “The Behavioral Investor” by Daniel Crosby. It talks a lot about the behavioral aspects of finance and has built a career with his PhD studying this information about how behavior impacts our financial plan. So there’s some ideas to get started. So that’s No. 4. No. 4 is making a commitment to read and doing so with reading at least one book per month.

No. 5 is start visualizing what success will look like for you in 2020. You know, several years ago, I read a book called “The Miracle Morning,” and one of the activities they talk about in “The Miracle Morning” by Hal Elrod, it’s a great book, great process, is this concept of visualization. Pat Flynn talks about this a lot as well in his book, “Will It Fly?” And they talk about this process of not only setting goals but visualizing those goals becoming a reality and then revisiting those goals each and every day or maybe it’s once a week or maybe it’s several times a month. And when you do that, an amazing thing happens between you start with the goal that maybe feels like a hope or a dream or a wish, and then you articulate it, and then you become more specific, and then you put a number to it, and then you start to repeat that and see it and think about what would this feel like? What would this look like if this were to become a reality? And you begin to convince yourself through visualization that it will become a reality.

So I want you to answer this question as you think about visualizing success for 2020. And that question is, at the end of 2020, finish this statement: I will feel like I am winning financially if… So write it down. Look at it. What is happening for you at the end of 2020 that you will feel like you are winning financially if these things happen? The more specific you can get here, the better. Maybe it’s a certain amount that you want to have paid off of debt, credit card debt, student loan debt. Maybe it’s a certain amount that you want saved for a rainy day. Maybe it’s a certain amount for investing or for paying on a mortgage or for starting to get invested in real estate. And I would encourage you in addition to just writing these down, maybe some things that come to mind that you’re already thinking about, set one big, audacious, stretch goal for 2020. One thing that may seem like, you know what, it’s a hope or it’s a dream, it’s out of sight, it’s out of touch, but this is something I’m going to put down on paper, and I’m going to begin to think about that if I get these other things achieved, I’m going to be in a position to work towards this bigger goal.

So for Jess and I in 2019, this was real estate. We said, you know what, we want to invest in our first real estate property. We want to do that in 2019. Now, at the time, we had a big $0 invested to do that, but we knew it was a goal. We were able to articulate why that was a goal for our family. We created a sinking fund in Ally that had a big $0 for a long time, but it was a constant visual reminder of why we needed to achieve the other things within our financial plan that were ultimately going to allow us to unlock this part of it. We’re going to talk more about what that process was for us and our first property and hopefully soon our second property in the next couple weeks.

So I want to finish here with a quote from Seth Godin that I think really gets to this concept of visualizing for the future, really gets to this concept of setting big goals and often that our limitations are internal, our limitations are the variable that we can’t see a big enough picture to be able to realize what we’re actually capable of. And this is really this concept of a growth mindset. Seth Godin says, “Not the limit of our skills, not the limit of our knowledge, not the limit of our physical capacity. It’s almost always the limits of our internal narrative, our guts, our willingness to be kind, to believe, to care enough to lead. We can’t do anything about the limitations of physics, and we can never do enough to change the limitations of our culture.” But Seth says, “But we can begin today on changing the internal limits we place on ourselves. Yes, it’s your turn.” I love that from Seth Godin.

So there you have it. Five ways to finish 2019 strong. I hope you can take away one of these five, maybe all of these five, and as always, I’d love to hear what your thoughts are and would love to have you share your progress with the Your Financial Pharmacist community over at the Your Financial Pharmacist Facebook group.

Before we wrap up today’s episode of the Your Financial Pharmacist podcast, I want to again thank today’s sponsor, the American Pharmacists Association. Founded in 1852, APhA is the largest association of pharmacists in the U.S. with more than 62,000 practicing pharmacists, pharmaceutical scientists, student pharmacists, and pharmacy technicians as members. Join APhA now to gain premier access to YFP-facilitated webinars, financial articles, live events, resources, and consultations. Your membership will also allow you to receive exclusive discounts on YFP products and services. You can join APhA at a 20% discount by visiting pharmacists.com/join and using the coupon code A19YFP. For more information about the financial resources we offer in partnership with APhA, visit pharmacists.com/YFP.

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

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YFP 119: Ask a YFP CFP®

Posted on by yfpadmin


Ask a YFP CFP®

Christina Slavonik, CFP® at Your Financial Pharmacist, joins Tim Ulbrich for a new installment of the YFP podcast, Ask a YFP CFP®. Christina answers financial questions from the Your Financial Pharmacist community covering topics such as student loans, investing and the inverted yield curve.

Summary

Christina Slavonik, CFP®, is a team member of Your Financial Pharmacist and offers fee-only comprehensive financial planning. In this podcast episode, Christina answers questions from the YFP community in a rapid fire format.

To start, Christina explains that fee-only financial planning means that we’re not getting extra commissions as many traditional firms are. Christina explains that YFP believes the best way to measure non-conflict of interest is to provide fee-only services where clients are only paying for the advice they receive. YFP also upholds to the fiduciary standard where the clients’ best interests are really the focus.

Christina answers several questions from diverse topics such as student loans, investing and the inverted yield curve. Two of the asked questions are below:

Andre asks if he’s sacrificing a lot of immediate short term investment opportunities like having a house or saving for retirement in order to pay off student loans more quickly through refinancing. Christina explains that it really depends on your goals and life plan. While there may be some comprises that have to be made, YFP believes there should be a balance of today and tomorrow so that you’re enjoying your life along the way to meeting your financial goals.

Amanda asks, “I’ve heard that given the inverted yield curve as well as many other factors that we may be entering a recession. How can I best prepare? Should I be picking up lots of extra shifts at my 2nd job to boost my emergency savings (currently 3 months) or should I continue focusing on student loan debt?” Christina responds by saying that there will always be recessions. There have been 47 recessions in the U.S. and the average recession lasts about 1 ½ years. She explains that the markets are cyclical and recessions are part of the process. The best way to cover yourself in any situation, whether we’re in a recession or not, is to be diversified in your investments and also your income. Having a second job or side hustle and having an emergency fund with 3 to 6 months of income for emergency expenses are all good practices.

If you have a question you’d like answered, email [email protected] or send us a message on Facebook or Instagram.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast, excited to be here live on Facebook for the first installment of a new segment that we’re doing, Ask a YFP CFP, standing for Certified Financial Planner, where we’re going to be taking your questions on a regular basis going forward, and we’re going to ask those questions to one of our Certified Financial Planners, Tim Baker or joining me this evening, Christina Slavonik. So Christina, thank you so much for joining.

Christina Slavonik: Yes, thanks so much for having me, Tim. I’m excited.

Tim Ulbrich: Excited to do this. We’ve got some great questions that we’re going to answer this evening. And before we jump into those, I know some of our audience and community members with your background you’ve had — you’ve been on the show before — but some may not be, so give us a quick introduction and talk about some of the work that you’re doing over at YFP.

Christina Slavonik: Sure. Well, I’ve been in the industry doing various roles for the past 13 years and really just hit the planning piece the last several years, became a Certified Financial Planner in 2017 and was working with the more traditional side of investment management, which you hear about fee-based and fee-only, this was a little bit of both mixed. And so when I had the opportunity to come on board with Your Financial Pharmacist, it’s a niche. I love working with younger professionals, and it just seems like a great segway into the next stage.

Tim Ulbrich: Well, we’re certainly excited to have you as a part of the team. And you mentioned fee-based, fee-only, we talk a lot on the show about the importance of the credential of Certified Financial Planner but also the importance of being fee-only. Break that down for us real quick. Why is fee-only so important? And what does the credential CFP even mean?

Christina Slavonik: Sure. So fee-only, when that comes to mind is you’re paying us just for the advice. We’re not getting any extra commissions, no extra fees being paid on Assets Under Management, which is how a lot of traditional firms are paid and a lot of advisors. Nothing wrong with that, but we just believe that the best way to measure a non-conflict of interest is to provide that fee-only service, which is you’re just paying us for our advice and being a Certified Financial Planner, we are held to that higher standard, the fiduciary standard, so to speak. And we’re supposed to be holding our clients’ best interests at heart.

Tim Ulbrich: Yeah, and I think one of the examples I use often that is in the pharmacy world, you know, we tend to think that OK, everyone is licensed as a pharmacist, everyone has their doctorate of pharmacy, and therefore, we’re all obligated to act in the best interests of our patients. That’s what we do. And so it was a shocker to me when I first entered into this just over about four years ago to really learn that the industry in the financial planning world is very much not the case, even that really the opposite. And for those of you that want to learn more about this topic of fiduciary, fee-only, we’ve got lots of information on the website. But I think also John Oliver has a great segment on fiduciary and fee-only that I think is worth watching. And he really breaks this down in a way that’s easy to understand. So if you’re not already familiar, we offer fee-only comprehensive financial planning over at Your Financial Pharmacist. As I mentioned, we have two Certified Financial Planners, Christina and Tim Baker. And you can learn more over at YFPPlanning.com. And so we’re going to be taking your questions on a regular basis. Some of the questions that came in this evening came via email, our Facebook group, Instagram, so you can reach us at [email protected] or you can shoot us a question in one of those social media outlets as well. In terms of format, I’m going to rapid-fire these questions to Christina, so I’m going to put her on the hot seat. We have lots of questions, student loans, investing, inverted yield curves, which is the cool term these days, so we’re going to talk about lots of different things. And certainly, if you’re on live now and you have a question, throw it out there and we’d love to answer that as well. You ready?

Christina Slavonik: I’m ready. Let’s get going.

Tim Ulbrich: Awesome. Let’s do this. We’ve got some good questions, so this is exciting.

Christina Slavonik: I’m very impressed with the lineup.

Tim Ulbrich: So Andre — first question comes from Andre, and he has two questions. He’s a new member of our Facebook group, so Andre, welcome to the community. We’re excited to have you. His first question is traditionally, most people pursue PSLF, standing for Public Service Loan Forgiveness, or refinance their student loans. But his question is are there other, non-traditional methods to consider beyond PSLF or refinance?

Christina Slavonik: Yeah, this is a really great question, Andre. So one of the things that we’re seeing more and more is non-traditional method. Some employers are actually offering reimbursement to help you pay off your loans faster in various forms and fashions. So that’s actually something to look into with your current employer. And there’s always the non-PSLF forgiveness. I know some people kind of forget about that one. Of course, you would have to pay the tax hit once that forgiveness is sent your way. It is counted as income on your tax return. But still, it is a forgiveness. And I think some people forget about that kind of forgiveness. Side hustles, you know, other nontraditional ways, I know some people have talked about giving away plasma. I wouldn’t go as far as selling an organ, but hey, you know, the sky’s the limit if you’re that committed to paying off those loans. Cutting certain expenses, just fairly small changes can move the needle in a big way over a sustained period of time.

Tim Ulbrich: Yeah, and one of the things we preach, Christina, you know this in working with clients is that unfortunately, when it comes to choosing a student loan repayment strategy, it’s probably way more complicated than it needs to be. Multiple options in the federal system, income-based repayment, standard monthly payments, extended, graduated, forgiveness, non-forgiveness, PSLF, non-PSLF, and then you’ve also got the whole host of options you see in the private market with refinance.

Christina Slavonik: Right.

Tim Ulbrich: And I think because of that confusion, I know what happened for me in my personal journey, I see with lots of pharmacists, is there’s often that paralysis by analysis where people default into the standard 10-year or maybe go into income-based repayment but wander into that and don’t really think about why or what they’re trying to do. And if you’re talking about six-figure+ student loan debt, we now know the average graduating student is facing about $173,000 on average, which is mind-blowing. But this is not a decision that you want to wander into. And we’ve seen with clients, with individuals, intentionality in this choice can be the difference of tens of thousands of dollars, especially when you consider in the context of the rest of your financial plan. So I would point our listeners, if you haven’t already checked out — shoutout to Tim Church, he did an awesome job on this piece — if you go to YourFinancialPharmacist.com/ultimate, he’s got the ultimate guide to repaying back your student loans. It talks through a lot of those options and gives you additional information. Second question from Andre, Christina, he asks, “Am I sacrificing a lot of immediate, short-term investment opportunities such a house, retirement, kids, etc. in order to pay off student loans more quickly through refinancing?” What are your thoughts on that?

Christina Slavonik: Yeah, that’s always a tough one to navigate, especially when it’s staring at you right in the face. Hard to put a price tag on that clarity and peace of mind, totally get that. But being able to be with an accountability partner that can help you put all these things on the table, it all goes back to your life plan, what goals you have for yourself. And your financial plan should be built around that life plan. Once we kind of get that clarification, it’s much easier to see where the other things will fall into place. And it can be quite a transformative experience, and your priorities become more defined. Some of the questions I ask myself is trying to find that balance, what keeps you awake the most at night? And kind of prioritizing it that way and then working with this through a Certified Financial Planner or a life coach that can help you navigate which path you should take. There’s some compromises that may be worth sacrificing up front. Just some ideas, especially little kids. I don’t know how old your children are or if you’re just planning to have kids, but there’s so many ways you can have fun when they’re young, and you don’t have to spend a whole lot of money. So there’s just different ways to think out of the box when it comes to those opportunities.

Tim Ulbrich: Yeah, and I love the approach that you and Tim take on this that there has to be a balance of today and tomorrow. Right? I mean, we have to take care of our financial house today, but if we do a great job with that for 30 or 40 years and we never enjoy it along the way, then I think we’re losing, right? We have to find this balance between living a rich life today and living a rich life in the future. And I think that happens through asking some of those probing questions that really get at the things, you know, what do you care about most? What are you passionate about? What really gets you excited each and every day? And ultimately, why does this whole topic of money even matter? And I think that’s a great question to ask before you even get into the x’s and o’s of your financial plan. And I’ll never forget, I think it was Episode 032 and 033, maybe 031 and 032, where Tim Baker interview Jess and I, talking about this concept of find your why. When you really start to challenge and say, OK, we’re paying down debt, we’re saving, we’re doing all of these things, but why are we doing these things? What are the things that really matter? And I think that’s what Andre is getting to in this question here. Alright, next one’s a big one. So to Christina from Christina, and it’s a really multi-part question that’s got some investing pieces, student loan pieces, FSA dependent savings account, so I’m going to break this down and collectively, we’ll tackle this one. So Christina asks, “I just started working at a not-for-profit hospital. As soon as that happened, I switched to PAYE, Pay As You Earn, loan and have already submitted my PSLF loan forgiveness employment verification form to the DOE, Department of Education.” Lots of acronyms here in this question. “I maxed out by 403b so that I can hit the $19,000 limit.” The question from Christina is, “Can I also contribute to my traditional IRA? Or is it one or the other?”

Christina Slavonik: Well, my answer is yes, Christina, from Christina, you can contribute to max out your 401k or 403b up to that $19,000 as well as max out an IRA. So the way I like to think about it is one is provided by your employer, the other is provided personally to yourself. So both have maximum limits. The IRA, of course, you can choose between a Roth and a traditional. You can only max one of those out or just a combination of those two. But yes, to answer that question, you can.

Tim Ulbrich: Yeah, so great point. I mean, 401k, 403b, those are employer-sponsored, one for-profit, one not-for-profit. IRA, the I standing for Individual, right? So that’s your individual retirement account. So second part of this, then, is, “I am also a working PRN” — nerdy pharmacy lingo here — so “as needed at my retail job. And I left that at a 6% contribution for my 401k since that is what they match. What happens if I get extra shifts and end up contributing more? Is there a penalty? I tried to calculate and plan on watching it very closely, but I would like to know in the event it happens.”

Christina Slavonik: Well, yeah, it’s good that you’re being proactive and not waiting. You really have until your tax filing deadline of April 15 to make any corrections if you need to. And yes, there is a penalty involved. There’s typically a 6% excise tax as well as some other double taxation issues if you cannot get that amount out in time before you file your taxes. So yes, just keep tracking on both pay stubs, maybe even getting your HR person involved if possible. But yeah, you may just have to totally not contribute to one of those altogether for the rest of the year since the year is almost over and approaching that tax deadline.

Tim Ulbrich: And I think relatively a good problem to be thinking about, right? If you’re worried about exceeding the maximum contribution.

Christina Slavonik: Yes.

Tim Ulbrich: So let’s not lose that fact, Christina, great job on making these contributions. Next part of this is, “There was also a dependent FSA, Flexible Savings Account, offered that I opted into for child care expenses. I’m trying to max as much as possible so that I can decrease my AGI, Adjusted Gross Income, for my PAYE, Pay As You Earn, loan. How do you determine when to file married separate or married jointly?” This is a great question. We get this all the time.

Christina Slavonik: Yeah, it is a fabulous question and one that’s best suited for someone, an enrolled agent or CPA that deals with taxes on a regular basis. There are so many pieces that wag the tax dog. And it’s just hard to give a specific recommendation without seeing the whole situation. Sometimes, it does make sense to file separately when doing the Pay As You Earn as the other spouse’s income does not count. But again, there are other factors to consider as well.

Tim Ulbrich: And I think for me, that’s the take-home point when I get a question like this is that making sure that those that are in an income-based repayment plan, especially those that are pursuing Public Service Loan Forgiveness, that you understand there can be a difference. And from there, you really dig deeper with an enrolled agent, with a tax professional, because they can look at the rest of your financial plan to understand the rest of your financial situation, understand what might be best. And we’re also grateful that we have Paul on our team, who is an enrolled agent, that can supplement the financial planning services that you and Tim are doing as well. OK, last part here from Christina is, “And for dependents’ savings account that are offered through your employer, is there a max that each person can use? Is it $5,000 per family and only $2,500 per person? Or can one do the full $5,000?”

Christina Slavonik: Sure, this is a really good question and one that we’ve actually seen before. Yes, the maximum is $5,000 to contribute. But really, any person in that family can utilize that. I know Tim Baker has mentioned that there are state-specific rules when it comes to FSAs, but in general, you can use it on qualified expenses for the physical care, the day care, child care, yeah. Just keep the receipts, keep good records of what you actually used it for. And one other side note with that: I know you’re wanting to lower your AGI by doing this. And sometimes, employers will also offer the Health Savings Account component for a high-deductible health plan. Sometimes having a limited purpose FSA will allow you to have an HSA as well, which can increase the deduction you can put towards lowering your AGI, so that’s another way to check into some more tax savings.

Tim Ulbrich: And good news we got back from Christina as a follow-up to this question. She says, “We max out our deductions for a total of $55,000 going into the 403b, TSA, IRAs, DSA, which should bring us to just under $100,000 of Adjusted Gross Income for the year. Thank you for reaching out and for all the help with the group.” I love that because I think that what I see through Christina’s questions is intentionality. And I see her digging in, I see her trying to understand the tax situations, understand what’s going on with the rest of the financial plan as it relates to student loans. And let me encourage those that are listening that they hear 401k, 403b, Roth IRA, FSA, HSA, DSA, and you’re following, great. But for those that are hearing some of those terms for the first time, we have a lot that we’ve covered in the investing realm on the podcast. Episode 072-076 back in fall 2018, we did an entire series on investing for this reason, so I would encourage you to check that out and certainly get more information that will help you with the rest of this decision as you’re looking at loan forgiveness and some of these situations. OK, from Stephanie, this question comes from Instagram: “Recommendations for personal loan lenders for the intention of consolidating credit card debt?” What are your thoughts on that one, Christina?

Christina Slavonik: Sure, well, congratulations, Stephanie, being one of the 2019 graduates. Like many graduates, I’m sure you’ve had your share of transitional expenses, such as the job moving, job search, budget changes. While we can’t generally recommend any specific lender, we do recommend starting with a current banking relationship as the best way to tackle that, including a credit union. They can normally give you pretty good rates. Try being careful. Some things to look out for when consolidating credit card debt is make sure that there may be a minimum that you have to consolidate. And sometimes you may not meet that minimum. So having to make sure you know that. Try not to take more than five years to pay off that loan just because the shorter we can keep that, the better. And know if there are going to be any origination fees or what those flat fees or any flat fees that are involved. Sometimes it’s a percentage of what you consolidate, sometimes there isn’t. And don’t — try not to use the credit cards once you consolidate. I know that’s one of the hardest things, but I’ve seen that happen time and time again. And I know the snowball method — now we’re venturing into Dave Ramsey territory, that’s one of the things he says — once you’re paying off those credit cards, try not to use them. You’re trying to get rid of that debt. So other items to consider, maybe a home equity line of credit is another way to approach that. And revisiting the budget. If you can avoid taking on a consolidation loan altogether, the extra steps are worth it and just finding ways that you can walk through your budget and maybe cut some extra expenses. I do want to give out a shout to Tom Eraz (?), he’s our accounting budgeting nerd at YFP Planning. And he’s helped many, many of our clients with questions just like this, what should I do in this situation? And he’s been very helpful with giving some suggestions.

Tim Ulbrich: To say Tom is a budgeting nerd is an understatement. I mean, he gets jacked up about budgeting.

Christina Slavonik: Yeah, I’ve never seen someone so excited about spreadsheets.

Tim Ulbrich: Yeah, I think he loves helping people in that area. Alright, time to get nerdy, and we’re going to talk about inverted yield curves. And I swear about a month ago, this was like the cool thing to talk about on NPR and the Wall Street Journal. Everybody was talking about inverted yield curves. So Amanda asks, “I’ve heard that given the inverted yield curve as well as many other factors that we may be entering a recession.” So the question is, “How can I best prepare? Should I be picking up lots of extra shifts at my second job to boost my emergency savings currently at three months? Or should I continue focusing on student loan debt? Thank you for your help.”

Christina Slavonik: Sure, Amanda. Yeah. And I know sometimes it’s hard not to listen to the talking heads and the people when they comment on inverted yield curves and what those indicators may mean. Typically, it may or may not say that a recession’s on the way. That’s just one of the indicators that we kind of look at. But again, it’s not something to hang your laurels on. There always will be recessions. I know we’ve had about 47 recessions in the U.S. history. Average one lasts about one and a half years, so just a little bit of feedback on that. The markets are cyclical, so what goes up will go down. That’s just part of the process. But just know that I believe you are already covering yourself the best way you can. Recession or not, it’s always great to be diversified, not just in your investments but also how you have your cash flow coming in to you. So even though you’re picking up those side hustles, working those second jobs, you’re not getting stuck in the 9-5, which is fantastic. Having a second side hustle or flow of income coming through and having that emergency fund already saved up at 3-6 months of emergency expenses for those non-discretionary items. These are great behaviors just to keep consistent during good and bad markets. So never really a bad idea to keep paying towards debt as it overall increases your net worth over time. And just be careful to keep reevaluating your lifestyle creep is a good exercise as well. So very good. Very good.

Tim Ulbrich: Yeah, I agree. When I saw this question, I mean, I think boosting emergency savings and paying down debt is good practice regardless of a pending recession or not. So I think it’s important to think about those foundational items. So Jeff asks, again, kind of along this idea of low interest rates, potentially a pending recession, “How should a prolonged period of extremely low or even negative interest rates be considered in your financial plan?”

Christina Slavonik: Sure, and one thing I like to think about first is where are you at in your life cycle? Are you approaching retirement? Are you a retiree who would have to look at those cash alternatives such as a bond ladder, which is where you can match cash flow with the demand for cash via multi-maturing layerings, and that’s a whole other topic. But yeah, mostly when dealing with young professionals, you’re generally saving for those long-term goals and objectives, so saving for retirement. And the period of a downside should really have little consequence with the long-term strategy, so I try not to get too wrapped up if you see prolonged periods of market drops. Generally, if you’re trying to borrow money, now would be a great time to do that, an extreme or low, negative interest rate environments. And capitalize on the securities and the equities, especially during the down times because you’re buying at a bargain. And so by the time the market does go back up again, you know you’re going to be well ahead if you had decided not to do that, instead take your investment ball and go home. So again, just really determining your objectives and having an investment allocation that matches that objective. Short-term goals, you may need to dial back a little bit, CDs, Money Market funds or whatnot. But yeah, just in general, I wouldn’t worry too much if you have a long-term strategy.

Tim Ulbrich: Yeah, I think that’s an important point: long-term strategy. And building off of the previous question with the inverted curve and looking at interest rates and other things, I think it is hard to take the noise out of it. I mean, I meant to keep them and I forgot to do so, but I’m still that guy who gets a newspaper delivered at home every day. And literally, you know, I was thinking back in December, January, it was like every day, it was the front page of one day the market was going up, the next it was going down.

Christina Slavonik: It’s always going on.

Tim Ulbrich: And the projections of why this was going on, and even though I’ve got a plan and I’m sticking to it, like it’s still hard to ignore the noise, and it starts to have that subconscious effect over time. But I think your point’s a good one here when we talk about negative low interest rates, really think about — the two areas that come to mind, especially for a lot of our community members, would be mortgage interest rates and whether it’s a new home or refinancing on a home, I think now is the time is probably to be looking at that if you haven’t done so in awhile. You know, when you look at a 30-year mortgage, a point on that loan can be really significant on a $300,000-400,000 house and looking at what would be your break-even on a refinance, and then also refinance on the student loans. We preach over and over again that refinancing student loans is not for everyone. So if you’re pursuing Public Service Loan Forgiveness, absolutely not. There’s certain provisions you want to consider and be looking for when you’re doing a refinance. But for those that the math makes sense and they’re really doing all of those things they need to be thinking about, you know, a point or two on your student loans obviously can be really significant. And as we see student loans still at 6, 7, 8% for many graduates, and we’re seeing refi rates continue to come down. I think it’s a good opportunity to look at those. OK, Kelsey asks, back into the student loan category, “Question about re-certifying my IBR income-based replacement income — income-based repayment income. I’m seeing that PAYE and RePAYE may be a better option for those that qualify. I’m due to re-certify for IBR this month. But would changing to PAYE or RePAYE affect anything in regards to qualifying for PSLF in the future? I’m five years in, and I don’t want to mess anything up. I’ve read the horror stories from those who’ve submitted for forgiveness, and they say not to change anything. But I’m hoping to make my payment a little lower this year if I can. Any thoughts, suggestions, or advice?”

Christina Slavonik: Yes. Three words: student loan analysis. This is one of those bigger picture things. So yeah, looking at the bigger picture, definitely changing from an IBR to a Pay As You Earn or RePAYE would not affect qualifying for the student loan forgiveness itself, but you would need to figure out which loans in particular would qualify and how to navigate that process. So that’s probably where people say if it’s not broke, don’t fix it. Stay where you’re at. So I wouldn’t want you to consolidate as that could restart the forgiveness clock all over again since you are five years in. I typically wouldn’t touch it unless you’re willing to do a little more digging and get that analysis done. As a side note, we did have a client that did go through the analysis, and she was in the IBR, went through the analysis program, and we did discover that she would be a good candidate to switch to the PAYE or RePAYE. And we were able to walk her through the steps. So in general, yes, the PAYE, RePAYE, can be more beneficial, meaning it can lower your payments, but it’s hard to say a firm yes or no without looking under the hood of the car, so to speak.

Tim Ulbrich: Yeah, and I think most of the horror stories that I’ve seen and heard and read about have been because of the consolidation piece that for many people, restarted the PSLF clock. Certainly, there’s been some qualified employer issues that have been out there. But I think if you really dig deep on this — and we talked about this in Episode 078 where we broke down is pursuing Public Service Loan Forgiveness a waste? And this really came out of the NPR story that was famous that we still have questions about. Every time we’re speaking, we’re quoting 99% of applicants that were denied. And really, when you dug into that a lot deeper, we talked about that on that episode, you know, many of those were incomplete applications, many people that weren’t in a qualifying repayment plan, and many people that ran into issues around consolidation or other things. And I think it’s important to reiterate here that this program, in terms of those that are actually qualified and eligible for forgiveness, is still relatively new. So 2007, this program was started, meaning 2017 was the first group that was up for forgiveness to take place. And I think the information that people have today and a lot of things we talk about in terms of what you need to be doing to cross your t’s, dot your i’s, is very different than the information that was available before. So I think our take is as we talk about many times when it comes to student loans, look at all your options, do the math, see how you feel about it, and make sure certainly if it’s PSLF that you’re doing all the details that you need to do to make sure you qualify. Alright, last question we have here, of course, somebody, we had to talk about the Dave Ramsey baby steps and the Dave Ramsey program. So Andrea asks — and it’s a good one — “Here’s my question. I’m starting the Dave Ramsey program at my church tonight. What are good points in his program” — so I’m pretty sure she’s referring to Financial Peace University — “that I should really focus on. Are there parts of the program that you disagree with or have a different opinion? I love his baby steps but not knowing exactly where to start.” So what are your thoughts on the Ramsey baby steps and the Ramsey plan?

Christina Slavonik: Yeah, and Andrea, I’m so excited. I love Dave Ramsey and what he has done in society in general just making people more aware on the forefront that you can get in control of your finances. And this is, I mean, a tremendous, huge first step, especially for those that have had no prior experience getting back to the baby steps, getting into the habit of saving and paying down debt, starting with that $1,000 emergency fund is a really key component to jumpstarting that. And I love the snowball method. That is one thing that we do preach on here is the debt rolldown and how to tackle that debt. We do focus more on the emergency fund part, you know, if you’re comfortable having a $1,000, that’s great. But we try to have at least three months, maybe $10,000 as a buffer, depending on what kind of income you have coming in just to forebode any huge, unexpected things coming your way. And then getting the match in your retirement plan, we think that’s a great thing. I know he preaches that. Getting basic term life insurance, we do recommend just getting basic. There’s no way you can beat that. And then working on what’s the next steps? I know he is a big component of paying down the mortgage. I guess that’s probably one of the places we may deviate a little bit from. And of course, you know, again, what keeps you up at night? It all comes back to that emotional factor. If you feel like paying down your mortgage as soon as possible is the best way to go, but most times, you can be earning a whole lot more putting that extra payments into the market or to another savings goal. You can, however, shave off 10-15 years off of a 30-year loan by just making an extra payment or two each year. So just trying to balance that out. He can be a little extreme in some of the methods he tackles, but again, it’s great. I have nothing bad to say about Dave Ramsey. And he’s really done a great service to many, many people.

Tim Ulbrich: Yeah, I’m not sure, as you know, I went through Financial Peace, Jess and I did, and it was a great experience for us and listened to his podcast for awhile. And I, like you, I think that it provides a great framework. But certainly, there’s nothing that evokes a greater emotional reaction than talking about Dave Ramsey’s baby steps, right? And I think what’s important to remember — and I actually had a chance to go visit Ramsey’s office when I was at the American Pharmacists Association in Nashville a couple years ago and quietly was able to talk to one of their team members who certainly was willing to open up and say, ‘Hey, the reality is Dave’s talking to 5+ million people every day, right? And so when you’re teaching that many people every day, there has to be a simple framework and model.’ And so he’s talking with people that have maybe an income of $20,000-30,000 but of course people that have incomes of $300,000 or more per year. And of course, their situations are going to be very different. But at the end of the day, it’s a stepwise approach, and I think you have to remember that it’s meant for that general audience. I think you also have to remember that it’s predicated on the fact that behavioral aspects related to your financial plan are really what’s going to get many people hung up. It’s not necessarily always the math, but it could be the behavioral piece. And for even the people here listening tonight, I think some people, that model and framework as is may be great to have the discipline, even if it means leaving some of the dollars, some of the math on the table. For other people, maybe that’s not an issue, and they’re going to really adjust, move things around, and create a plan of their own. So I think it very much depends on how much do you need that stepwise approach? How much does that model really resonate with you? And where are you at in the financial planning? Do you really feel like you need that motivation and reminder along the way? I, too, like you — and we talked about this Episode 068, we went back and forth a little bit on the pros and cons of the Dave Ramsey steps, and we hope to have him on the show someday, maybe doing that episode if he were to come on the show, I don’t know.

Christina Slavonik: That would be great.

Tim Ulbrich: But one of the things we talked about, of course, was employer retirement match, which is something that I disagree with him on that. For most people with few exceptions, I think we’re talking about free money. And I think the other thing that you mentioned, the mortgage. I think for some people, paying off the home really makes a whole lot of sense. I think for other people, depending on your interest rate, depending on what’s going on else in your plan, maybe not so much. I think some people are taking that home out 30 years at a low interest rate so they can free up money to do other types of investing, and they’re calculating risk appropriately. Other people maybe not so much. So again, it depends. And I think of course, the big variable and difference is that Dave’s audience is not on average facing $173,000 of student loan debt, right?

Christina Slavonik: Very good point.

Tim Ulbrich: So that’s a very unique factor. And when you think about his framework and model, baby steps, really paying off all debt before you build up a full emergency fund, I think we would agree that some of that needs to be happening in tandem because somebody may be in debt for 10+ years paying off student loans. So great stuff there, Christina. We actually had another question come in that I’m going to read. And just a reminder to those that are on live as well, if you have a question before we jump off, we’d love to answer it. Question relates to PSLF and picking up extra hours at a non-qualifying employer. So question is, “Can you work on the side at a retail pharmacy, which would be a for-profit, non-qualifying employer while enrolled and working with the Public Service Loan Forgiveness employer?” So imagine a situation here where somebody’s working full-time for a not-for-profit hospital, and then they’re picking up extra shifts at a for-profit. Is there extra penalty for making more money from the side retail job? Of course besides it having an impact on your Adjusted Gross Income and therefore, impacting your payments.

Christina Slavonik: Yeah, that’s a good question. And the answer is no. As long as you’re working at a 501c3, the forgiveness should still be OK. I mean, you have many people out there pursuing different side hustles and whatnot just to help make ends meet. And so yeah, the short answer would be no, it shouldn’t affect the PSLF. Is that what was the question?

Tim Ulbrich: That is. I think the other obvious component here if I’m understanding this correctly would be making more money of course would increase the AGI.

Christina Slavonik: It would.

Tim Ulbrich: Which would change the monthly payment, right?

Christina Slavonik: It could, definitely. Yeah. So that is one aspect of that.

Tim Ulbrich: Awesome. Well, Christina, thank you so much. We’re going to be doing this hopefully a lot more often in the future. And just a reminder to the community, shoot us your question that you have, we’d love to have it answered by Christina or Tim Baker, again, our Certified Financial Planners. You can shoot us an email at [email protected]. You can hit us up in the YFP Facebook group or on Instagram as well. And again, as I mentioned at the very beginning of the call, if you’re not already familiar, we offer fee-only comprehensive financial planning over at Your Financial Pharmacist. So you can learn more about that and working with Christina or Tim over at YFPPlanning.com. So Christina, thank you so much. And to everyone else, have a great rest of your night.

Christina Slavonik: Thank you so much, Tim.

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YFP 118: What Would You Do With an Extra $1,000 a Month?

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What Would You Do With an Extra $1,000 a Month?

On this week’s podcast episode, Tim Ulbrich takes you through an exercise to envision what you would do with an extra $1,000 a month and what steps you could take to make it a reality.

Summary

Tim Ulbrich flies solo on this week’s podcast episode to take you through an exercise to envision what you would you do with an extra $1,000 a month and what steps you would need to take to make it a reality.

The context behind this exercise comes from Andrew Yang, a 2020 Presidential Candidate. Yang proposes the Freedom Dividend, or Universal Basic Income, in which every U.S. citizen 18 years or older would receive $1,000 a month. Your Financial Pharmacist does not endorse Andrew Yang and does not want the focus of this episode to be about politics or the implementation of the Freedom Dividend, but instead encourages listeners to dive into the questions posed,

Tim begins by asking this question: What would you do with an extra $1,000 a month? The more you think about it or write your answers, the more that come to mind. Perhaps you’d put the money toward paying off debt or maybe you’d save it or donate it or invest it. Maybe you’d spread it over multiple competing priorities. Maybe you’d use the additional money to pay off your mortgage sooner. Tim shares several responses to this question from the YFP Facebook group in which he hears dreams, hope, peace of mind, and accelerated financial plans. In these responses, he also hears that some may feel that their goals, hopes and dreams are out of reach.

So, how can you change your financial position so that you have an extra $1,000 a month? Tim encourages a mindset shift from what if to how, from I hope so to how can I, from I wish to one step to make this happen is….

Tim explains that this fundamental mind shift may allow you to explore opportunities to bring in additional income that you may not have thought about before. He also suggests that the focus doesn’t have to be to gain $1,000 extra a month but instead aiming for $100 or $200. Refinancing your mortgage or student loans, taking on a side hustle, working extra shifts or moonlighting, trimming your spending, downsizing your home or selling a car you don’t really need, or asking for a raise are all potential avenues to help increase your income each month.

To close, Tim reshapes theses questions: 1) What will you do with an extra $1,000 a month and 2) When will it happen, what will it look like, and who will hold you accountable to get there? The team at YFP has created a lot of resources to help, including offering fee-only financial planning services with Tim Baker or Christina Slavonik, who are both Certified Financial Planners.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. And before we jump into today’s show, I’m excited to announce that we are going to be taking more of your questions on the podcast through a new segment we’re doing called Ask a YFP CFP. Yes, one of our CFPs, one of our Certified Financial Planners over at Your Financial Pharmacist, Tim Baker or Christina Slavonik, will be answering listener questions on a regular basis. So we’re ready for your questions. You can send them in by shooting us an email over at [email protected]. Again, that’s [email protected]. And in the subject line, you can write, “Ask a YFP CFP.” Please don’t be shy. Likely if you’re thinking of a question, I’m sure many others of our listeners are thinking the same.

OK, so for this week, I’m flying solo to talk about two questions, two questions that I’m encouraging every listener to consider. No. 1, what would you do with an extra $1,000 per month? And No. 2, what steps do you need to take to make this a reality? Again, No. 1, what would you do with an extra $1,000 per month? And No. 2, what steps do you need to take to make this a reality?

So let’s start with some important context for where this idea, where these two questions are coming from. And I’m going to intentionally be very brief here as I have no intent for this episode to have a political slant, but rather I want to use an idea that was recently presented by one of the presidential candidates to help spark a conversation. So I’m not, YFP is not, endorsing this presidential candidate or his ideas. So I would ask that you fight the urge to rebuke the idea and rather embrace the exercise. This is a conversation that is not necessarily about the implementation of this candidate’s ideas but rather using this idea as an exercise to dream a little bit, to think about what would it look like if you were to get out of the rut that often we find ourselves in month-to-month and take a step back and dream about the bigger picture and the goals that you have as it relates to your financial plan.

So who am I talking about? What am I talking about? After watching one of the recent presidential debates, there was 10 candidates who were up on stage. One of those candidates was Andrew Yang. And he has out there a proposed Freedom Dividend. And essentially, this is a form of universal basic income, and what he’s proposing is that it would provide all U.S. citizens over the age of 18 with $1,000 per month. So again, that’s called the Freedom Dividend, and it’s a form of universal basic income. And he’s proposing to provide all U.S. citizens over the age of 18 with $1,000 per month, regardless of income, regardless of current financial situations.

So when I heard this, it got me thinking about what would I do with an extra $1,000 per month? So again, regardless of politics and whether or not you agree with this concept of a Freedom Dividend, this is a fun exercise that I think we can walk through together. And for those that want to learn about this concept, we’ll make sure to link to some information in the show notes.

So first question here: What would you do if you had an extra $1,000 per month? So regardless of the source, whether it was the Freedom Dividend, whether it was a major slashing of taxes that were to happen — obviously, that would have to be pretty major — whether it was a significant raise, whether it was investing in real estate, whether it was maybe starting your own business or starting a side hustle, maybe it’s walking into an inheritance. Whatever may be the case, regardless of how this came to be, the question here is what would you do if you had an extra $1,000 per month? And I want you to take a moment and think about this question. Now, for those that are driving, I don’t want you to think too hard. But for those that are listening at home, I want you to write it down. Again, what would you do if you had an extra $1,000 per month? And I think this question is an interesting one. And the more you think about it, I think you’ll find that similar to me, the more ideas that will come to be, the more ideas that will come to mind, dreams will get bigger and the excitement starts brewing.

So would you put it towards one area? Maybe it’s paying off student loans. Maybe it’s paying off a credit card or paying down a mortgage early. Maybe it’s saving for a rainy day or giving or putting more towards investing. So would you put it towards one of those areas, or would you try to spread it out over multiple priorities that you’re working on? I think it’s important to get specific here as when we talk about the second question, which is how will this become a reality? Getting specific will then put you in the mindset to begin to think about what would it look like, what would it feel like if this were to become a reality?

Now, I want you to think about — and as I mentioned, I want you to think about and ultimately ask yourself, how would you feel and how would this accelerate or change your financial plan? So for example, if you were wanting to put this money towards making extra mortgage payments, let’s say you currently have 20 years left on your mortgage and you put an extra $1,000 per month, run a calculator. What would that look like? How would that change your payoff date? And again, how would that make you feel?

So I posed this question to the YFP Facebook community this past weekend. And in short, it really was incredible to see the responses that were out there. And the engagement from that post really told me something about the power of asking questions such as this one, which allows you to dream a little bit about your financial plan. And here’s some of the responses that came in from the group.

Tyson said, “I’d put the $1,000, I’d put a little bit of it towards debt, charity, and save. It would take away the living paycheck-to-paycheck of life.”

Katie says, “We’d pay off medical and student loan debt.”

Isaac says, “I’d use it to kickstart my own company.”
AJ says, “Student loans, helping parents retire, and charity.”

Joe says, “I’d use it to enroll in online education to pursue my dream of becoming an animator. I refuse to go through a traditional school and put myself into a crazy amount of debt.”

Jacob says, “It would lower the risk of financial ruin and allow my wife and I to pursue several business ideas as well as construction projects around the house.”
Debbie says, “10% to my church, 70% to my debt, and 20% to travel.”

Beth says, “To pay off debt, pre-pay bills, home repairs, vocal lessons for a child, dental, vision, and savings. Definitely spend each month in my community,” with a heart.

Hartley says, “The first thing I would do is get a better vehicle. We currently have a quickly falling apart truck he drives to work, and I walk. My work is closer to where we live. Next I’d begin paying off debts, get my credit in order. And third, I’d put opening our business finally into the works.”

Rebecca says, “I’d pay off my house a lot faster and become debt-free sooner.”

Tiffany says, “I’d pay off personal, medical, and student debt, get my son into some activities, buy new shoes I’ve been putting off, put money into new house savings, retirement, and my son’s savings. Probably actually go on a vacation once a year, not cringe when I pay $200 for my son’s inhaler. Lots of stuff.”

Jimmy says, “12,000 a year plus $12,000 for my wife=$24,000 a year straight to debt. We save enough for projects, funds, and travel outside of this, so $24,000 would be a nice chunk to battle all debt and still enjoy the quality of life.”

Joe says, “I’d create more jobs as this would allow me to take more risks with my ideas without threatening my family’s security.”

And Holly says, “I’d pay off my house within three years and then travel and put away more for retirement.”

Robert says, “I would invest it in real estate.”

And Denise says, “If I had $1,000 per month, I would get long-awaited treatment for my injuries I had to put on hold while helping three injured daughters with medical issues. They are nearly grown, and treatment would allow me to have longevity and start working on dreams I could not work on while raising six children into adulthood alone, working two and three jobs, putting myself through school with minimal child support. Yes, I would heal first, then get an e-commerce business more profitable to fund my philanthropic endeavors.” Wow.

Do you hear what I hear in these responses and in reading between the lines when we asked the question, what would you do with an extra $1,000 per month? I hear dreams. I hear a sense of hope and excitement. I sense peace of mind that $1,000 would take off the edge, help people get caught up, help accelerate a plan or help to invest in starting a business. I hear people getting out of the month-to-month mindset and rut that is so easy for all of us to get stuck in, myself included. I hear people that have intentional goals in mind, who have thought of this. But I also hear in a sense that some feel those goals, hopes and dreams are out of reach, that there’s no different path than the one currently being taken. That short of something like the Freedom Dividend, these goals aren’t going to become a reality, which takes us to our second question. The first being we discussed what would you do with an extra $1,000 per month? The second question is how can you change your financial position so that you have an extra $1,000 per month?

So now that we have a sense of what the goal is with an extra $1,000 per month, I would challenge you to shift the mindset from ‘what if’ to ‘how,’ from ‘I hope to’ to ‘how can I,’ from ‘I wish’ to ‘what’s one step I can take today to,’ from ‘I hope the Freedom Dividend comes’ to ‘I’ll figure out my own Freedom Dividend, and if it comes, it will be a bonus.’ There’s a fundamental mindset shift in those statements. One that is a sense of waiting, one that’s a sense of hoping and dreaming but also has a sense that it may not become real. The other being a sense of action, a mindset of making that dream a reality. So again, how can you get an extra $1,000 a month is the second question that we’re reflecting on. Of course, we aren’t necessarily talking about a clean $1,000 per month. Maybe it’s that, but this is one example. Maybe it’s starting with $100 or $200 a month and going from there. As John Ackhoff says, one of my favorite authors and he that wrote the book “Start,” you just have to start. So maybe it’s $100. Maybe it’s $200. Maybe it is $1,000 that’s going to make this become a reality.

So how can you get an extra $1,000 per month? I want you to think about that question, reflect on that question, and write it down. Maybe it’s refinancing your mortgage or your student loans. We’re in historically low interest rates, and maybe that’s an area you haven’t reevaluated. Perhaps you bought a home, let’s say a year and a half, two years ago, at an interest rate of 4.5%. You might be able to get that down lower to 3%. Maybe you have student loans that are at 6-8%, and if refinancing is a good fit for you, there may be significant savings there that can happen month-to-month. So maybe it’s refinancing your mortgage or student loans. Maybe it’s starting a side hustle or a business. Maybe it’s picking up extra shifts with your employer if that’s an option or even moonlighting at another institution. Maybe it’s trimming your spending, and these be small cuts here or there, cutting the cable or lawn service. Or maybe, maybe it’s a more dramatic move like downsizing the home, selling the car, offloading the boat. Maybe it’s asking for a raise besides accepting cost of living adjustments. Really evaluating what value do you bring to your employer and really asking for appropriate compensation for that if you feel like that’s warranted. Maybe it’s spending a little to earn more, such as investing in real estate. But rather than just one of those, likely it’s a combination of one or more of these factors or others that I didn’t even list in that short list. I hope it’s a combination of both growing the income, growing the top line and cutting expenses because I think that’s where the magic happens. While cutting is good, I think cutting without a mindset for growth can be a dead end. And I think that’s important to say again: Cutting has its place. Cutting is important, and it can be good and it can be necessary, but cutting without a mindset for growth can be a dead end, can have a ceiling to what you’re able to achieve.

As with almost anything in life, I think this comes down to finding a balance. Here, we’re looking for that balance between what would it mean, how would it feel, what would it look like for you to achieve this goal that we’re talking about of what you would be doing with an extra $1,000 per month and balancing that against what would you be giving up. For example, if $1,000 per month is what you’re going to put toward paying off the mortgage and that would change your payoff time from let’s say 25 years to 15 years, so you cut 10 years off and you decide that in order to make that a reality, you’re going to pick up extra shifts and cut expenses to grow the top line, cut expenses, the question is, is it worth it? Is that extra time invested, that extra money earned and what comes potentially with a sacrifice of time, is it worth it to cut 10 years off your mortgage? And I think the answer is it depends. It depends on how much you value your time, how important it is to pay off the home early, and how much you enjoy the things that you’d be giving up. There’s no right answer here.

So let me wrap up our time together by reshaping the questions we started with and then letting you know how we, the YFP team and the YFP community, are here to help. So remember, we started with the question, what would you do with an extra $1,000 per month? And we followed that up with how can you change your financial position so that you’d have an extra $1,000 per month? So instead of what would you do with an extra $1,000 per month, I would encourage you to shift that to what will you do with an extra $1,000 per month? One implies a hope, a wish, a dream that may or may not become a reality. The second is a different mindset of a plan of making that come to be. And second, not just how you can change your financial position, but when will that happen? What will it look like? And who will be keeping you accountable in that process?

So in terms of YFP, how are we here to help as a team and as a community at large? First, we’re here to support you through a host of resources that we have on our website, everything from free guides, calculators, extensive blog posts on a variety of topics, your weekly podcasts such as the one that you’re listening to here right now. Our mission at YFP, you’ve heard us say it before, is to help you as the pharmacy professional on your path towards financial freedom. And we talk about that term financial freedom all the time. And for each person, I think that can mean something very different, something unique, and I’m hopeful that through this exercise today, you’re one step closer to determining what financial freedom means to you. Second, we can help you through our Facebook group, which is now more than 4,000 pharmacy professionals that are committed to helping one another on this journey towards financial freedom. This community is there to help, whether it’s to answer a question that you have or to give you a place to share a win or keep you accountable on your own journey. So if you’re not already part of the community, I hope you will join us over at the Your Financial Pharmacist Facebook group. And third, we at Your Financial Pharmacist offer fee-only comprehensive financial planning that is customized to the pharmacy professional. So whether you want to pay off your student loans, whether you want to make the right investment decisions, or you simply want to build a solid financial plan, our certified financial planners Tim Baker and Christina Slavonik are here to help you get your income working for you. And you can learn more about that at YFPPlanning.com. Again, that’s YFPPlanning.com.

So as we wrap up this week’s episode of the Your Financial Pharmacist podcast, we need your help in spreading the news about the revolution that is happening among pharmacy professionals that are committed to taking control of their financial future. And you can help us with this by helping others find our show that we release each and every week. And you can do that by leaving a rating and review in Apple Podcasts or wherever you listen to your podcasts. As always, thank you so much for joining us, and we look forward to having you join us again next week. Have a great rest of your week.

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