YFP 119: Ask a YFP CFP®

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

• CommonBond
• Your Financial Pharmacist
• John Oliver
• YFP Planning
• Email YFP: [email protected]
• YFP on Facebook
• YFP on Instagram
• YFP Facebook Group
• YFP’s Ultimate Guide to Pay Back Pharmacy School Loans
• YFP 032: Find Your Why (Part 1): 3 Life Planning Questions w/ Jess & Tim Ulbrich
• YFP 033: Find Your Why (Part 2): The Path to Success w/ Jess & Tim Ulbrich
• YFP 072: Investing Mind Tricks: How Behavioral Bias Affects Our Decisions
• YFP 073: How to Determine the Priority of Investing
• YFP 074: Evaluating Your 401k Plan
• YFP 075: DIY, Robo, or Hire a Planner?
• YFP 076: Investing Rapid Fire Q&A
• Dave Ramsey
• Refinance Student Loans
• YFP 078: Is Pursuing the Public Service Loan Forgiveness Program a Waste?
• Dave Ramsey’s Financial Peace University
• APhA
• YFP 068: Pros/Cons of the Dave Ramsey 7 Baby Steps

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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