4. Financial Wellness and the Medical School Cost Dilemma with Dr. Tim Ulbrich

🎙️ Join us in today's engaging discussion with Dr. Tim Ulbrich as we delve into the intricate world of pharmacy and medicine finances. It's surprising but true – the number one barrier that holds most pharmacy graduates back from pursuing their dreams of becoming physicians is financial concerns. In this insightful conversation, we address these very valid concerns and unlock strategies to supercharge your financial wellness on your journey from pharmacist to future physician.

In this illuminating blog post, we cover a wide range of topics that will help you chart a financially secure path:

1. General Personal Finance Recommendations: Dr. Tim Ulbrich shares expert advice on managing your personal finances, setting up a budget, and making strategic financial decisions to pave the way for your medical school dreams.

2. Pharmacy Debt and Medical School Debt: The burden of student debt can be overwhelming. Discover practical strategies to handle your existing pharmacy debt while taking on the financial responsibilities of medical school.

3. The Benefits of Physician Loans: Learn about the unique advantages that physician loans offer to aspiring doctors. Dr. Ulbrich sheds light on how these specialized financial tools can alleviate the financial stress of medical school.

4. Achieving Financial Wellness: Achieving financial wellness is not just a goal; it's a journey. Dr. Ulbrich outlines actionable steps and long-term strategies that will set you on the path to financial stability and prosperity.

Don't miss out on this opportunity to gain valuable insights from an expert in the field. Whether you're a pharmacist contemplating the leap to medical school or a future physician looking for ways to manage your finances better, this discussion with Dr. Tim Ulbrich will provide you with the guidance and knowledge you need to thrive on your unique financial journey. Join us and take a significant step towards securing your financial future in the world of pharmacy and medicine!

⚡️ For more resources to get started, check out some of our other blog post content!

• The MCAT: Everything You Need To Know

• How Hard is Medical School

• Can you work while in Medical School? The Physician Pharmacist Do's and Don'ts

• 6 Most Common Questions About Transitioning From Pharmacy to Medicine

• The Art of Applying to Medical School (The Pharmacy Student Edition)!

🧠 Enjoying the podcast and want to listen to more? Visit The Physician Pharmacist Podcast for a list of episodes. Here's a featured episode below!

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🥼 Complete Transcript of "Financial Wellness and the Medical School Cost Dilemma with Dr. Tim Ulbrich"

Nathan Gartland

Welcome to the physician pharmacist podcast, the show designed to shed some light on a very unusual pathway into medicine. I'm your host, Nathan Gartland. I'm a licensed pharmacist and second year medical student, and I'm also the author of PharmD to MD, as well as the owner of the physician pharmacists company. Most pharmacy students and professional graduates are aware of the possibility of going to medical school, but very few actually take the leap. We are here today to unpack some of these details and open your eyes to the possibility of a career in both pharmacy and medicine. In today's show, we will cover topics concerning personal finance, handling pharmacy debt, as well as medical school debt, talk about physician loans, and general financial wellness discussions. I'm very excited for our fourth episode of the physician pharmacist podcast mini series where we will be interviewing Dr. Tim Oberg. Tim Olbrich, is the co founder and CEO of your financial pharmacist founded in 2015. Y of P is a free fee only financial planning firm and connects with the Wi Fi community of 13,000 plus pharmacy professionals via the your financial pharmacist, podcast blog, website resources and speaking engagements. today. Why have P has partnered with 70 Plus organizations to provide financial education and advice. Tim received his doctor of pharmacy degree from Ohio Northern University and completed postgraduate residency training at The Ohio State University. Tim is the host of your financial pharmacist podcast, which has more than 1 million downloads. Tim is also the co author of seven figure pharmacists, how to maximize your income, eliminate that and create wealth, which is more than 5000 copies sold. Tim has presented over 200 Pharmacy associations, colleges and groups on various personal finance topics including debt management, investing, retirement planning, and financial wellbeing. Welcome, Tim.

Tim Ulbrich

Thanks, Nathan, really excited to be here and love the work that you're doing to help individuals realize and learn more about the Pat pathway potentially going to medical school.

Nathan Gartland

Fantastic. Well, I'm super excited to have you on the show today. And we're just going to unpack some of your your history. That was a lot of information there with that introduction. So I just wanted to hear a little bit what got you involved with pharmacy? Because that was where you originally started with all of this.

Tim Ulbrich

Yeah, that's right. So I started pharmacy school in 2002. I went to a direct entry 06 program and finished in 2008 from Ohio Northern University. And Nathan, I wish I had a really profound story in the pharmacy, you know, many, many individuals do in terms of a healthcare situation that may be impacted them or their families that motivated their interest in in health care, really, for me, it was, you know, I was 18 years old, and I loved science and math. And I had a guidance counselor said hey, have you thought about pharmacy? And I said, No, I have not. And so I shadowed an independent pharmacy, I had a pharmacist at my church that was able to do some other shadowing, which eventually became an internship later on. And I thought, Hey, this looks to be a great, great career, a good outlook. At the time, there was a shortage of pharmacists things have changed a little bit since then. And that really was the pathway into pharmacy school. And while I have not taken a traditional route, I'm very grateful for that journey, as it certainly has opened up very many doors along the way.

Nathan Gartland

Fantastic. And have you always been interested in finance? Or was that something that you've kind of grew into after you had graduated? Or was it something that was something that fostered throughout your your pharmacy training as well?

Tim Ulbrich

Yeah, I've always had a subtle interest. I don't know if I could have articulated it. You know, throughout college or high school, I did grow up in a family small business, I was always around the topic of business, the topic of finance. I've always enjoyed math, and really started to nerd out on personal finance shortly after finishing my residency training. This was back in 2008 2009, I was making a whopping resident salary of $31,000. At the time, they thankfully they've come up a little bit since then. And you know, from there, took on a faculty position was finally making that six figure income that that had been, you know, the desire along the way and remember thinking, like, progressing financially as quickly as I would like to and at the time I felt alone in those feelings. You know, now I know well, after working with 1000s of pharmacists across the country that many feel those same feelings things as you know, I'm overwhelmed with my student loan debt. Or as I mentioned, I am making a good income but I feel like I'm financially behind where I feel like I'm not prepared for saving for the future. And I remember specifically, when I started nerding out on this topic, reading a lot of books and podcasts. It was around 2012. I read the book, The Millionaire Next Door by Dr. Tom Stanley, and really good kind of Mount Rushmore of personal finance books and he talks a lot in that in that book about the difference between income and net worth which is very obvious, but income is a tool. Net worth is, you know, assets, what you own minus liabilities, what you owe is what actually sticks, right. And many healthcare professionals, if they're not careful, can become a victim to a great income. But not not a whole lot of net worth. And we talked about this in the book seven figure pharmacist as your financial vital check. And that was just like an epiphany moment of, man, we got to do something differently, or else we're going to be on this hamster wheel of being okay. But But there's more than okay, that's out there. And so, you know, we started to my wife, Jess, and I started getting really serious about budgeting and goal setting, working together and unpacking the student loans. I'm sure a lot of things we'll talk about here today, which led to our Debt Free Journey. But, you know, it was it was a subtle interest over time, but but I really caught fire with it once I realized that, man, I'm not alone in this journey. There are 1000s of pharmacists, and certainly other healthcare professionals that have this feeling of making a good income. But because of that, because of other things that I just don't feel like I'm progressing financially, like, I would like to

Nathan Gartland

have that. And I'm curious to know them, what what was your motivation for writing seven figure pharmacist because not every pharmacist is going out and writing books about all these personal finance, opportunities, or epiphanies that they've had about having this fixed income and finding ways to overcome their debt burden? So I guess what, what triggered you to write this book in the first place?

Tim Ulbrich

Yeah, I want to give a shout out here to my co author, Tim church, also a pharmacist works at the VA down in Florida. And I always encourage folks, if they're, you know, thinking about writing a book, and they have a good partner that they may write with, you know, incredible accountability that can help and I think ultimately makes the project better as well, when you're bringing more than one perspective. And so, you know, I had been on the initial journey of your financial pharmacists, which I started in the fall of 2015, after Justin and I finished paying off over a couple $100,000 of debt. And we had realized that there just was this gaping hole out there in terms of a lack of information about financial wellness, for the pharmacy profession. And so, you know, we started the blog, and eventually, that became a podcast and lots of resources that we have available today. But we saw a book really as an opportunity to reach individual farmers all across the country, as well as potentially a tool that can be leveraged by institutions for, you know, elective courses or other courses. And, you know, I can't take credit for initiating the project, actually, Tim church had reached out to me, Tim was a former student of mine, when I was on faculty at Northeast Ohio Medical University. And he said, Tim, what do you think about writing a book on personal finance for pharmacy, and I said, Hey, it's been on my mind, but you know, among other projects, and busy personal professional life, it just hadn't moved forward. And so we sat down at a cracker bear, I can remember it vividly and started hashing out an outline, we started talking about the marketing, we started talking about, are we going to self published are we going to, you know, try to work with an organization to do this. And that really was, was the motivation. And then we said, Alright, let's start writing. And, you know, it was intense, I think the bulk of the writing we did in about a six month period, I'm not sure I would advise that, you know, it's a pretty big book, a little over 350 pages. And it was intense. But you know, we were that passionate, and that on fire, about needing to get more information out there to other pharmacists to let them know you are not alone in the feelings, you know, that they were having, and perhaps that feeling of a lack of education and empowerment around their financial plan. So, you know, that helped with the motivation, right? I knew and I had full confidence that if I could get this resource into the hands of other pharmacists, that it was going to be transformational. And Nathan, you know, this, you're a financial nerd as well. Like, there's nothing transformational about the material that we write about, or that we talk about, you know, on the podcast, maybe some X's and O's things, you know, around like student loans and other things. But there's something powerful that when you can take a topic like personal finance that has talked about in many different ways in many different languages, right, there are tons of resources out there, but you can present it in a way that meet someone at a place where they're ready to receive that material and act upon it. That is where you start to see the transformation in the behavior. And that's that's what we did with seven figure pharmacist, and we're really proud of that resource and the impact that that it's had on the profession.

Nathan Gartland

Yeah, that's, that's terrific. There's a lot to unpack there for sure. I think like a lot of pharmacists are confident that they'll be making a six figure salary at the end. That's always kind of the the classic story of all pharmacists, oh, you'll go to school for six years, and you'll make you know, six figure pharmacy salary. But what does that really mean? How do you actually become financially secure with that? I think it's just a great, you've created a great resource for a lot of pharmacists, who also see another fellow pharmacist who's gotten out of this debt struggle and also maximize their wealth. So I think it's just a great resource for for any pharmacy student or professional pharmacist looking for additional information on just financial wellness. And you obviously obviously started your financial pharmacist to what what we As your motivation for starting the business itself, so you wrote the book and everything is just kind of what I've noticed, especially with my own business is that you kind of you start with one idea, and then you progress it, it all starts to roll together. Is that how it's similarly progressed for you?

Tim Ulbrich

Absolutely, Nathan. And that's a word of encouragement, I'd get any listeners that you know, have an idea. And they're passionate about something. And they're like, ah, is this a business is this not like, not sure, I can see the full vision, like, just take the first step, right, because it will take on a life of its own over time, your idea will either be validated or it will not be, you know, you'll kind of see where your passion lies with it as time goes on. But if you get caught up, and you know, the the vision that may or may not be coming unlikely, is going to be very different than what you think it may be three, five years down the road, you know, that can become paralyzing. And you know, for me, Nathan, right, my wife, Jess, and I finished our debt repayment journey, actually, November 6 2015, we hit submit on that very last payment of debt. And it was in the month of December, just a month later, that I set up the LLC, your financial pharmacists. And all I knew at the time was that there was a need in the profession of pharmacy, I was going to start writing on the topic. And I loosely had an idea that there was opportunities in terms of, you know, whether it's books or speaking, potentially financial planning, you know, other resources that might be out there. But I did not definitely did not have the full vision fleshed out as to where it would be, you know, at this point in time, and I think I could probably say that hopefully for five years from now, as well. And so I knew there was a hole in terms of the profession and the resources that were there around financial wellness, I knew that going through that my own journey, I had an opportunity that to share some of that information. And I didn't know how he's going to monetize it, you know, to begin with. So in November 2015, I started the blog was not monetizing that the first piece of monetization came from some speaking opportunities with some professional organizations at a state national level, as well, some colleges and that started to pick up and take off over time. And then eventually, that led to the book. And now we've got other products and services that we offer all the way up to one on one financial planning. And so it really was about, you know, a mission that I was passionate about to improve the financial wellness to the pharmacy profession, I knew that there was a need for it, I knew there was a problem that needs to be solved. And I knew that it was going to take a business to get there where it would go, I wasn't certain. But but it was enough, enough momentum and enough energy behind that idea to get started.

Nathan Gartland

Of that. And the key is you acted on it, there's so many great ideas out there that are cut short, because the individual just doesn't want to move forward with it or just play around with some of those ideas. So I'm so glad that you did that. And obviously, it's it's changed your life. So it's it's fantastic. And today, I want to talk a little bit about let's get into some of the investing basics. For especially for a lot of the listeners for the show, we're going to have a very high debt burden, especially those who are interested in obviously just exiting pharmacy school, but also going to medical school afterwards. So I want to talk a little bit about how to handle massive student loan burden. And I know this could be a whole podcast in and of itself. But would you be able to go over just a few, I guess basic mechanisms that you would recommend a lot of pharmacy students or you know, post Medical School graduates look into I know Public Service Loan Forgiveness is a popular option. Consolidating loans is important and obviously refinancing when you have horrible what's called interest rate. So I'm curious to know a little bit more from your perspective, how you advertise and how you, I guess, consults a lot of high income earners, how they can overcome this barrier.

Tim Ulbrich

Yeah, Nathan, this is the number one pain point that we hear among pharmacy graduates within the first five to 10 years, you know, for obvious reasons. In pharmacy, we're looking at a median debt load around $170,000. I would suspect medical school, it's north of that. We know and other health professions like veterinary medicine, it's higher than that dental school is higher than that ophthalmology school is higher than that. So you know, we've got it good, I guess in quotes relative to other health care professions, but nonetheless, you know, we become somewhat numb to that number. You know, one of the things I often say is when I speak with a group of 100, or 200, pharmacy professionals, either recent or soon to be graduates, when I talk about those kinds of numbers, I get no emotional reaction from anyone in the room, none. Because it's just become part of the story. And one of my challenges is in a loving way. I try to get people to wake up to understand, you know, we don't need to be suffocated by this. But we have to understand the magnitude of it to be motivated to choose a repayment strategy that is optimized so that it doesn't paralyze the rest of our financial plan. We've got to remember student loan debt and debt repayment is playing defense. It is one part of the financial plan right? There's a lot of other things we're going to be talking about with wealth building, you know with home purchase all these other goals. But if we're not intentional with really understanding and unpacking our student loan repayment, we're going to be missing on making one of the most important decisions for many folks in this transitionary phase. And whether we like it or not, the student loan repayment system is complicated. Okay, we can complain about that all day long. But it is it's complicated. And so it's on the individual to really do the due diligence to make sure they're digesting and getting information from a trusted source, that's helping them unpack all of these loan repayment options, you know, you look at the federal student loan repayment option alone. And there's lots of discussion about trying to simplify this. But there's a whole host of options you have, you know, fixed payments, you have income driven repayments that go up and down based on changes in your income, there's options, you know, that are 10 years, the standard, there's options that will let you take it out much, much longer, you know, with extended types of plans that are out there. And then you have a whole host of options out in the private system that that are there as well. And these have implications, big implications. And we've talked at length on our podcast about case studies and stories where, you know, Option A versus B can easily be the difference of, you know, $100,000 or more. And once you understand the nuances of things like loan forgiveness, you start to really see why that is the case. And so my take home point here is folks need to take the time to understand as painful as it is understand all the nuances of student loan repayments so that they can confidently choose a repayment plan that is optimized for their personal situation. And so for this group, this audience, Nathan, and I think you have some first hand experience here. You know, one of the advantages that medical graduates have over pharmacy graduates is more of them qualify for public service, loan forgiveness, right. So, you know, just by nature of training, and residencies and so forth, you're gonna have more individuals that are working for a qualified employer, right. So with public service, loan forgiveness, also known as PSLF, you have to work for a 501 C three, not for profit organization, where a federal government agency organization, make 120 qualifying payments, so 10 years worth of payments, they don't have to be consecutive. But you can speed them up. I know, some people want to say, Hey, can I speed them up? No, you can't. And then after that time period, you got forgiveness and forgiveness tax free if we're crossing our T's and dotting our eyes. So with pharmacy graduates, you know, my estimation is about 25% or so qualify for PSLF. You look at the number that goes into residency, it's much lower, obviously, the medical graduates and you know, about 80% of all hospital health systems are not for profit. So there's just not as many although for those that do qualify, it can be very advantageous. We just featured on our podcast, three pharmacists that collectively had over $700,000, forgiven, tax free. And there's a lot of bad information that's still out there, Nathan on this, and I think it got a bad rap a few years ago in that first group, so we have to remember PSLF was legislatively enacted in 2007. So 10 year timeline, it wasn't until 2017 2018, we saw that first group of borrowers reach forgiveness. And it's been a clunky program, you know, there hasn't been great information, especially for those early borrowers. There's a lot of issues around consolidation, and people, you know, getting hung up in the rules. And that was four years ago, we have to remember now, five years ago, we have to remember the information is a lot better today. And we have to remember that there's been administrative moves that have been made that are very, very favorable to the borrower that have fixed some of those issues. And as we looked at here, during the pandemic, that have counted, for those that are inactive repayment have counted as qualifying payments, even though the payments have been frozen during this time period. So there's been a lot of favorable moves towards PSLF. And we can nerd out on this for a moment if you want. But there's a lot of optimization with PSLF. And you know it, one of the things that that folks have to consider is that the way they calculate your monthly payments for public student loan forgiveness is based off of an income driven repayment calculation. Now, what does that mean? Well, that means is your income goes up, or perhaps your income goes down. Hopefully that's not happening. But as your income goes up, your monthly payments gonna go up. So they're using your adjusted gross income your AGI to calculate your monthly payment. Now, for the financial nerds that are listening, they're thinking, ooh, what can I do to impact my AGI? Right? Because if I can lower my AGI, not by making less, but by making some strategic moves, might I reduce my loan payment and therefore increase the amount that's forgiven? And the answer is yes. Right. So there's things like 401 K contributions, HSA contributions, those lower your adjusted gross income, reduce your student loan payment in the income driven repayment model, increase the amount that's forgiven, tax free and And you're saving during that time period. And the advantage that medical graduates have nation is, you know, I guess we can call an advantage. There, they're in a lower income period throughout residency for a longer period of time, right? Exact. So, whereas if someone you know, in pharmacy just does a one year residency, they're gonna have a really low, sometimes zero monthly payment for a year, year and a half. But because of the length of medical residency, you're gonna have a big decent chunk of that 10 years, where you're going to have low monthly payments, and in some cases, you know, it can be $0 monthly payments, depending on your situation. So understanding unpacking this, you know, really optimizing the PSLF strategy, I think, for the group that's going on to the medical pathway is probably going to be, you know, the lowest hanging fruit to make sure we take advantage of, and then for those that have private loans right now, that, you know, maybe were incurred at a high interest rate, we're gonna do everything we can to try to minimize that interest rate, perhaps through something like a refinance. But if you have federal loans, we cannot forget, it's worth stating 1234 times, federal loans are eligible for forgiveness, private loans, it's a one way street. So the second you move your federal loans to the private system, they ain't common back. Right. So private loans that you already have, which some folks have well, you know, through medical school, through pharmacy school, typically, those are a higher interest rate, we want to make sure we can get those down to a lower rate. But we don't want to move federal loans into the private system, especially if we're going to be pursuing loan forgiveness. If we're not, then that's a separate conversation, depending on interest rates. But we got to remember that that's a one way street, and then they wouldn't be eligible for that forgiveness.

Nathan Gartland

Wow, there's a lot of great information just in that you're gonna have to go rewind that for all of our listeners, and just unpack all of that great info, or check out Tim's podcast. But that yeah, that was phenomenal. And I actually appreciate how you mentioned that the public service loan forgiveness has actually improved when it came to the information just because me personally, when I first heard about this a couple years ago, I was think I heard like all it sounds kind of shady, oh, you're not guaranteed all this, you know all the money or like if you miss a payment, then you get thrown out of the program, a lot of horror stories that were probably more myths than they were actually actually happening to people. And maybe you have a different opinion about that. But yeah, I'm just so glad to hear that like, especially for some of our potential medical students who are listening in that they are going to be in a very good position, especially when they're when residency training has gotten so long, I was thinking you were saying, Oh, you're going to be eligible for X amount of years post graduation from medical school. So I was thinking to myself, Oh, those neurosurgeons that are doing their nine years of residency training actually have one extra year ironically, they all don't make enough to pay off all their loans in a single month. But

Tim Ulbrich

yeah, and it's, it's important that they remember, you know, those neurosurgeon, residents, obviously, you're gonna be able to optimize it at a different level. But any any resident, don't forget, it's not the math is not just the tax free forgiveness, it's also you have to factor in what you could be saving that otherwise you'd be putting towards student loans, right, if you didn't pursue forgiveness, so, you know, let's just use a nice round number of $10,000, you're able to contribute $10,000, let's say between like an HSA health savings account in a 401k per year, you know, over 1010 years. That's $100,000, right. But that's going to grow and compound over many, many, many years. So, you know, often folks look at it just from the tax free forgiveness, which that in and of itself is going to be advantageous, but Don't also forget to factor in the investing side of it as well.

Nathan Gartland

Low fat, so a lot of good options and something definitely for a lot of our listeners to look into. And you mentioned a little bit already two additional investment vehicles, you mentioned 401k, I think a lot of our listeners are probably relatively familiar with that. It's nice to know that those that you can lower your taxable income, which can then lower your monthly loan payment through the Public Service Loan Forgiveness. I'm curious to hear a little bit more, because most people, like I said, are familiar with 401 K's. But there are other options as well like Roth IRAs, and also for high income earners like backdoor Roth IRAs. And I'm curious myself to learn a little bit more about those. And obviously HSAs, as well for medical expenses.

Tim Ulbrich

Yeah, great, great questions. And these are typically top questions, because these are the areas where folks are going to be investing from a tax advantage standpoint. And let me let me just break down some terms that that often get confused is there are traditional flavors of a 401 K and an IRA and there's Roth flavors of a 401 K or an IRA and those aren't to be confused. So anytime you hear the word traditional think pre tax. Anytime you heard the word Roth think post tax. Now what does that mean? So if I have a traditional 401k Let's say you make $100,000 per year, and you're going to contribute up to 20,000. Some 500, that's the max here in 2022. So let's say you put in $20,000 in a traditional 401k, just for round numbers, well, what that does is in a traditional pre tax that reduces your taxable income from 100,000, to $80,000. So you're deferring or not paying tax today, which has advantages for things like public service, loan forgiveness, we just talked about that, your investments, so what you choose inside of that 401k, or inside of that account, those are going to grow tax free. And then when you pull it out at the age of 59, and a half or greater without penalty, so if you pull it up before, then you have to incur a penalty, you're then going to pay taxes afterwards. So at some point, you're gonna pay tax, right when and with a traditional account, you're gonna pay tax later. Now with a Roth account, again, Roth equals post tax. So when you put money into a Roth account, whether that's a Roth 401 K, or whether that's a Roth IRA, or you know, backdoor Roth IRA, you mentioned as well, that money you're putting in with after tax dollars, so it already hit your paycheck or your bank account, you've already been taxed, you're then going to contribute that money, it's been tax today, it's going to grow tax free. And then when you pull it out at the age of 59, and a half or greater without penalty, you're not going to pay tax again, because you already paid taxes on the front end. So Roth after tax, traditional before tax. So just for some, you know, round numbers here so folks can can get an idea of what could I contribute? Well, in an employer sponsored account to whether you know, that's a traditional or Roth or combination, you as the individual in 22.2, can put $20,500 into that account that does not include your or any employer match. And when I say 401k, Nathan, so 401 K for three B, or TSP is functionally the same thing. 401 K is for a for profit employer, for three B's for not for profit employer, and then TSP is for those that work for the federal government. So think of like a VA type of position. So 20,500 in an IRA, so I stands for Individual, I've meaning that individual separate from independent from your employer sponsored retirement town, you can put in $6,000 per year, unless you're at a certain age, and then you can put in additional money as a catch up provision. Now, with with the IRAs I mentioned, there's both a traditional and there's a Roth version of an IRA, and most pharmacists, most physicians, most healthcare professionals, are going to make too much money to contribute to a traditional IRA in the way that they could take advantage of the tax deduction. Similarly, many pharmacists, many healthcare professionals, depending on their income, are also going to make too much potentially, that they will not be able to contribute directly to a Roth IRA. So in 2022, if you are an individual, and you make more than $144,000, as your modified adjusted gross income, so you're M AGI. As an individual, you cannot contribute directly to a Roth IRA, you make too much. According to the IRS, if you're filing jointly, it's greater than 214,000. And there's a phase out for amounts that are a little bit under that. So, for example, if you're a household, you know, to healthcare professionals, you're more than turning 14,000, you can't put money directly into a Roth IRA. So there's what's known as a backdoor Roth IRA, which is a legal loophole, well known. White Coat investor has a great article on this Nathan, if you want to link into the show notes, we've got a podcast and article we've done on our site as well. And essentially what you're doing is because you can't contribute directly to a Roth, you're putting money into a traditional IRA, and then you're converting that into a Roth contribution. Now there is discussion that they're going to close this loophole. But for now, that has not been closed. And because of that, often what folks have is some type of mix between Traditional and Roth. So have a balance of pre tax and post tax, which I think is probably something that is desirable to have. Now, the other low hanging fruit option that folks have is what's known as a health savings account. And we're seeing more and more people that are eligible to access an HSA. So a health savings account is available to those that have health care insurance through their employer through what's known as a High Deductible Health Plan, which is becoming more and more common. And if you have a high deductible health plan, you then have access to an HSA. And the contribution limits between 22 for an individual or 3650, for a family of 7300. So not as large as what we heard in the 401k. But these are significant, because for the for the tax nerds that are out there, these have what's known as a triple tax benefit. So they have the best of both worlds of the traditional and a Roth. What does that mean? It means that the money you put in today is reducing your taxable income bonus for PSLF borrowers, right? It's growing tax free, and then you can withdraw that money, tax free as long as you're using it for qualified health care expenses or you're reimbursing yourself later for those health care expenses. So HSA is what's known as a tax avoidance vehicle, not in an illegal way, but in a legal way is that you're avoiding tax from beginning to end. And so because of that, I tend to think of the HSA as typically the low hanging fruit after an employer match on employer match, you know, it'd be free money after that, because of the benefits the triple tax benefit. And because of the potential benefits as it relates to student loans as well, more often than not, I'm thinking about, okay, how can I maximize the HSA to take advantage of that, and then you can start to balance out with Roth, or additional employer sponsored accounts. So you put these together, you know, we talked about a 401k, 20,500, Roth six, and then HSAs, either 3650, or 7300, depending on if you're single, or a family plan, that starts to become a pretty substantial percentage of one's income. And, you know, there certainly are many other ways to invest. But from a tax advantage standpoint, these are the three accounts that I usually focus on first.

Nathan Gartland

Wow, I love that. I definitely have some homework to do on a lot of that information, but um, no, that was fantastic. Just to break it all down for the listeners, because I think a lot of healthcare professionals just in general, are very, I guess, distant when it comes to financial considerations, because our life is relatively stressful when it comes to our work day. And then we come home, and we have to sit there and read through a bunch of, you know, very, very Menai, I guess, cry content, when it comes to finances, it's not exactly the most attractive option for a lot of people. And so just spelling it out like that, I think was just fantastic. And you mentioned to the white coat investor, I'm a big fan of the the white coat investor, as well. And one of the things they advocate in the book is actually living like a resident is super important. I'm sure, you can mention that. You've mentioned that a little bit before in your other content on your website. But basically, the book posits that your first few years as an attending are paramount to obtaining financial success, because you have the opportunity to solidify financial habits that are going to basically carry you throughout the rest of your career. So as high income earners, like obviously, pharmacists included, I think we're at risk for a feature known as lifestyle creep. Do you mind telling us a little bit about this? I've seen you write a couple blogs about it too, in the past?

Tim Ulbrich

Yeah, I think it's a great point, Nathan. And I think any practitioner that's in the middle, or the end of their career will will advise you know, what you just share there, which is, you know, if you can hold the line, for a period of time, depending on your personal situation, what we're trying to do is really keep our expenses at bay, because especially as we think about saving for retirement, you know, what we're able to contribute and save each and every year is going to be the number number one factor of getting there. And inevitably, life gets more expensive, right? So when I shared in our own journey, we paid off our student loan debt in November 2015. At the moment, I was like, wow, what are we going to do with all this cash flow? Right? That we were printing or student loans? Well, guess what? Now we've got four children, and I love them dearly, but they're very, very expensive. You know, our expenses have have gone up significantly. So like life over time, obviously, you know, can get more expensive. And so the idea being is that, you know, you've been used to a student or resident or a fellowship income, and can you hold that line for a while while your income goes up? And what you're trying to do there is really begin to build the behaviors and the mindset towards financial wellness. And Tom Stanley talks about this at great length, and he does so powerfully in the book, The Millionaire Next Door. And so that's the concept is, you know, and I think this is where pharmacists to be frank, Nathan are at somewhat of a disadvantage is that unless they do residency or fellowship, many of them are going from like zero to 120. Right. And if you're not ready for that, lifestyle, creep escalates quickly. And I think there's a lot of peer comparison and pressure, and I've been in school forever. And now I feel like, you know, I need to do this, this and this. And all of that is okay, you know, we just need to make sure we put it in proportion with the goals that we're trying to achieve. What I have seen and and I don't have any literature to back this up, so anecdotal, but those that do a couple years of residency in pharmacy, and I would suspect maybe this is the same with with physicians and a longer period, when you can have a stepping stone from zero to a much bigger number. For several years. I think that helps with the long term, right, because you're in that stepping stone base for a longer period of time. And you're not going from zero to 100 or zero to 200 right out of the gates. Now, the caveat to all this is I believe personally, that in order to have a successful financial plan, we have to find a balance between taking care of our future self and living a rich life today. We have to find this balance between the two and there's a lot of spectrums that are out there from the You Only Live Once you know spend it today. We're worried about tomorrow later, and the other end and which is I see a lot of medical professionals get hung up in is, you know, I can nerd out and squirrel a bunch of money away. But I'm going to be really cheap for the next, you know, 20 or 30 years, and I may not enjoy life along the way. And both have to be accounted for. And there is a point where you might save too much at the expense of today. And there is a point where you're not saving enough, you know, to have yourself taken care of in the future. So this is where we got to get into the projections, looking at the entirety of the financial plan. But I think for many, you know, if we can we can keep this lifestyle creep at bay, it's really going to help us long term to be successful with our financial plan.

Nathan Gartland

Absolutely. And one of the most important things I'm sure when you sit down with a lot of your clients is to just sit down and figure out what are your goals? Where do you want to be in the next 30 years, financially, professionally, socially, all of that information? And then I think that would definitely help you figure out exactly what kind of spending and budgets that they should be put upon themselves, but also allowing some freedom to go and get the car of your dreams or are obviously, within reason. But some of those things that you've the delayed gratification associated with some of these big purchases, I think, is a huge factor as well. And obviously it leads to, I can help prevent some potential burnout to buy heroin and in spending a little bit money. Alrighty, so I think lastly, most of our listeners are probably interested in acquiring a house at some point. And I was hoping to be able to talk a little bit more about, I guess, getting a mortgage, and what kind of mortgage can a lot of high income earners realistically afford? Especially going from maybe a pharmacist to going to a, I guess, a general surgeon or something along those lines? How much is too much when it comes to living lavishly?

Tim Ulbrich

Yeah, this is a great question. I would say outside of the student loans, this is probably the most common question that that I get. And it's more timely than ever. Right now. As you know, home prices are doing what they've been doing, which is going up up up, and interest rates are up, right, we're now above 5%, on a 30 year fixed rate home. So the cost of buying and owning a home is going up faster than we're typically seen with incomes. You know, there are some general rules of thumb out there that are probably not super relevant in today's market. So you know, Millionaire Next Door, you use the general rule of thumb of, you know, two times your gross income as a rough metric of no more no more than on a home. nother rule of thumb I've heard is, you know, somewhere around 25% or less of your take home pay for principal and interest taxes and insurance, also known as piti. So principal interest, taxes, insurance, also probably not super relevant at this time, just considering where home prices are, especially for folks listening, that live in a high cost of living market. So, you know, the take home point of those, whether you want to use some factor of those or close number is we're trying to really avoid a position where we're house poor, right? Meaning that, you know, so much of our monthly pay is going toward a home, that it's really crippling, especially when we look at student loan debt and other types of goals that we're not able to save for the future, we're not able to, you know, enjoy other things, because we've got so much going toward this home payment. And you know, what we're seeing now, Nathan has a lot of lenders, it used to be the 2028 36 rules, what they used to determine how much home someone could afford in terms of what they were willing to lend doesn't mean what their budget should be. But what the bank was willing to lend. We're seeing that push upward. So instead of that 36 number, which that 36 was a measure measure of all debt relative to their income. So that would include student loans, we're seeing that push up into the 40s. So again, the question we need to discern here is, is what the bank says I'm able to buy really what I want from my own financial plan, right, they're not going to be in the nuance of your student loan repayment goals, they're not going to be in the nuance of your retirement goals. So they're really looking at their risk mitigation. And so you've got to set your own budget. Now, one of the things that we're seeing grow in popularity for good reasons, are what are known as The Doctor loans that are out there. So in our space, they call the pharmacist, Home Loans, physicians, there's many, many more out there. So there's not as many out there for pharmacists. And essentially, the these are loans and allow, you know, high income producing professionals to have a stable income, they get into a home with a much lower downpayment than the conventional 20% without having PMI or private mortgage insurance. And so you know, these typically require that you have a professional degree, these typically require that you have a good credit score. So like on the pharmacist home loan product, it's greater than 700. And these typically require for physicians sometimes are as low as 0% down for pharmacists that might be 3%. Down you know, or some something close to that. And usually this is the thing that folks need to be looking at, usually, at least in this market right now. Depending on what you put down. These are typically competitive with conventional rates, but I obviously have the advantage of not that higher amount down. Now is there risk in that? Yeah, we need to consider that right. So the advantage here is, let's say you're buying a $500,000. Home, you know, conventional 20% down, you're gonna have to bring $100,000 cash on the table. Well, if you're only putting 3% down or 5%, down, or even 0% down, obviously, the huge advantage is you might get into a home earlier, because it can take a long time to save up, you know, 100 grand of cash. The downside is you don't have a whole lot of equity in the home. So you know, equity is something you're going to build over time and the way that mortgage payments are structure, you know, the first several years of your payment, a lot of that's gonna go toward interest, not a whole lot, it's gonna go toward equity. Well, why does that matter matters because if the market, you know, turns, which I don't think it will, in any, anytime in the near future, but if the market turns or if you have to move, you know, let's say unexpectedly be because of a new position or something, anytime you move, obviously, that the closing cost of transaction costs, sometimes your equity is what helps you buffer those costs. And if you don't have much, or any equity, you're gonna have to come up with that cash at a later point in time. So are these products valuable? I think they certainly can have a place, we just need to understand, you know, what's involved with them, and how we may balance it with other financial goals?

Nathan Gartland

Absolutely. And a lot of there's also a lot of hidden costs associated with homeownership, obviously, the property taxes, and homeowners insurance and a lot of other things that aren't just factored into your monthly mortgage. So another consideration, but already, so I know you have to take off right now. So we have come to the end of our interview. And I actually just had one final question. I just wanted to know, as a business owner, and with your financial pharmacist, where do you want to be in the next 10 years? What are your goals?

Tim Ulbrich

Yeah, that's a great question. They say my goal, you know, for my career in the work that we're doing with y fp is to transform the pharmacist workforce to be financially well. And the reason I'm so passionate about that, from personal experience, as well as working with 1000s of pharmacists across the country, is that I know it can improve our profession and therefore improve the care that our profession can provide to patients. And I firmly believe that for us as a profession to grow and evolve, we need folks that you know, can take risks that can work with confidence, and they can make the moves that they want to make. And the financial wellness is such an important pillar of that. So my lifelong mission, my life on journeys to support the profession of pharmacy, and to really transform it and to put a dent in this financial wellness and perhaps even, you know, reduce some debt loads and other things along the way.

Nathan Gartland

Of that. Well, I'd like to thank all of our listeners today for their attention and interest in the finances of medicine. If you have any additional questions about the medical school journey, check out my personal website at WWW dot physician pharmacist.com. For more financial tips, please check out Tim's book seven figure pharmacist on Amazon or seven figure pharmacist.com. Additionally, you can also visit your financial pharmacists.com for more. Before we let you go, Tim, how can our listeners get in touch with you?

Tim Ulbrich

Yeah, so you mentioned the website. I appreciate that also pretty active on LinkedIn. So folks can find me on LinkedIn at Tim Olbrich. And we'd love to continue the conversation. So that thanks for the opportunity. All right. Well, thank

Nathan Gartland

you so much for being on the podcast today. I look forward to seeing your company grow along with all the portfolio's of your clients along the way. Thank you. All right. Have a great week, Tim

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