Jan 14, 2018
Welcome to the Pharmacy Leaders Podcast with your host Tony Guerra. The Pharmacy Leaders Podcast is a member of the Pharmacy Podcast Network with interviews and advice on building your professional network brand and a purposeful second income from students, residents and innovative professionals.
Welcome to the Pharmacy Leaders Podcast. I wanted to have a special episode to talk with Tim Church about his book or his and Tim Albrecht's book because I'm an author and it was a really tough road. Took me over a year to get the book out, ten years to get the content really if you look at my path and I know a lot of you would benefit from having some kind of side product. The new tax code, I am not a tax advisor giving tax advice but I've heard the new tax code is favoring LLCs that are product based over service based and so again I've just heard that's what's going through Congress right now. But what I wanted to talk with Tim about was to learn about these six prescriptions, talk through each of them in depth and get a little bit of advice from him. So Tim, welcome to the Pharmacy Leaders Podcast.
Thanks for having me back Tony.
Okay so the first thing we talk about is an ounce of prevention and so the first kind of prescription you talked about is preventive financial medicine but I want to break that up into three parts. I want to talk about finances in pre-pharmacy, finances in pharmacy school and then finances after pharmacy school because each of us has our own awakening maybe a little different time and then as you kind of talk about the different parts I'll talk about my mistakes including buying a car two months before I graduated and then taking out student loans after pharmacy schools. So we'll talk about those mistakes too but let's start with pre-pharmacy so you're thinking about pharmacy school, you're concerned about the cost, how would you save money and prevent financial ruin before you even get there?
Well number one, I would see, are there any opportunities where I could not have to go into debt. Could I get it completely free and not have to pay for anything well that's pretty tough there's not many ways that you can do that in given how expensive pharmacy schools. There are a couple scholarships that are out there, there's a couple through the military that you may be eligible for but that obviously would make you have a commitment to doing that service. Obviously if you have the savings already or you have savings from family members that can help you out. Anything that you can do to put you in a good position the least amount of debt that you have to take out the better off you're going to be because anything that you're purchasing, any money that's going into school that interest is accruing, it's completely unsubsidized when you're going into pharmacy school meaning that the interest that keeps accumulating the minute the loan is disbursed essentially. So it's always accumulating, it's always growing and now that's how it becomes such a larger number at the end when you graduate versus what you actually borrowed.
Well, I normally put in a plug for community college which I can do at one hundred and fifty dollars a credit hour you can finish your pre-pharmacy requirements for ten thousand dollars total for those two years. But tell me some of the maybe things that you've seen in terms of number of years. So have you seen people maybe going to the two-year route instead of the four-year route now or do you have any advice in terms of how long they should do pre-pharmacy to be successful in pharmacy school, Because obviously the longer they're in undergrad generally the more they're going to pay.
I think it really depends on what school if you're looking for a specific school they have different requirements. Some schools require degrees now, they require bachelor's degree.
I've heard that, yeah.
So then that may require you do two to four years of school to get that whereas other pharmacy schools that are accelerated sometimes, you know, there you can get everything done in six years and you don't necessarily need a degree. So I think that a lot of that planning comes on where you're actually looking to go, you know, is it somewhere specific, are you limited by your geography or could you go to another school if it's cheaper or. So I think there's a lot of variables that sort of go into that but if you're looking at the PharmD which is the standard degree that everyone comes out with that when you have the PharmD you can practice and when you're registered and licensed in that state. And so what we recommended in the book and what we recommend is, you find the best fit school for you but if you can do that by picking the one that costs the least amount that's also the best fit that that's really the route that you want to take.
Okay, so let's go into pharmacy school from pre-pharmacy. We're seeing three-year schools come out in this they say that, you know, the savings obviously you get to start working one year earlier, one year less of maybe rent and the university of California, San Francisco actually went from four to three years and San Francisco Housing might even justify that that you have one less year of housing in San Francisco which is extremely expensive. But tell me, but what I've heard is that the overall tuition doesn't change. So you're still paying as much in those three years as you did for, is it still worth it to go to a three year school if the tuition is the same or is that maybe a more of a personal decision?
Yeah I think it is. It's more of a personal decision. It goes into play is how fast you want to graduate and get out of school, do you have to go to, you have to be in that location. I mean I think there's just a lot of factors that are going into that but whether you choose that route or a traditional four-year PharmD I think the idea is the same is that number one, you want to find out exactly how much it's going to cost you. And that's where I think a lot of people make the mistake is, they don't realize all of the costs associated with it. It's not just the tuition, it's like you said it's the housing, it's the other things that you need to budget for in order to live but also pay all of the fees and what you need to actually go through school. So I think that's really an important point is to know that number and know what it's going to take for you to live off of versus the mantra of we'll just take out the max that you can on every year and you're just going to pay the rest back.
I need an Excedrin, yeah I just, you know, that, yeah. Yeah and any time I hear well I took the max, I'm just like, just in case what, you know, and I understand that there's a need for safety and well we'll talk about a little bit about that later, but.
Those people they're not paying that back you're blowing it and I know that because I did it.
Okay yeah, well we'll talk about what happens after in a second but my own story is that I really wanted to give myself a present for making it through pharmacy school so my one of my Appy rotations was in Arizona so I went to a Toyota dealership bought a car left it on the lot in March. So I, you know, I asked him well I don't any money for a down payment it's like oh you can put the down payment from a credit card. So three grand more on a credit card so I could walk off the plane and have a car. So I managed to go 20,000 in debt in one day, you know, so that was kind of my maybe bonehead moment as I left pharmacy school. But what advice were you giving in the book or what advice are you giving to prevent additional financial, I don't want to say ruin but I guess when you when you $160,000 or more you're kind of which I think is the average you're thinking what's another drink on the Titanic is it sinking, you know?
How do you turn that around, how do you turn that around and say okay we just slow it down?
Right and especially I think that if you've restricted yourself and you've lived very frugally during pharmacy school there's that need that when you see that big salary that you want to go out and reward yourself and buy something big whether it's a home a car or something else and there's certainly a tendency to do that. But I think you need to be in the right position but if you look at the interest rates especially with most unsubsidized loans that graduate students are going to be receiving, you know, they're anywhere from six to eight percent.
Again? That was back in my time. I thought they went down to like two three, are they back up?
For undergrad they may be lower but when you're when you're actually borrowing for pharmacy school what's available through the Department of Education they're up there still. They're up 6 to 8%.
And so when you look at that, when you look at that interest that accrues I mean anything else that you're purchasing that you're adding to it. It really puts yourself in a in a worse position than what you were when you graduated and I made the same mistake you made, similar to you did Tony with the car. I mean I mean this is what I did I had about 200,000 in student loan debt when I graduated and that was a combination of pharmacy and undergrad.
And so I didn't think that was enough so I had to add $26,000 before with a nice-looking Honda Accord.
Well at least you got a nice car.
Yeah well, I still have the car it's paid off now but if I could go back I wouldn't have made that purchase I would have done something that I could have paid cash for that I could, you know, that was a decent reliable car that wouldn't have had added so much more debt to what I had to pay off. Because the reality is is that even with a good salary pharmacists especially because you start out with such a great salary you're subjected and you're prone to something called lifestyle creep, it's also called hyperbolic discounting.
Where however much money you make you're going to spend at least up to that income and possibly even more. And so when a lot of your chunk of money is going towards debt it's hard to make progress and some of the other goals that you're doing.
Okay so let's go from the mess that we made to now, okay we're going to make a plan. So tell me a little bit about the basics of making a financial plan maybe a first step or, you know, how do we outline that. I think when I talked to Tim on our show he said how, I don't want to say embarrassing but it was almost like, you know, when you show someone your financials it's like you're naked, you're like here this is what I've done, you know.
And now you want to make a plan so I think maybe, you know, who do I talk to or who can I talk to, what's the first step I can take to make that financial plane or manufacture a financial plan?
Well so, there's a couple different ways to go about it. I think that the most important thing is you really need to get clarity on your situation. So if you have multiple student loan lenders you need to know exactly how much you owe, you need to know if you have any assets and so I think one of the things that we talked about in the book is keeping that net worth in mind. And so your net worth is just simply your total amount of your assets, what you own minus what you owe and keeping that in mind in thinking the mindset should be, how do I improve my net worth, how do I get to a better net worth as time goes on. And so that's kind of a good way to at least a start and look at where you are with your position. Now there's a number of plans that are out there in terms of okay well, what step do I do first, what do I do second and what we put in the book we just mentioned a couple, we mentioned Dave Ramsey's baby steps and then we also mentioned the compass map by Howard Dayton which is very similar. But essentially with those plans for the most part you're really knocking out all of your debt first before you get aggressive with investing. Now the compass map with Howard Dayton, he would say that you should if you have an employee match that you would put into your match and then really get aggressive with your debt and then go back to invest more. So there's a lot of controversy out there.
In terms of how to do that and not everyone agrees and, you know, those are just some suggestions that we have if you're just really don't know what direction to take or you don't feel comfortable about your plan.
Okay so let's take into the next kind of group. We just passed the holidays, a number of people are going to have a little bit of shock when they look at their credit card like wait, did I buy that, did you buy that, did we buy that, you know, and, you know, in a partnership, in a marriage there's always, you know, we keep everything separate but I know many families keep things together. What does it mean to protect and maximize your income? I don't think you're talking about working, you know, 60 hours a week, 80 hours a week overtime. What is it, what are some strategies that maybe we can use to maximize our income and protect it?
Well I think it depends on what your goals are and how fast you want to achieve them.
So it could mean working 60 hours.
I had a friend of mine he was working three pharmacy jobs because he wanted to get out of student loan debt as fast as he could so he was working 60 maybe plus hours.
Okay, oh wow.
So, you know, we put that chapter in there with maximizing your income which is really looking at, if you want to accelerate your goals or you want to get to a good position that here are some opportunities that and things you can do to grow that top line number. So beyond your normal day-to-day job with your salary there are other opportunities. So a lot of times people will say well, the pharmacists in salary is fixed. Well, relatively speaking it may be but the income is not and so there you want to look for those opportunities where you can provide value and how you serve people and that's how you gain income. And then we talked a little bit about, you know, what are some of the things you can do with your income tax which now are going to change, some of them are going to change with the new tax code. But just certainly making sure you get all the deductions that you're eligible for and that you can, you know, is certainly also going to help bring with, what you're bringing home and help you achieve those goals that you're trying that you want.
Okay so we're going to take a step into the next section which is about shortening the amount of time it takes to pay off your loans. My own personal stories that I became a real estate agent about 8 oh gosh, about maybe let's see 01. So I would have been a pharmacist for four years and I met an accountant and he said you need kills that's what you're missing and what a kill to him was a big check like a $5,000 check or a $10,000 check coming from somewhere else that was over and above what you made. And then one day, you know, I just had gotten good at the real estate, I just got sick of the loans and I just sent a forty-three thousand dollar check and that was back in the day where that was maybe a lot of money. Now that's a small amount of the debt and then for my wife I had done well with the real estate and moved here and the mistake of maybe having a joint account as your wife can see exactly how much you have and exactly how much she has. And she's like wow, you know, you could totally pay off my student loans if you really wanted to. And it was, you know, in jest she was being funny about it but I think in one way she was being not funny at all and she's like look man we're married dude and we're in this for life.
So why do I have loan, you know, why do I have student loan debt when you have X number of dollars from your houses and.
Well so that's like, you know, it's like you don't I don't have debt, we have debt.
Yeah we had children but you have debt, you know, and so it became I just gave her, you know, I didn't give her 25 thousand for Christmas but I paid off her student loans because I felt bad about it. But now I have three bank accounts that I won't go into that. But tell me a little bit about shortening the half-life of this debt because what I did was I just, I found outside income through we'll talk about the books later but through real estate through teaching gigs, through other things. What are some techniques to shorten that half life, to shorten the amount of time it's going to take for you to pay that off?
There's really I mean it really comes down to either one of two things. I mean we talked about in the last section where you can maximize your income you can grow that top line. So as long as that extra income is going towards the debt and not going to fund your lifestyle, you know, that can help you get in the right direction and then the other thing is obviously cutting back on your expenses. And that's something that's been sort of fun my wife and I have worked through and looked for all the ways on things that we really don't need that show up in the budget that come there. And, you know, we can, we're fine without it, you know, we're content and we're still living great lives when we're really knocking out our student loans and going on that. But I mean those are really the two big strategies, it's not like it's not anything very scientific. It really comes down to how much are you willing to sacrifice number one, in terms of how fast you want to get rid of your debt and how much are you willing to work if you want to grow that top-line and get extra income to help expedite it.
As someone who did pay them off eventually I can tell you that it wasn't a feeling of elation, it was a feeling of relief. It was just, I don't know I think I got two inches taller or something like that it was just this thing that was on my shoulders. But you talked a little bit which in the next section I think Ben Franklin was the one that said the what is it the greatest something-or-other is compound interest. And tell me a little bit about becoming a compounding pharmacist, understanding the power of compound effect because in the beginning it doesn't look like a lot when you make seven percent of a hundred dollars, it's one hundred and seven but then over a number of years that really is exponential. So tell me a little bit about compounding and how you can make it work for you.
Yeah so, I mean in order to grow in your investments that you put in it really comes down to the time over which you invest and how much you're investing over that time period. And the way compound interest works that it works to your advantage the faster that you can contribute to that, you know, whether that's through your 401 k or whether that's through an IRA but the longer amount of time that you have for the money to compound because every year when it compounds its compounding on the amount before that was already compounded. And like you said, you're not going to see any huge changes at first it's going to take several years before you can really see that. But eventually that most of the money that's in your account over a long period of time is going to be from the growth and not actually what you put in through your contributions. I think that.
No I'm just going to say that, I think one of the hardest things is for people to decide, you know, do I put all of my money on my student loans or do I start investing. Because keeping that in mind with compound interest you obviously don't want to start late but you also may have these other financial obligations. And so that's kind of one of the big questions that always comes up in the financial industry and there's really not one answer and, you know, people will always debate and argue that. But I think there's so much to be said about your own personal emotions and where you want to be, you know, if you're somebody that you want to pay off your debt as fast as possible at the expense of not investing for X amount of years. Then, you know, that's important, you may lose out on some growth but if it's more important to you to have that feeling like you said of relief or that feeling of just not having that on your shoulders then I think that that's great and you want to do that. Or if you're someone that you don't want to wait to invest but you want to put something, you know, that's fine too. So I think there's a lot of emotions in your goals that go into that kind of decision-making but either way you look at it you want time to work for you and so the faster that you can start contributing regularly, you know, the better off you're going to be.
So I want to go into your last section, adhere the habits of the wealthy. I want to tell you a little story first. I was at fidelity investments in Scottsdale, I was in Arizona I think it was my first or second year out as a pharmacist and I was going to meet with somebody and I'm sitting next to this guy and I glanced over at his sheet and he pointed to it and he said 6%, that's all I was trying to get. And he had 3.1 million dollars in stocks and I was just like 6%? He's like yeah man 40 years six percent just keep it going and that's one of the habits of the wealthy that I think a lot of people are going to struggle with because now we hear gosh if I just bought Bitcoin at $1 or, you know, if I just timed the market and bought it, you know, just a couple years ago. Well if you had time to market in 06, 08 would have been a disaster. You know, so but they're not looking like that.
They're looking at gosh if I just bought Bitcoin in a thousand, you know, last year it's fifteen thousand hour or whatever the crypto-currency is. Tell me a little bit about the habits of the wealthy, may be slow and steady as it goes versus the gosh I just missed that next boat.
Yeah I mean most of the people, most of the stories that you hear from people that are wealthy, it's not that they hit the lottery, it's not that they made it an awesome decision to get into a certain single stock. But it's really kind of boring, it's not very sexy. A lot of people they've essentially just lived below their means and always contributed a percentage of their income towards investments or whether that's real estate or however the, whatever the investments are. And they do that consistently over and over and over and over again and like you said, it's really that that compound interest that works over time. But in order to do that you have to give up some of your income that you could be using today and I think that's one of the hardest things to overcome. And we talked a little bit about in the book it's called basically called the present bias where, you know, we're more likely to do things and purchase things and use our money that are going to give us pleasure and happiness today versus deferring that to a bigger goal that we may never see until 20 30 years from now. And so it's very difficult to do that but it's sort of important and one of the strategies I think for being consistent with that is to really have it come out of your checks automatically. So you never get a chance to actually get the money, it cannot cross into your hands not even into your bank account. It's already gone and you can't actually realize that. So I think automating any kind of savings that you're doing toward your investments it's just such a really important strategy.
So automation, pay yourself first I've heard of a lot of these things. Well is there anything that we didn't cover about the book that we went through the six prescriptions to help you achieve financial success. Is there anything that we didn't cover and then where would people get it if they did want to get it?
Yeah I think the only other thing we, you know, we touched on a little bit was about debt but we have a whole chapter on student loans. And one of the chapters is how do you manage student loan debt once you already have it and looking at what are your strategies for that and then we have a chapter in the beginning under the preventive financial medicine section for pharmacy students who are kind of going through it and how do you minimize the amount of debt that you're going through. So we really make a point to highlight those and then there's actually a whole appendix on all of the pharmacy scholarships that students could be eligible for that are national scholarships. And so right now we sell it through our website that's at 7-figurepharmacist.com and if anybody wants to get a discount if they put the code podcast in you actually could get a 20% discount on that.
Awesome and then can you tell me a little bit about the calculators. Where do they find those?
For your financial pharmacist?
Yeah, yeah what so, you mentioned some calculators and some tools.
Yeah what we've recently done on your financial pharmacist, we implemented two calculators one is called is a refinance calculator. So looking at really the intent was for student loans. So if you were able to refinance your loans from a 7% interest rate to a 4% over that term how much would you save. And that's really, it could be substantial I mean if you look at someone a pharmacist who has typical student loan debt of 160,000 and they drop their interest rate just buy a couple percentages it can be, you know, thirty to forty thousand dollars in savings over that.
So that's really a big, so we have that calculator that's at yourfinancialpharmacists.com slash forward slash refinance. You can get and then we also have another calculator under the resource tab it's called an early payoff calculator. So you can see if you're making extra payments than what's your monthly so let's say you wanted to put five hundred dollars extra per month or a thousand dollars extra per month on your debt that could be your mortgage or student loan or credit card.
How much faster would you pay it off and how much would you save in interest. And there's also what you kind of had alluded to earlier is well what if you run into a big chunk of money what if you run into a big chunk like a tax return, a bonus or gift or something like that how would that impact the payoff. And so there's actually a, it's pretty cool you can put that input in there as well. To see how that affects your payoff.
Okay, awesome. All right well, thanks so much for all your advice and thanks for being in the Pharmacy Leaders Podcast.
Thanks Tony, it's a pleasure.
Thanks for listening the podcast. This is Tim Church from your financial pharmacist. If you head on over to 7-figurepharmacist.com you can get 20% off your purchase by entering the code podcast. 7-figure pharmacist is a book written by pharmacists for pharmacists and will help you learn how to protect and transform your amazing income into wealth.
Support for this episode comes from Good Night Pharmacology. 350 brand and generic name drugs with classifications. A leading resource for students in the United States, United Kingdom and Australia. Print, ebook and audio-book available on Audible, iTunes and Amazon.com. Thank you for listening to the Pharmacy Leaders Podcast with your host Tony Guerra. Be sure to share the show with a hashtag hash pharmacyleaders.