Hey everybody Tim Albrecht here. Welcome to this week's episode of the YFP Podcast. We strive to inspire and encourage you on your path towards achieving financial freedom. Today my partner and certified financial planner Tim Bakers taking two questions from the YFP community. One on ideas for growing your income to accelerate achieving financial goals and the other on saving for kids college and how to prioritize those savings with other goals. If you have a question you'd like us to feature on an upcoming episode, head on over to your www.fonanticpharmacist.com/askyfp to record your question or send us an email at info@grofonanticpharmacist.com. And before we get started, I want to let you know that we are now publishing the podcast in video form on YouTube. If you want to watch this interview, make sure to subscribe to the Your Financial Pharmacist's YouTube channel or publish new shows each week. Alright, let's jump into our first question which comes from Corey in Tucson, Arizona. Hey YFP crew, how can the pharmacist grow their income? With the high floor low ceiling profession like ours, finding ways to increase money coming in may be of interest given there's only so much furbling you can do. And if I furbled anymore, my wife and kids just might revolt. Thanks and no fresher, you just might save this household. Corey, thank you so much for taking time to submit your question. Tim Baker, what are your thoughts? Yeah, so I was thinking about this from like a pharmacist angle versus like how can I make additional money where you could sell things, recycle, donate plasma, anybody can do that. But I'm really thinking about this from the pharmacist angle. I kind of think about it in really two parts. The first part being where my feet are and what I'm currently doing. And then what is outside of what I'm currently doing? You know, if we talk about diversifying your income streams or explore an entrepreneurial venture. So I think the first part is if you're a pharmacist and XYZ organization, you know, and again, this is going to be dependent and I realize that the more specialized or niche that you are, the more attractive or the more you can, you know, kind of demand from like a salary perspective, we know this through like board certification and things like that, Tim. So it could be that, right? And you know, our niche is working with pharmacists on their financial plan. If I go back in time and, you know, I commented on your post on LinkedIn about you shifting away from academia to go to YFP and I was thinking about my own journey and like when I was launching script financial, which is now YFP, you know, I could have said, Hey, it's Baker financial advisors, but I don't think that would really speak to anybody except for myself. I think being niched in any type of profession can be really helpful for your career. And I think about this, and we'll talk about a little bit in the second part of this question of building a brand. When I think of oncology and pharmacists, I think of a particular person, Kelly Carlstrom, if I think of geriatrics, I think of a particular person, functional medicine, I think of a particular person, if you can distinguish yourself as the thought leader in that particular niche, that can lead to other opportunities to make income. So it could be specialization. It could be pursuing leadership positions or additional opportunities within your organization to make additional income. And I think the other probably more obvious thing, Tim, that a lot of pharmacists maybe aren't great at is just negotiation. Right. So if you kind of look at a traditional financial plan, it's kind of where you're at. What's the balance sheet? Where are we going, goal setting? It's fundamentals like a savings plan, cash loan budget and debt, its investment, retirement, looking for more of the long term stuff, its wealth protection, insurance plan in, and a state plan. And that's essentially a financial plan. But one of the things early on in my career at script and then YFP was really talking about sour negotiation. And I think what I was seeing in that, there was a lot of meat left on the bone with regard to this transaction, so to speak. So I would talk to a pharmacist and say, "Hey, good news, Tim. I just got a new job or whatever it is." And I would say, "Great. What did you counter?" And it would be like crickets, right? And I think the response that I would typically get is like, "I didn't counter. I was just happy to have a job." And I'm like, "I totally get that. I totally get that." But I think having some tools to be able to advocate for yourself in those moments, and it's not just when you change jobs, I would argue that you should have those conversations really at a minimum, anytime that you're talking about your review, if you get reviewed twice a year or once a year, that type of thing. I think if you can develop some of those tools to advocate for yourself, you put yourself in a better situation to grow your income as per the question. And it's often a missed opportunity where it's kind of uncomfortable, maybe it's a little yuck that we feel greedy, that we don't necessarily put ourselves in a position to make the most that we can. So from the where are we at perspective, pursuing leadership positions, potentially specializing and negotiating your salaries or three things that if I'm a pharmacist, I'm saying, "Hey, those things I should do." I think the other two things diversify an income stream, entrepreneurial stuff, I kind of lump those together. So it could be part-time or per DM work. I know I'd talk to some pharmacist, they're like, "I want to earn income." But then when I'm like, "Well, why don't you pick up an extra shift?" They're like, "They want to strangle me." And I understand that. But I also would say here, Tim, and I think some of the trap that pharmacists fall into is any additional income has to be on par with what I make as a pharmacist, and I would push back on that. So as an example, if you make $70 an hour as a pharmacist, any additional money that you make has to kind of be on par with that. And I think that doesn't necessarily play, right? So I would put that as, and again, it's a trade-off, right? So I think you've got to have to figure that out and what's a good number there. So it could be part-time or per DM work, it could be consultant, it could be MTM, it could be just working with long-term care facilities or clinics, medical writing. We've had clients that have been really successful at that, could be teaching or precepting freelance work. That kind of falls into the medical writing or drug information resources, that type of thing. So I do think that there's lots of opportunities out there. It's just a matter of finding them and kind of getting into a rhythm of, "Okay, this is worth my time or it's not." Other things, it could be something like, "Hey, you take a bold move and you open your own pharmacy." I think there's a lot of innovation to be had there. I know there's a lot of pharmacies that are open and they're kind of operating outside of insurance. It could be to start a consultant business, it could be to develop a product or service. I know we've talked to some of these fellowship programs across the country and we've seen pharmacists that in fellowship are developing a product that is really exciting. It could be something that's more non-traditional on whether it's building a personal brand, a content creation, trying to start a blog, monetize it, a YouTube channel, public speaking, which I know can be somewhat tough. Sometimes we give that away for free and that's the system in which we're in or writing a book. Obviously, you have some experience with that, creating courses. I think there's a lot of things out there to potentially do and try. I think the goal here is to figure out what is the goal for this additional income. Is it to pay down the debt? Is it to retire early? Is it fire? Those types of things. If you could kind of align, again, the things that you're passionate about and monetize it, that's great, but that doesn't always work out. We know that sometimes we just got to pay the bills and that's the focus. Again, thinking about this from a pharmacy perspective, that's kind of where I took it, but there's a million other ways. I think that you could potentially earn additional income that's more or less non-pharmacy related. I'm glad you took that approach to him because if we open up the doors beyond pharmacy, of course, we get into things like real estate and other types of opportunities, which are certainly possibilities, but I also love that you asked a really important question at the end of your answer there, which is like, what are we trying to achieve? What are we trying to accomplish? Because I think as Corey alluded to in his question, there can be a frugality fatigue that can happen over time. We often talk about cutting expenses, cutting expenses, cutting expenses. Certainly, that can help us as we're trying to achieve any goal, whether that be putting an extra towards savings, whether that be paying down debt. But there's also the income-sided equation, which is what we're talking about here. And of course, you put both those together and really good things start to happen. But what is the goal? What are we trying to accomplish? And I think in this discussion, because you bring up a really interesting point that when you talk to pharmacists that are looking at fracture income, it's like, hey, how many professions are there where you're making 70 bucks an hour? You can just go pick up extra shifts and they're like, Tim, I don't want to go pick up extra shifts. And it's interesting, because then it's like, all right, tell me more, and they're spending hours upon hours upon hours and not earning nearly what they could and picking up extra shifts. And I say that not out of judgment out of that, but out of what that tells me is, well, maybe there's something here just beyond the dollars and cents. Like, is there an interest or a passion or, you know, I really just want to kind of tap into a different creative side of this work that maybe I'm not getting or feeling in my everyday work? And all of a sudden, the conversation changes a little bit of like, sure, there's a financial aspect, but maybe there's also some type of, you know, purpose or creativity outlet or something of what are we trying to accomplish? What are we trying to do through earning additional income and diversifying these streams? Yeah, I think another, you know, point to that because if people talk about, oh, you can get paid to do your passion. That's a great thing. One of my first entrepreneurial endeavors was like, I was second grade and I got really big into like, drawing different Garfield and things like that. And I started a shop and I had all these orders and then I got behind track, you know, I was charging like a quarter for every drawing. And then it became like a job. I'm under this deadline to get these drawings out and I'm like, man, I hate Garfield. I don't like Bart Simpson anymore. It kind of became like a passion of mine, kind of became a job. And that was like, you know, kind of a core memory of mine of like, man, I don't want to do something like that again. So it can have negative consequences. But yeah, I mean, like, I think a lot of people are like, yeah, but what about, you know, what about my student loans? You know, I have to make additional money to get through that. But I'm like, well, maybe there's a different path, you know, maybe looking at, you know, where you work and you can do something similar from a for profit to a nonprofit that kind of allows you to work smarter or not harder that plays. So, you know, there's probably a question, we probably need to go a question or two or three deeper on Corey's question. Again, if we were in kind of a client planer type of environment to kind of get to the core of that. But as an entrepreneur, I love the idea, you know, everyone talks about, oh, we have to cut expenses. I love the idea of like growing top line income, right? That excites me because if you can figure a model out, you could potentially uncap your income. That's exciting. But it often takes a lot of work and iteration to figure out what that is. If we're talking about from a business perspective, a few resources to that we have in this area that we'll link to in the show notes on to make sure folks are aware and they can dig deeper. We've got a blog post that goes back a while now 19 ways that pharmacists can make some extra money, just to get the ideas going on episode 388 recently. I interviewed four pharmacist entrepreneurs that are doing very different things and a couple of them still working full-time in their pharmacy jobs while they pursue their businesses. Wide array of different types of experiences and how they have monetized their clinical expertise. So check out that interview. I think it can stimulate some ideas. And then finally, we've talked about salary negotiation before on the show. We'll link to that. I think that's an incredible resource and you articulated well. It's a skill that often we don't have, maybe aren't comfortable with, but that might move the needle more than anything we're talking about here, especially when we've got the compound effect of that. Yeah. And probably something to also interject, Tim. Obviously, I'm a financial planner, so maybe someone's sitting here listening and thinking like, "Why isn't Tim talking about investing for passive income?" But sometimes I talk to prospective clients that are like, "Hey, I want to invest for passive income and I need it next year." And what I would say is that typically, when you're investing for income, you're typically doing that over a lifetime of investing, where we'll take the 4% role, right? If you manage to accumulate a million dollars in an investment account from a retirement planning perspective, the rule of thumb is if you take 4% of that, or $40,000, that portfolio can last for 20, 30 years or longer. In that case, it's less about appreciation of stock, mutual fund ETF prices, and more about safety and principle. So you're not taking as much risk, the income, the dividends, interest payments are creating that 4% or that $40,000 for you to live off of. So obviously, it takes time to do that. Now, there are certain examples where it doesn't take that long. It could be closely held stock or something like that, and those are certain situations where people have access to buying into a privately held company, or a small company, things like that. Hey, I want to invest for passive income is a long-term play. I'm trying to grow these dollars as much as possible to then eventually turn that false it on and live off of that. And I'm not saying people can't do that in a shorter time frame, but typically, you're doing this in conjunction with putting money into your 401(k), your IRAs, other things, and then also looking at a passive play that typically decades in the making. Good stuff. All right, let's move on to our next question, which comes from Amanda from Brainerd, Minnesota. Hi, YFP. My name is Amanda, and I am from Brainerd, Minnesota. My husband and I welcomed our first child this year. And we are wondering what we need to know about 529 college savings plans. And if there are good strategies for saving for our child's education, we'll still meeting our other financial goals, like saving for retirement and paying out for a mortgage. I kind of would start with the question is like, what's the goal, right? So, you know, oftentimes, when I ask this question, it's like, I don't really know, or we don't really have a goal. So is it, hey, I want to get my kid through two years of school, four years of school. You know, is it masters, doctorate? Is it public, private, in-state, out-of-state? I think probably kicking the tires on what that looks like is important. And I think there are a lot of people that are apprehensive of 529 plans. So just to kind of define what a 529 plan is, it's a tax-advantaged savings plan design to encourage savings for education costs. Typically two types, you have a college savings plan, which is an investment account that grows tax-deferred with withdrawals that are tax-free for qualified expenses. And there's a slew of qualified expenses that were more narrow when they first came out that are become more broad as years go on. And I think it's going to continue to do that. You also have a prepaid tuition plan, which is typically a lot less popular, but this allows you to tuition at today's rates for participating schools for the future. And, you know, there's pros and cons of each, but I think typically people go into the college savings and they're more familiar and comfortable with, okay, I'm saving for education retirement in my 401(k). So the big draw here is the tax advantages. So at the federal level, earnings grow, tax-deferred, and withdrawals are tax-free for qualified education expenses. At the state level, many states offer tax deductions or credits for contributions if you use your state's plans. And there is a slew of states that offer tax benefits for, you know, using their own plans. There are states that doesn't matter. You can use any plan. And then there are states that don't have income tax, so you don't really get a benefit. And then there are states that are kind of more, we don't care if you put money in a 529, you don't get any benefit looking at you, California, Delaware, Hawaii, Kentucky, North Carolina. So the thing about this is like you get the benefit at the state level kind of on the front end, and then on the back end, you typically get the benefit at the state and the federal level. I think what often happens is that people let the tax advantages kind of drive their contribution amounts. And it's not necessarily a terrible thing, but it can be, especially like if you're over saving or potentially under saving. So I think, again, looking at what is the goal we've talked about previously, Tim, the one third role, and that's kind of what my family does, what Shane I do for our three kids. I think that's important to know. We talk qualified education expenses, tuition fees, room board, books, supplies, equipment. You can use it for student loan repayments, apprenticeship costs. I think the other thing that I would say is not all 529s are created equal. So research and plans, we did this with Ohio one, we were like, hey, it's rated at one of the better plans in the country. But if I compare that to how we manage money at YFP, it's more expensive, right? You want to compare plans from different states, depending on where you're resident, what plan to use, you want to look for plans that have low administrative and investment fees, you know, that have a kind of a diverse investment options, understand what the contribution limits and when you get the benefit, being able to understand who owns the account. So I have three accounts for my three kids. I am the account owner and they are beneficiaries. You can change beneficiaries. If Olivia decides not to go to college, I can use that money for Liam. Is that we, in the future, people get worried that if there isn't an out, what do I use that for? So like, I don't have a problem, you know, given that to a relative, a grand kid, that type of thing. If you decide to get the money out, it's a penalty and you pay tax, right? So it's not the end of the world. I think for most part, if you think your child is going to go through some type of training post high school, it's a good vehicle to use. Obviously, there's risks. Any time you invest any money, there's no guarantee that you're going to get a return, understanding when you get penalized for pulling out early and what that looks like. So those would be the highlights, Tim, in terms of a 529. Maybe a coin flip is maybe too much, but it's typically 50/50 where people are like, yeah, I'm all in on the phone. There's probably another 50% that are apprehensive. So again, I think asking those questions of like, what's the goal? How do you view this money and going from there is really important, but there's a lot going on here, right? In terms of the type of plan, how you invest it, how does that, what's the glide path of those investments over time, what are the fees, multiple kids, there's a lot of new rules with you being able to transfer it over to a Roth in the future and all those things. So there's quite a bit at play here with regard to this decision, but I think it is a valuable bucket to use if you have a solid belief that your child is going to do some type of training or education post high school. Yeah, let me throw out a couple of resources, Tim, for those of you that want to dig deeper, and then I've got a couple of other thoughts I want to get your input on. So we have a blog post, seven things to consider before starting a 529 plan that goes in a little bit more depth along with Tim was saying, and then not too long ago, we did an episode 368, how much is enough when it comes to kids' college, right? So we think about that question often in terms of retirement. I don't know if we think about that same question when we think about kids' college and to your point about what's the goal. You mentioned the third, the third, the third role, we talk about that in that episode, but if we can have a north star of what's the desired output, we can then backtrack into what do we need to be saving today based on a set of assumptions, and that's helpful. If we back up though, just a minute, you know, to my experience, and there's no judgment out there because I felt this myself, is when people go through their own journey of incurring a lot of student loan debt and the pain that can come with that, I think that leads to a tendency to want to maybe either oversave or not prioritize these in the way that maybe objectively you would, right? And so I think intent is good, but, you know, if I went through my own journeys, I did a pay off a couple hundred thousand dollars a day. Naturally, I'm like, I don't want my kids to ever have to go through that. Good intent. I've seen the other way too, where it's like, hey, oh, you're going to go. Yeah, I've seen that. And that might be a pretty even split as well. But yeah, I've seen it both ways where it's like, hey, I don't want my child ever have to experience that, but then also like I had to do so. Yeah, yeah. And I think where this can come into context with planning is we can try to more objectively look at this. So for example, if someone's listening and then they fall into the side of, hey, I went through this. I don't want my kid to go through this. You know, we might then have a tendency to put some of these steps out of order. We think about some of the baby steps of the financial plan, getting the emergency fund set up, making sure we eliminate any high interest rate credit card debt, making sure we've got the base of our own debt repayment plan, not to say we have to be debt free, but at least have the plan of where we're going, making sure we've got a base of our own investing strategy and thinking about the future. And so does the 529, if it fits in, depending on your goals and vision for your own kids, then the question is where, right? Where does it fit in with other things? Yeah, and I think what you're alluded to is this need for some people, you know, have gone through that debt journey to overcorrect in the face of their own plan, right? And, you know, what a financial planner will say eloquently will be like, hey, Tim, you can take a student loan or your child can take a student loan. You can't take a retirement loan. So there could be a world where you forego your own retirement and you're really working on the 529s. And then when they go to college, you're using that and kind of the income that you're earning that time. And then you're impoverished in retirement and your kids have to take care of you on the back end instead. So again, that's kind of an extreme example. But yeah, I think, again, we always talk about intention here, right? And I think sometimes, you know, we talk about this with invest in, sometimes emotions can really recap it in a well-played plan. And, you know, I think emotions aren't important. You know, hey, I would sleep a lot better at night if our emergency fund was X instead of Y. Do it, right? I think, though, that education is one of those gray areas where it's like, I know I should be doing something here, but I don't really know what it is. And depending on my own experience, I'm going to overcorrect or not address it at all. And you have the opportunity to do so in a meaningful way. Again, I think it's those parts of your financial plan that is important. Maybe, you know, it goes along the hey, put your mask on before you put on a child's mask, the airplane example. But it's worthy of examination. Yeah, in my experience, Tim tells me that the emotions in the math, which I firmly agree, are both important. They're not independent variables, right? When you took me through the kid's college savings calculator answering the question, how much is enough? When you can get to the granularity, sure, it's based on a set of assumptions, and those assumptions can change, will change potentially just like we have our retirement. But when I can look at it and say, okay, I've got a five year old, a nine year old, a 12 year old, the 13 year old, here's what we have for each M safe today. Based on let's assume for your in state public tuition, we've got a great university, our backyard here. Go back guys. So we'll use that for assumptions and we'll look at certain savings, rate of returns and other things. We'd start to distill it down to, okay, we want to pay a third. Are we ahead? Are we behind? Are we on track? And then what would it mean monthly to get on track with where we want to be that type of analysis can inform the emotions, meaning that, you know, I can be looking at this thinking kids college, I don't know, we're just kind of throwing money at it. I know we need to be saving. Are we there? Are we not there? I think the math can help inform that. Yeah, it's the same kind of analysis that we go through with retirement. You know, this is a little bit more of a tighter schedule because you're typically looking at 18ish years versus like a 30 year career. But yeah, it's the same thing. And in what I always kind of, you know, I go back to my first job in, you know, in financial planning, you know, we would say, Hey, client, hey, Tim, you need 2.65 million dollars for retirement. And then we kind of go on to the next thing. And you could literally see their eyes gloss over because if you're 10 plus years from retirement, it doesn't connect. So going through that analysis, whether it's retirement or education planning, it could be incremental things like, Hey, save $75 more for this kid and you should be fine. Put this lump sum that you have and then say $50 more and you'll be okay, right? Or let's tweak some things here. You're really conservatively invested right now and you still have 12 years until they go to like, let's modify that. So it's taking those, and this is just financial planning and it's taking those large problems and then basically breaking it down to what can I be doing today, this month, to affect change. And again, like, it's not always going to be perfect. But I think with education planning in particular, if I can get to like, if my full solution is to pay a third to do the 33% role, and I'm at 29%, maybe I have to reach into my pocket a little bit more when my kid goes to college or they have to take a little bit of a more of a student loan. But like, it's, we're right there, right? And I think a lot of people, they throw up their hands, they're like, this is too big of a problem, analyze where they're at and, you know, where they need to go. Yeah, I think as we talk about all the time, it's taking these unanswered questions that are constantly screwing our mind, right? These unclosed loops that are causing some distressing, getting them written down on paper and then developing a plan. And sometimes that plan means to what you said earlier, we only have so much money in a given month, right? So it might be that we wish we could do more than we can do in the moment. But that clarity can come from, all right, we've thought about these things, we've written them down, we prioritize them, and now we're beginning to work towards that. A lot of momentum can really come from that. That's right. Thank you to Corey and Amanda for taking time to submit your questions. If you have a question, we'd love to hear from you. We can send us an email info at yourfinancialpharmacist.com. You can also submit and record your question by going to yourfinancialpharmacist.com/askyfp. If you're thinking about strategies, whether it's to grow your income or save for kids, colleges, perhaps you're thinking about, are you on track for retirement, maybe getting your estate planning documents button up or building a more tax-efficient financial plan? At YFP, we have a team of the only certified financial planners that work with pharmacist households all across the country. We would love to have a conversation. You can book a discovery call by going to yourfinancialpharmacist.com and you'll see on our homepage an option to schedule that call. An important reminder that this podcast is provided for information purposes only and it's not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial product. For more information on this, you can visit yourfinancialpharmacist.com forward slash disclaimer. Thanks so much for listening. Have a great rest of your week.
