What does it really mean to be “on track” financially? Tim & Tim unpack net worth, comparison, lifestyle creep, and financial clarity.
This episode is brought to you by the American Pharmacists Association (APhA). Through our partnership with APhA, members of the YFP community can save 20% on a new or renewed membership by visiting pharmacist.com/join and using the coupon code YFP_Wealth
Episode Summary
In this episode of Scripted Wealth: Money & Meaning for Pharmacists, Tim Ulbrich and Tim Baker unpack one of the most common and emotionally loaded questions pharmacists ask themselves: “Am I on track financially?”
The conversation explores how many pharmacists measure financial progress through retirement balances, income, or expected net worth, while often overlooking the deeper qualitative factors that actually define financial success. Tim and Tim discuss the danger of comparison, the impact of social media and lifestyle creep, and why a lack of clarity and planning often fuels feelings of being “behind” even when the numbers suggest otherwise.
Along the way, they break down the three major phases of wealth building for pharmacists, discuss expected net worth benchmarks by age, explain why net worth and cash flow often feel disconnected, and highlight the importance of aligning financial decisions with your goals, values, and desired lifestyle.
What you’ll learn in this episode:
- Why “being on track” financially means more than just hitting a retirement number
- How pharmacists move through different phases of wealth building over their career
- What expected net worth benchmarks can (and can’t) tell you
- Why high earners can still feel financially stressed despite strong savings
- How a clear financial plan creates flexibility, confidence, and intentionality
Mentioned in Today’s Episode
- YFP Wealth: https://yfpwealth.com
Episode Transcript
[00:00:00] The common thread is lack of clarity and lack of a plan, right? If, if we can develop a plan that is a North Star of where do we need to be going? Where do we want to go? Why do we want to be going there? And then to bring the plan around it, quantitatively and qualitatively support it, it helps us course-correct, if you will, to actually put some meat on the bone to what does on track mean, not just externally.
What does on track mean to me, to us, to our financial plan, our family, our household? And then let’s develop the plan and execute on that plan over a long period of time. Before we get started with today’s episode, I wanna take a moment to recognize our ongoing collaboration with the American Pharmacists Association.
APhA has been a part of my journey since 2006, when I joined as a student pharmacist. Over the years, I’ve personally benefited from the education, the community, and the advocacy they provide, so it’s especially meaningful to now partner together [00:01:00] in serving this profession. Since 2017, YFP has worked alongside APhA to bring personalized financial education to its members.
Throughout the year, we’ll be co-hosting webinars with APhA on topics like investing, retirement planning, debt repayment strategies, and more. If you’re not yet a member of APhA, it’s a great time to consider joining. You’ll get access to these resources, along with an exclusive discount on the initial planning fee for YFP Wealth’s one-on-one comprehensive financial planning service.
You can also save 20% on your APhA membership by visiting pharmacists.com/join and using the code YFP_Wealth. Again, that’s YFP_Wealth. All right. Let’s jump into today’s episode of the Scripted Wealth podcast. Tim, today we’re gonna talk about the concept of being on track, and a- as the name implies, [00:02:00] there’s some type of measuring stick that we’re comparing that against, whether it’s us as an individual asking, “Am I on track?”
Or for those that are working with an advisor, you know, it could be that that individual is helping them assess, “Hey, are, are you on track financially?” And so I wanna unpack that term as we get started here. When, when someone says, “Hey, I think I’m on track,” or, “I think I’m behind,” you know, what, what, what are they actually trying to measure?
Or, or what do you think they’re trying to measure? Is it, is it a retirement number? Is it something more related emotionally, a peace of mind, or having options or flexibility? Like, what, what do you think is packed inside of that term? That’s actually a great question, Tim. I, I, um, I don’t, I don’t think it’s a retirement number.
I think if I, if I think about the pharmacist brain, I, I think it is more about am I, am I checking all the boxes that need to be checked? [00:03:00] Um, I think it’s more like that. And then I think you do overlay a bit of the, you know, where, where do I fit in the space, um, financially relative to peers, right? And again, I think any time that you compare, that’s a, that’s a bit of a, an issue ’cause everybody’s financial plan is a, is, is a unique snowflake.
Everyone’s circumstance is, is, um, is different. So I do think it’s more about am I taking advantage and doing all the things that I should be doing? And most of the time we just don’t know, right? Because we’re not financial planners. You know, we, we read things or we hear what our colleagues are doing with real estate or crypto, and they’re like, “Okay, maybe I should be doing that,” or, you know, I see a colleague that retires and I’m like, “Man, I’m, I feel like I’m far away from that.”
Um, but then I do think it is, again, thinking about the pharmacist brain, I do think it is like an also like a numbers based. Yeah. Um, and I, I… It’s probably more related to, [00:04:00] like, investment portfolio and savings, and less about what we think is most important. Um, or it could even be income, and probably what we think is less import- or most important, which would be kind of net worth and, you know, overlaying expected net worth there.
So I, it is a question that I often ask, and it, it, it’s purpose- you know, like a prospective client. It is purposely meant to be open-ended, um, to kind of delve into where, you know, what, what do you mean by that, you know? And I think oftentimes a, a default answer I get is like, “Well, I just don’t feel like I have enough, like-” Mm-hmm.
set aside,” right? Um, and, uh, but I do think at the end of the day it’s also like where do I fit? Like, if I’m a 45-year-old pharmacist, like, where do I fit with- Yeah … other 45-year-old pharmacists? And I think that’s a good thing to kind of know that as a benchmark, but it also can be a very dangerous thing.
Yeah. As, as you were sharing that, I was thinking about my own journey, and we’ll, we’ll [00:05:00] talk a little bit about how this might shift, right, o- over time or in different stages of life or career, you know, how this definition could and probably will, will look differently. But, you know, I was thinking about early in my journey, coming out with $200,000 of debt, right?
The on track that for me was, you know, am I progressing in paying off this debt? Am I on track with what my peers are doing or, you know, how fast I should pay off this debt? Or coulda been a home purchase. Am I, am I on track with buying a home and getting out of a renting, you know, situation? Because that’s just maybe what you’re s- supposed to do.
But I think as time progressed, and, and I, I would echo what you said in the conversations I have with pharmacists where this topic comes up, it typically is quantitatively focused and specifically around income, uh, and/or retirement balance, investment balance, right? There’s some type of number they have in mind that is where they should be- Um, and it u- [00:06:00] usually is centered around those two pieces, and it’s often then, you can correct me if I’m wrong, Tim, but it’s often then when we start to talk about the broader parts of the plan of, hey, well, well, what about the other things in addition to income or investments?
Which, of course, income is gonna be the tool that we use for so many parts of the plan. But what, what about the, the wealth protection side of the plan, right? When we talk about estate planning or insurance or, uh, even on the, on the qualitative side. Let’s talk about that part of the equation like, like we have been doing on this show the last couple episodes as well.
So it, it does feel very quantitatively focused, and specifically I would agree on income and on some type of investment balance number or retirement, you know, focused number. But, but I, I, I think the point here is that it, it can often be quite vague, right? And one of the risks I think we run is we’re making decisions based on a judgment [00:07:00] call that we’ve made or determined of whether or not we’re on track, that’s then influencing other parts of our plan, um, that might be somewhat subjective.
You know, I, I’m thinking about so- something that’s unique to our generation, Tim, this probably sounds a little bit like O- Old Man Tim and Tim on the rockers, is, like, in the news cycle that we live in, and especially you think about just social media algorithms, like, it, it is very much set up to put you in a position of, “I’m behind.
I, I must be behind. I must not be on track.” And I think sometimes that could be the depth of really what’s underneath this unsettled feeling of like, ugh, maybe I’m not on track, when perhaps if we peel back the onion a little bit, like, may- maybe we are on track if we, if we ask some of those deeper questions.
Yeah, and then I think the, the flip side of that is I alfo- also get a lot, um, you know, people that speak to me that there is, you know, they make [00:08:00] as a household 300, 400, half a million dollars, and there’s a lot of overconfidence there, right? And the, the savings rate is not consistent or it’s- Yeah … not great, and, you know, we’ve made some mistakes behavioral wi- behavioral-wise, um, that, that aren’t great.
So yeah, it, it is, um, it is a, it definitely is a spectrum and, you know, I, you know, I think if you think about it back in the day, like, like baby boom generation, um, and even older Gen Xers, like social media wasn’t a thing, right? So you didn’t have everybody’s best foot forward in your face all the time.
And for a lot of older generations, too, like p- pensions were the, the norm. Yeah. Right? So, like, even having a, you know, even the thought of, like, tracking- a large investment portfolio. I mean, that was, that still was there, but for the most part it was like, “Hey, I’m gonna work for the same company for 40 years, and the pension is [00:09:00] more or less gonna take care of the majority of, you know, along with Social Security, is gonna take care of the, the majority of what I need, you know, in, in retirement.”
Like, that day is done, right? That does- doesn’t exist. So yeah, there is, um, there is a lot of uncertainty of like, “Hey, where do I fit in the universe in terms of, you know, my ability to sustain a paycheck or whatever that is, you know, when I’m, when I’m, you know, older and not necessarily working anymore?”
And e- even in, even in some of the meetings where I’ll like, I’ll, I’ll say, “Hey, paint… Hey, Tim, paint the picture of like what, what the balance sheet looks like today- Yeah … so I can kinda get a sense of where you’re at.” And I’ll get a question of like, “Well, like, how do you, you know, based on, you know, you meet with a lot of pharmacists and having a lot of these meetings, like, what do you think?
Like, what’s your pen- professional- What’s the benchmark? … opinion?” Yeah, and I’m like, “Well, it just really depends, right?” Because like we, you know, the next big thing that we typically do in our process is overlay like what are your goals, right? Yeah. So if you have a half a million dollars saved and, you know, could you [00:10:00] retire today?
Maybe if your, if your kind of burn rate is very low. But if you’re- Yeah … if, if we need 150 grand a year outside of Social Security, like, that’s probably not tenable. So to me it’s, it, it’s, it is so much of it depends until we get, you know, the, the inputs needed to really build out a comprehensive plan and, and be able to show you, you know, projections and, “Hey, can we fund this near-term goal or, you know, this goal that’s 10 years out?
And, and how does that affect overall, you know, the money that’s in the plan?” I, I just think it’s a, it’s such a, it’s such a tailored thing to the individual, and I think sometimes we just get caught up because we’re trying to do it in broad strokes. How do you… I, I alluded to this a little bit ago as I was reflecting back on some of the early stages of, of measuring what I thought was on track, right?
Progress with debt payoff, you know, timeline to purchase a home. Even as I play that out a little bit further, you know, I think about things like how much should we have saved in an emergency fund or how [00:11:00] are we doing with our kids’ 529 accounts, and then of course retirement accounts and other things come into play as well.
Which begs the question of like, does this definition of on track, does it change and evolve as we move through different seasons of life? What, what are your thoughts on that and, and what you see with the prospective clients and the clients that you talk with that, you know, range from, hey, our phase of life and, and middle of their career, maybe, maybe that debt’s on the backside, they’re in the midst of raising a family, maybe they’re caring for elderly parents, all, all the way to those that are actually transitioning into retirement, which of course looks very different.
Yeah. So I, I kinda look at this, and, and this is something I’ve been working on, Tim, and I’ll put it out into the ether so I either, you know, I actually do something with this content or it’ll kind of force me So, like, I’ve been kinda working on, and I don’t know if I’m gonna do, like, an on-track webinar or if it’s, uh, something I write, but basically it’s kind of like think of a pharmacist’s wealth building in really three main phases.[00:12:00]
Um, and, and this is a little bit different because, you know, for most people, uh, for most people, it’s you have the accumulation phase and then you have the decumulation or withdrawal phase in retirement, right? The s- those are the two things. I think with pharmacists it’s a little bit different. I, I kinda think of it as, like, three phases, right?
So phase one, kinda think of this as, like, escape philosophy. We’re really just trying to get this thing in orbit, and the primary objective here– So this is kinda typically in your, your l- you know, late 20s, maybe even as late as, like, late 30s, and this is typically where the primary objective is to start making money and to stop drowning, right?
Because this stage is often, um, where there’s serious loan payment. Obviously, we’ve talked about student loans ad nauseam. Um, starting to kind of s- you know, seed the buckets of retirement savings, so whether that’s a 401, a 403, a TSP, maybe even looking at [00:13:00] IRAs. Um, buying a first home, you know, raising kids, maybe a little bit of career s- uh, instability.
Um, and here in this phase, if we think about net worth, painfully slow progress, right? Um- Ne- negative often. Yeah. It starts negative- Yeah … but even because we’re, we’re very much in a– we’re kind of swapping out, right? So we’re swapping out a mortgage, a note for a house. Yeah. We’re swapping out– We’re, we’re, we’re– W- the, the amount of money that’s going into our, our, um, our retirement accounts, you know, that doesn’t– you don’t really see, start to see that exponential growth- Yeah
until you have more of a balance, right? So, you know, the, the– what we’re really trying to focus on here i- or why we feel broke here even though we’re making a good salary is student loans, the, the, the whole idea behind, behind taxes of, like, “Okay, I make this and this is actually what I get.” Yeah. Mortgages, daycare, um, you know, and, [00:14:00] and really that we haven’t seen the fruits of our labor from an investment, uh, really take off.
So, you know, it’s– the, the question that I, I think is often asked, you know, from a pharmacist in this stage is, “I make great money, but, like, why does it feel like I don’t?” Mm-hmm. Like, “Why does it feel like I’m struggling?” Yes. Mm-hmm. And, and we’ve talked about this before, Tim, is, like, you don’t feel your net worth, right?
So even if you go from negative 300,000 to a positive 300,000 in a relatively short period of time, you don’t feel that. What you feel is money in and out of the bank account, right? So you might feel a little bit more of the investment, you know, the investment portfolio because- You know, if you’re looking at every day, which Tim, I know you’ve been in that, you know, guilty of that early in your career, it’s like, you know, you just kinda can get a little bit sidetracked.
And again, the market is fickle, right? So it might have a really good, you know, good day and you’re like, “Okay, I, I made a lot of money to- today.” And then the next day it’s gone, right? Because a politician said something or, you know, whatever it is. So that, that’s kind of the first phase, which I kind of bolt on the front [00:15:00] of, you know, um, you know, kind of the, the general public.
Now, the second phase, if I can go to the next phase, is really a kind of an accumulation. And think about this as like your 40s to early 50s. Yeah. And this is where you start to see things accelerate, right? So loans are often reduced, forgiven, or eliminated. You typically start to s- g- enter your peak earnings or start to get into more of that.
Again, that’s a little bit different for pharmacists depending on where they’re at. Um, but then you, you typically start to see contributions rise. Um, cou- compounding becomes more visible. Um, and then- Fe- feel it a little bit more, the progress. Yeah, right. Yeah. Mm-hmm. And then the net worth is, is le- it’s, it’s not, it’s nonlinear, right?
So we start to see more of a curve there. Yeah. Um, and, you know, you start to see that path towards, you know, a million dollars in net worth, you know, you know, where you’re like, “Okay, uh…” Hey Tim, and I, I’ve heard this often, it’s like, “Hey, Tim, I didn’t really believe you. I would kind of roll my eyes when you were talking about trajectory,” but then you start to see it, right?
[00:16:00] Um, now you still have things like, “Hey, you know, we gotta pay for junior’s education,” or things like that. Those things pop up or maybe we’re trying to travel a little bit more and take advantage of some of the life experiences- Yeah … you know, while your kids are still in the house. You know, those obviously we need a plan for.
Um, but that’s kinda the, you know, the, the, the thought there. And then really it’s the, you kinda get into the, the, the last phase, which is optimat- optimization and then getting into the, you know, the decumulation. So this is kinda the mid-50s and beyond. And at this point, it’s, you know, how can I… I- you kinda go from can I build wealth to can I start to convert this into sustainability, sustainable freedom in the future, right?
So this is where we, we, we really wanna make sure that, you know, if we have good behavior and good planning in this optimization, then this is kind of the work smarter, not harder, right? So this is like if we’re, if we have great tax planning, we’re on a good behavior, um, [00:17:00] our investments are coordinated, um, we, we have plans for the things that pop up, ’cause those things pop up.
Like, you know, we can, we can kind of, uh, a- adjust to that. Um, then we can kind of really make sure that as we get into the decumulation phase, um, you know, we’re, we’re, we’re sitting pretty. But I will say that, you know, the over- the underlying thing for all of these phases is that, you know, two pharmacists can ma- make identical incomes, um, for 25, 30, 35 years- Can end up millions of dollars apart because of things like savings habits, lifestyle creep, taxes, just stuff happens, right?
It could be a divorce, it could be I have to, you know, take time off to, to care for an aging parent, or maybe I’m resetting my career because I feel burnt out. Investment behavior, housing decisions, right? Location matters, so it’s a lot harder, um, to have, you know, accessible cash if you live in a [00:18:00] high cost of living area versus, you know, somewhere that doesn’t.
Um, and then again, shameless plug, simply having a plan and tracking this and asking yourself objective questions or having an advisor ask yourself the objective questions are in terms of like, are, you know, is this where we wanna be, you know? And then obviously the technical overlay of all that. So, not necessarily a completely foreign thought, but I, but I think looking at that from a three phases, and you probably could add a fourth phase, which is just obviously how the, the retirement income and how are we, you know, looking at Social Security and, uh, you know, a dynamic withdrawal strategy and, and all that, you know, as we, we begin to spend down the, the, the portfolio and the, the things that we have accumulated over the course of our career.
And maybe even a fifth stage of like a transfer of wealth, right? Yeah. And, you know. True. So. Yeah. Ba- ba- Baker scripts, what, what do we call them this book? I don’t know, man. What’s going on? I, I know. Oh, we, we jumped to a book, man. I, I, I have- Oh, yeah … finding problem, problems just writing. No. Um, yeah. So we’ll- No
we’ll figure something out. [00:19:00] Hold you on the hook for a book. But I, I think what’s interesting about those phases, and, and I couldn’t agree more, just, just to be clear, while you made this point, those of course don’t live in independent buckets, right? Where there’s, there’s some accumulation that’s happening in the early phase, but you described it so well in that kind of cleanup.
We’re trying to get our arms around the plan, just get, get grounded and start to play some offense instead of playing defense all the time. Like, there will be some accumulation and of course, ideally, we’re, we’re starting to save towards that accumulation, but, but we often don’t feel it, and we don’t feel it in that phase ’cause it, it is a grind, and it’s an expensive phase of life.
And as you said, we, we haven’t yet, you know, seen the exponential growth in some of those investments. And, you know, e- even as we do start to do that, you know, someone may wake up in their early 40s and, “Hey, we got a half million, million dollars saved,” but on a month-to-month cash flow basis, like, it, it doesn’t feel like I’m, I’m doing really well financially, right?
And, and that I think is a really interesting segue to the conversation of net worth. [00:20:00] Because as you said, you know, the reality of, of what we feel month to month, year to year versus what our net worth may show, you know, those aren’t often connected in the way that we, we might think or hope. And since we’ve talked about net worth a few times, just again, a quick definition.
Net worth is your assets, what you own, minus your liabilities, or what you owe. Uh, and as we’ve articulated many, many times on the show, that, you know, income is a great tool that hopefully is gonna allow us to grow our net worth through growing our assets, paying down our, our debts or liabilities over time.
Uh, but net worth is a much better indicator of what sticks, of what we’re actually able to translate from income into hopefully long-term building wealth. Which I think, Tim, that then brings up the question, if I’m a pharmacist hearing this, I’m thinking, “Well, Tim, like, where should I be with my net worth at this phase of, of my career?”
And we talk a lot about the value of net worth as a measure of financial progress, so I think a natural question is that, right? What, what should be my net worth now? Or what is [00:21:00] my expected net worth? How, how do you think about that concept for someone who’s listening that’s, “Hey, I’m 40,” or, “I’m 50,” or, “I’m 55”?
Yeah. So, you know, the w- again, one of the things I’m, I’m working on, you know, related to this, you know, we talk about phases is, is that. And w- you know, specifically for, like, a pharmacist, right? So, um, you can, you can look up, like, hey, what, what should be… You know, what’s my n- uh, you know, net- I think Fidelity has some benchmarks out there, so, you know, what’s- w- should my net worth be in, when I’m 40, when I’m 50, when I’m 60?
So what I’ve kinda done is, you know, you look at, uh, you kinda start with, you know, again, what feeds… You know, not, not a financial plan, but what feeds into the net worth is you start with, you know, a pharmacist’s income, right? So we can make certain assumptions about, you know, what, what a pharmacist makes.
And again, it could be dependent on what type of pharmacist that you are. So if you’re in retail or if you’re in [00:22:00] industry, hospital, you know, even if you’re, you’re dual income, um, you know, that’s gonna change things. But you kinda start with that in mind, and we can kinda, you know, uh, estimate what a pharmacist will make over the course th- uh, course of their career.
So you kinda start with that first, and then we, we kind of apply a s- some savings rate assumptions. So if we’re assuming that we’re saving 15 or 20% consistently, again, maybe not at the very start but, you know, later, you know, a- as an average over the course of your career, um, you know, employer match, um, you know, we’re gonna assume, like, we’re not…
We, we don’t see exponential, um, levels of spend, you know, with, you know, uh, increases in salary, so we’re kind of avoiding that lifestyle creep. And we’re not doing, you know, we’re not doing things like si- like, you know, silly. Like, we’re, we’re not cashing out retirement, um, uh, uh, portfolios, which again, you know, we’ve, we’ve, we’ve seen that.
And then we’re kind of overlaying those, those broad benchmarks. [00:23:00] So to k- kind of give you an, an example of, you know, uh, a broad, you know, benchmark is, like, if you’re, if you’re 40 years old, your expected net worth is three times income, right? So if I make $100,000, my expected net worth should be 300,000.
Now you might be thinking like, “Man, I’m still working through the, the, the s- student debt,” right? So that can obviously be a factor, and that’s one of the things I’m looking at, too. At 50 years old, it could be six times income, and then at 60 years old, it’s eight times income. That’s, those are kind of the broad general benchmarks.
So what I’m developing is kind of like a, you know, through, th- basically I’m looking at it every five-year increments if I’m from age 35 really to 60, and kind of using those, um, those numbers and kind of giving a, “Hey, if your net worth falls, you know, between this range, you’re on track. If you’re below that range, you’re behind.
If you’re b- above that range, you’re kind of in a stronger position,” which I think offers more [00:24:00] flexibility. So as an example, if you are a… Based on these kind of, um, these kind of assumptions and metrics, if you’re a 50-year-old pharmacist, the on track network, net, expected net worth should be between a, a million and $2 million.
Um, so if you’re below a million dollars, you know, I would say, you know, statistically behind. Um, if you’re above $2 million, you’re kind of in that strong, strong position. So those are kind of the tranches. Now again, these are just, these are just benchmarks, right? So everyone’s situation is gonna be different.
And again, if you’re not, if your, if your net worth is not tracking to that, but you think the burn rate in which you’re gonna go through your portfolio in retirement, then you could be very much in a strong position. So it is gonna be dependent, and that’s why, again, we, we are big proponents of talking to an advisor.
Um, put these thing, you know, pr- I mean, get your, get your, your net worth, um, and your balance sheet in line. You know, overlay your goals, and then we can kind of project out, you know, [00:25:00] and validate those numbers or not. And if, and if you’re not, you know, again, then the beautiful thing about financial planning is that, you know, you can do a lot of things in a very relatively short period of time that could have exponential, you know, impact.
And, um, that’s, that’s kind of the whole, the, the whole gist of this. And the pharmacist in me, right, you know, I see the expected net worth calculation or I- Mm-hmm … I hear the rules of thumb, the three times this, the six times this, and, you know, I, I, I can see myself, like, driving listening to this, and I’m, like, pulling out my calculator, right?
Trying to do the quick numbers. And then, and then I feel, like, the palpitations and, uh, am I on track? And, oh my gosh, I have to save more and invest more. Yeah. Yada, yada, yada. A- and I think the point we’re trying to make, hopefully, is that we, we see you and wanna meet you, you know, in that place to kind of wet, wet your whistle, if you will, of like something to put our arms around.
However, right, what is the entire focus of what we so often talk about on the [00:26:00] show is the balance between these qualitative and the quantitative things. And, and I think one of the risks of some of these rules of thumb or benchmarks are, ugh, like I need to go chase that harder, chase that faster. A- and there may be, that, that, that may be a season for that, and that might be needed depending on the goals in your situation.
But as you just said several minutes ago, take two people with the same, you know, net worth or same income, and there could be very different needs, in large part because of a, of a burn rate when you look at something like a retirement number. So, you know, you could have someone who’s got a million dollars saved, and they might be behind according to whatever benchmark we’re using or, or retirement calculation.
Somebody else who’s got, you know, half a million dollars saved, but because their burn rate’s a lot lower and, and looking at their expenses and their other goals, they, they might be just fine, and they might be on track. Um, you know, so I think- Yeah, and I, and I think, uh, one of the, one of the big things here too is, like, a lot of people maybe outside of their 401, a lot of, a lot of people’s wealth is mostly tied up in their [00:27:00] house.
Right. And if they’re unwilling to use that, uh, and, and this happens in retirement where you’re like, “Ah, you know, I wanna stay in the house,” it’s really hard for us to be able to earmark that, that the worth in the house for anything except for it’s kinda just tied up in where you live, right? So that’s another thing is, like, you could, you can own a $2 million house, and, you know, that’s gonna be completely paid off and, but maybe that’s half your net worth.
Like, that’s, that’s hard to- Right … to, you know, if there’s no flexibility there, um, with that asset, it’s hard to, you know, use that for anything except for like, “Hey, we’re just gonna earmark that for, for living.” Um- Yeah … so it can be very different. Which really gets to asset, asset location, right? Right. And, you know, we don’t, we don’t need to nerd out on this too much, but that’s really what you’re, you’re talking about in terms of, you know, let’s say you have $2 million saved and I have $2 million saved, but half of mine is in my home equity, and then maybe I’ve got a, a second million that’s in a traditional IRA.
But [00:28:00] you’ve got $2 million that maybe, you know, almost all of that’s sitting in a brokerage account, for example. I mean, those are two very different situations, right? Yeah. Of, you know, how… So again, it, it’s a helpful tool, and I think it’s, it’s one that there’s value in measuring, you know, am I progressing in the right direction?
But the asterisk is really important to note, and I think speaks to the value of really getting into the individual aspects of s- of somebody’s situation and planning, um, and not just applying general rules of, of thumb, you know, to the whole, whole financial plan. What, what do you think, Tim, about the unique aspects of pharmacists with these benchmarks for expected net worth?
So what, what I’m thinking about are things like, hey, you know, yes, I, I maybe have above average income, um, but there’s a delayed start to earnings, right, because of a longer educational pathway. Therefore, there’s a delayed start to savings and compounding, although you could argue that’s maybe [00:29:00] offset by higher contribution rates, so it’ll, it’ll catch up and exceed it over time.
And there’s higher than average debt loads. Right? So w- wouldn’t we expect that if someone is looking at a general rule of thumb net worth calculation and they’re doing that number early in their career, that they might be behind because of those factors? “Hey, I got a delayed start to saving. I haven’t had time for those to compound, and I have more debt, therefore my liabilities column’s gonna be bigger.”
Um, and then at some point, that maybe crosses and exceed. What, what are your thoughts on that? Yeah. So I think that, you know, the kinda the model in which I’m working on, it, it does indirectly account for kind of a late start and negative net worth, right? Um, you know, so it kind of ass- assumes a longer than expected delayed, you know, ability to, to accumulate wealth, um- Right
be- due to the substantial debt and slower early compounding, right? Um, and that’s one of the things where, you know, when you would think, when you would, you would, [00:30:00] uh, read about this before, it’s like, well, you know, a lot of people aren’t coming out with six figures worth of debt, so how does that affect us?
So, but there are, you know, again, like with one of the, one of the, the things with debt is you start, you start, you know, negative, but because you have to pay off the loans or because of things like forgiveness, you can see, you can see progress on your net worth, right? Like I said, like w- what we’ve seen client, I, I mentioned, you know, the negative 300,000, the positive 300,000 in a, in a very short period of time.
And you can also have with forgiveness a cliff to where it’s like all of a sudden I’m negative 200,000 from a, from a liability- Yeah … from a net worth perspective, and that goes away overnight, right? So, uh, but not everyone has that, right? So it, it does account for that. You know, I think that the, you know, the one thing that people need to realize is like, yeah, when you, when you graduate and you have the average amount of net worth, that, that is a kind of the price you pay to [00:31:00] start the, your career at a six-figure salary.
Um, not everyone’s created equal, right? So there’s still, you know, 10%, right? So you might listen to that and be like, “Shut up, Tim,” and I get it. But- … the, you know, the, the thought is, is that over the course of a 30, 40-year career, that, that income and the ability to, um, defer income into retirement, you know, can still even outpace the general public, right?
Mo- most people, when they’re in their, when they reach 50, their expected net worth is, is, is not a million dollar, right? And we know that because of, you know, uh, 401k studies and just what the average American has. Um, so it, and it’s hard to see, right? So like if you’re, if you’re in that space right now and you’re like, “Yeah right, Tim,” like believe me, I get that a lot, you know?
Or it’s just like, “Yeah, that sounds great, but that’s not gonna be me,” or, “I’m never gonna be able to retire.” And I promise you, [00:32:00] again, with a little bit of planning and a little bit of intentionality, we’ll get there, right? And, and, and this is a- A slow and steady type of thing, but, like, once you get to a certain point, you start to see this, you ha- you kind of experience this inflection point, and you’ll start to see more of the exponential.
So there is, it, it is more so delayed than, you know, the, I think, you know, a different maybe path. But I’d also argue that, you know, where you start out from a, from a, from an income perspective is, is different as well. So, and I, I think if you can create positive, good behavior, um, as you, you know, when you approach the debt, and then overlay that to, um, the invested in, in savings rate, again, that, I think that bodes well for the longevity of the financial plan.
Yeah, and to your point, if people are aggressively paying down debt and they’re saving, you’re hitting both sides of the equation, right? So you’ll, you’ll see the net worth, you know, typically progress pr- pr- pr- [00:33:00] pretty, pretty early on. Um, and then hopefully over time, we, we see the exponential growth. I’m, I’m thinking of the people listening, Tim, that maybe are hearing some of these benchmarks and they’re thinking, “Well, according to that, I’m on track, but it doesn’t feel like that.”
Right? I, I still feel like I’m behind. And what’s coming up for me is, is I can vividly remember a place where Jess and I were at after working through the $200,000 of debt. You know, this probably would’ve been, like, early-ish 30s to mid-30s. Um, debt’s gone. Like, hey, we’ve got through that grind. Um, bought a home, growing family, and having this nagging feeling of like, yeah, the, the, the retirement calculations are checking out good, the net worth calculations are checking out good, but man, it does not feel like it, right, month to month, you know, year to year.
And just, just curious to hear y- more of your thoughts on that and what, what you see from clients and prospective clients, ’cause I think that’s a [00:34:00] very common thing, where people are in this middle part of their career-ish, and hey, may- maybe net worth is on track. Maybe the retirement numbers are checking out as we do the nest egg calculations.
But gosh, it just feels like we’re not there. Yeah. So I think when you– So if we, if we talk about that kind of escape velocity, um, uh, phase, the, the feeling of scarcity is not something that, like, it, you’re, like, things are tight, right? And I think right now, especially given the e- you know, the economic environment where everything is more expensive, gas, uh, food, rent, you know, buying a h- everything is expensive, right?
You, you, you feel that in your, in your day to day. Um, I think that, you know, a- as you, as you proceed though, like, so, so there’s, there’s context to this, right? So, like, if you are saving, and we, I [00:35:00] recently had a conversation, uh, with a client about this, like- If y- if you’re saving, you know, 15, 20, 25%, um, towards retirement or education, you’re kind of creating, like you don’t do that right out of the gate typically, but you’re, so you’re kind of creating a feeling of scarcity, which I would argue, in a lot of ways, is a good thing, right?
And I, I will say, like, if I see just money laying in my account, I’m, I’m trying to come up with things, creative things to do with it that have, that, that don’t help me at all, right? So- Yeah, versus creating a he- I, I talk about this as a healthy friction. Yes. Like, there’s a healthy friction. Right. Yep. Now, that could be exhausting, right?
So like, even the, y- if you’re doing a zero-based budget for, for years, and you’re accounting for every dollar that comes in, that is tiresome- Right … and typically not- Yeah … sustainable over the long period. So I think for sprints, those are actually, it’s, it’s a good exercise. It’s the same thing, like if you are feeling that, um, you know, I [00:36:00] think we, we can use, pr- probably use this example, Tim, going back, you know, into the memory vault with you guys.
I think because of your situation with loans, which you’ve documented coming out of pharmacy school, I think you and Jess were very much sensitive to, to that, and were attacking the, the boys’ education accounts ear- like, very early on. And I was just like, “Why?” Like, “What’s… Give me, give me some context behind that.”
Yeah. And, and I think we kind of came, came to the, the conclusion of like, hey, maybe we can, you know, you guys had done a lot even, you know, in, in, in the point of your career at that time, but I think even, like, lifting the pedal, you know, the foot off the pedal for that, freed up some additional, um, cash flow to do things that were maybe in the, the here and now, right?
And that’s what- Yeah … we go by, go back to, how can we live a l- a wealthy life today and a wealthy life tomorrow? So, and, and, you know, I had a conversation with a client recently where they’re like, “Oh, like, we feel like, you know, we’re starting to see some, some creep with [00:37:00] credit card bills and things like that,” not because of lifestyle creep, but that could be, that could be part of it when we get in, when we break down the data, which again, we, we have to, you know, rein in in control.
But also, you know, if their, if their savings rate is high, there’s maybe a, a, a ability for us to pull back, you know, based on the projections to say, “Okay, maybe we don’t need to max out right now.” We can, we, you know, because th- this is happening, this is happening, we can pull back on this and free up cash flow for here and now.
Like, that makes a lot of sense. Yeah, and I, I, I c- I think it’s, like, one of those, I think it’s almost, like, related to, like, the, the iceberg, right? So, you see an iceberg sticking, sticking out of the water, but, like, 80% of that i- like, the ice is underneath and you can’t see it. I think s- so, so is true with your financial plan.
Like, you know, i- if you have a emergency fund or if you’re well-funded for vacations or you’re well-funded for kids’ activities, um, you’re, you’re, you’re, you know, you’re maybe you’re maxing out your, [00:38:00] um, your c- Your 401and you have a, a good base, or you’re getting the state tax deduction or whatever for your 529s, the HSAs are being funded.
These are all building blocks and things that kind of fly beneath the surface. At the end of the day, what you’re feeling in terms of the pinch is, oh, like, you know, can’t wait to get paid again because, you know, I need that influx of cash because, you know, we, you know, groceries and things like that. So, the co- But, but if you don’t have that savings rate, and you don’t have that emergency fund, and we’re, we’re paying for trips on credit card and things like that, that’s where it’s like, okay, we gotta start…
That’s, that’s where, that’s lifestyle creep, right? And we gotta start, we, um… And it’s a two-sided equation. We either gotta make more money or we gotta cut expenses. Um, and the cutting expenses can be painful, but if you have a little bit of that buffer where you’re doing all those things, then it can free up some, some cash flow f- for the here and now to, to take advantage of the time that you, you know, whatever [00:39:00] phase of life that you’re in.
And, and I think that, that, that optionality and flexibility is, is, is really important. So, if we talk about like the, the diff- We talked about like the different phases, Tim, like, um, or no, the, the different tranches. Like, am I behind? Am I on track? Yeah. Am I in a strong position? Al- you know, and, and this is kind of something that I want to look at too, is like often those are categorized by flexibility, right?
So, like the strong position is one where I have the ability to work or not, um, m- maybe retire early, maybe it’s charitable capacity, um, just lower financial anxiety. If you’re on track, it’s kind of more of the here, you know, kind of maintain the here and now. Like, I’m retiring at a, you know, a, a, you know, a, a typical age or early to mid-60s.
I can maintain my lifestyle. I have some moderate flexibility. If you’re behind, you’re under-saving, you know, maybe you’re late to the game, you know, it’s lifestyle inflat- or lifestyle creep, um, [00:40:00] poor investment behavior or just poor financial behavior, and then no coordinated strategy. So, we’re trying to move up the ladder, right?
To, to get to where we have some moderate flexibility to where, hey, we, we can essentially do what we want. Um, so again, the, the financial plan is kind of the backbone of all this to be able to assess and not just kind of, you know, throw our finger in the air and be like, “Okay, I think I’m on track,” or I th- or I’m not.
That’s it right there. That, that’s what I think is going on here, whether you look at, you know, when you, when you said 529, and Jess and I, it triggered the memory of like when you asked the question, w- wh- what’s the point? What’s the purpose? What are we doing here, right? It was one of many examples where we were trying to check a box because that’s what you should do, right?
You should put money in a 529. Yeah, well, there’s, there’s trauma there, right? Like, you’re, you’re here today- Totally … one of the reasons you’re here today with me, you know, talking about this is because of what you experienced, and like- Yes … the lack of understanding of that. But that’s that baggage you sh- still carried.
Yes. And, you know, I think you were asked to an open ended [00:41:00] question of why are we doing that? And it, it, you’re not wrong. You could’ve, you could’ve came back at me and be like, “Hey, this is really important. I don’t want my sons to deal with that. Like, I wanna be, I wanna get them to where they are even-steven when they come out of college.”
And that’s fine too, right? But we have to build a plan around that, so. Yeah, but the, the, there, there’s always another box to check, right? Yes. It could be maxing out a 401, maxing- Right … out an IRA, maxing out an HSA, getting to the state tax deduction on a fi-… There’s always a bar to achieve. And, and I’m thinking about two different situations that are listening.
One, one of is that I’m the excessive box checker a- and maybe I’m, you know, always striving for that extra savings, that extra account, even when we get out, get through maxing out all those accounts, well, shouldn’t we have some in non-retirement accounts, and there’s more work to be done there, and shouldn’t we diversify into other areas, right?
So that, that’s one end of the spectrum. The other end of the spectrum is, you know, may- may- maybe I’m not saving enough for [00:42:00] retirement. I’m, I’m, you know, the lifestyle creep expenses, whatever’s going on, I’m, I’m, I’m technically behind and we do need to do a little bit more. In both of those situations though, the common thread I believe is lack of clarity and lack of a plan, right?
If, if we can develop a plan that is a north star of where do we need to be going, where do we want to go, why do we wanna be going there, and then to bring the plan around it quantitatively and qualitatively support it to answer some of the questions that need to be answered, it helps us course correct, if you will, to actually put some meat on the bone to what does on track mean, not just externally.
What does it, what does on track mean to me, to us, to our financial plan, our situation, our burn rate, our expenses, right, our family, our household? And then let’s develop the plan and execute on that plan over a long period of time. I, I think that’s where so much of the unsettledness comes from, of, hey, are we on track, are we not on track, and we’re making decisions based off of whether we think or we, [00:43:00] we, we are or we aren’t.
Like, we’re missing a plan or we’re missing some of the clarity to help answer that question, which is an answerable question. Yeah, and, and, and, you know, as you’re saying that, one of the things that pops into my head, it kinda goes back to, like, our script or plan meeting, which is really, like, the, the goal setting of hey, where do we, where are we going?
Um, you know, one of the exercises we do is we ask the question of, you know, what does success look like, you know, a year out? You know, so I kinda joke, like, let’s get into the DeLorean, go 88 miles per hour, and we go to May of 2027. We get out. What’s success like? Two, three years, five years, 10 years, 30 years.
The hard- The, the further we go out, the more, um, disconnected we are to, like, you know, today, right? So if I imagine, like, your 30-year-old self, most people are like, you know, they can do a year, three years, maybe even five years, but their 30-year-old self, it’s like- So I’m like, “Okay, what’s your, you know, your parents right now?
Like, put yourself in your parents’ shoes.” And that’s a little bit easy for us to do because you’re like, [00:44:00] “Okay, my dad- They can see it … my mom’s doing…” Yeah, they can see it. Mm-hmm. Um, and there’s also, this is kind of a tangential, but I actually heard this term. I was at a conference recently, and this is another thing I wanna, I wanna, I have, I have some content on.
Um, have you heard of, like, the en- end of history? It’s a cognitive bias. No. So thought experiment- I, I feel like I might have it, though, without even knowing what it is based on the term. You do. So, so, and we ta- if we talk about a, um, if we talk about, we… I didn’t know what this was, and like I, I finally, you know, I’m like, “Okay, that’s what it is.”
So if we think about, um, if I say, “Hey, Tim, reflect back on the, the last five years, um, and kinda the evolution of you and your family.” So five years ago was, what? 2021, so we’re right in the heart of the pandemic. You think about your, your b- your boys, um, you and Jess, where the business is. We, you, we could probably come to the conclusion that, like, a lot has changed, right?
Absolutely. [00:45:00] But- Even in one year, three years, yeah … but then, um, so then I’m like, “Okay, like, let’s talk about the next five years to 2031.” Assume that it’s gonna look like it does today. Exactly. Yeah. So, like, there’s this cognitive bias that we’re like, “Hey, I got it from here,” or, “Nothing’s gonna change.” Yeah.
And that’s completely, it’s completely untrue. It’s like our brain cannot see down the path of, like, what’s around the corner, and you just assume that, like, hey, my likes and my, my taste and the trajectory is gonna remain very consistent to, like, where it is today. My health will be the same, and- Correct
all will be f- Right. Yeah, yeah. So I think that, so I, I, I was like, “I need to talk about this,” ’cause I see this all the time, and I just didn’t know what it was. Um, but I think, like, that, that thought experiment of going out, you know, that, you know, and kinda project is really, really important, and to review that, you know, time and time and again to see how different things are, right?
So, um- You know, what you’re saying there, Tim, is if we can look [00:46:00] back and appreciate that change has happened, then we, it will help us be able to accept, and therefore we should assume that change will happen going forward because it has happened going backwards. Right. So you gotta f- fight against that bias.
Yeah, and our brain is just wired to think like- Yeah … okay, like, kind of like I have arrived, like I’ve made it, and, like, this is gonna be who I am and my situation for… No. I know with, you know, for me, I think the kind of the, the great equalizer are my kids, right? So, like, I see, like, it’s almost like you can see the change in them, and I know in five years my youngest, Zoe, she’s gonna be seven, not two.
So I can see that growth and how our family dynamic’s gonna change. But from a career perspective, from a relationship perspective, you just think like, “Hey, it’s gonna be status quo.” So- Doesn’t this, doesn’t this explain in part some of the, um- reservation or maybe challenges with things like long-term disability or term- Yeah
life insurance. Like- Yeah … right? We think that, “Hey, I’m gonna [00:47:00] be- I’m healthy now, like I’m gonna be healthy in five years,” or, you know, those situations aren’t, aren’t likely to happen, and statistically they’re not, right? But it’s hard to really f- predict ourselves or visualize ourself in a scenario other than where we’re at today.
Yeah. And, and, and those are the things that y- we, we mentioned, like, hey, you could have a pharmacist that is, you know, a two million net worth versus one that has a million net worth, but what’s lurking around the corner for the two million net worth because they haven’t done the estate or the risk assessment in terms of insurance policies, where maybe the one with the million dollars has.
You know, again, we don’t know what’s gonna happen, but that, that client or that pharmacist that is, their foundation is on r- rockier ground, these things happen, right? Like, so, you know, I met a, I met a planner at this conference that, you know, they’re based in New Orleans, and a lot of her clients have been affected by hurricanes and things like that.
Those are catastrophic losses, and sometimes they’re covered by [00:48:00] insurance and sometimes they’re not. And I’m like, “What do you do?” You k- kind of just start over or you move, which a lot of people there have and, you know, because of the, you know, just the, the, the, the weather. So, um, those things are lurking too, which is again, why we try to say build a, a good foundation.
And it’s, you know, from an insurance perspective, from estate plan perspective, it’s important to have that because you’re, you’re, you’re trying to… We t- we talk about, you know, building a moat, right, around the business and things like that. You have to build a moat around your financial plan because- Yeah
you know, these plans and these statistics, you know, happen for a reason, but you always think it’s gonna be someone else until it’s not, right? So, um, even something like a divorce, Tim, like that, that, uh, plays, you know, a major, um, it’s a major bump in the road in terms of the trajectory of wealth and things like that.
It can be very expensive. So if, you know, it, those are things that, you know, we have to account for and adjust. Um, and that’s often, um, one of the reasons why people will reach out to me as well. It’s like, “Hey, I just got through a divorce. I need to [00:49:00] kind of reset, catch my, catch my bearings.” And I think one of the things that is often comes out of those types of clients are, is just like the, the, the idea of like, “Okay, what do I want from here financially?”
But just even beyond that. So, um, yeah, I definitely think that, that to measure time, you know, hey, what does success look like a year out, three years out? And I, I pose that question, what does success look like? Because oftentimes it’s funny because we, we started the, the episode talking about like expected net worth or retirement portfolio.
Never is that answer of like, “I want a million dollars in my 401.” It’s like, it’s more of the qualitative things of like, I wanna make sure, I, I wanna take this trip that I’ve been putting off forever, you know? I wanna make sure that, you know, my kids are active, I’m healthy. Flexibility of time It’s, exactly, yeah Yeah.
Mm-hmm Uh, char- charitable things. It’s lo- Yeah … it’s a lot less of the checkin’ the box in [00:50:00] terms of, like, the financial numbers or, like, hey, I wanna make this amount of money. Um, and it’s more of the qualitative things, which again, I think is the, is the, the true value. All the technical stuff we’re gonna get, we’re gonna get right.
We’re gonna keep you from making catastrophic mistakes. We’re gonna make sure that the taxes are effi- efficient. We’re gonna make sure that the portfolio is kind of rowing in the same direction. Yep. Uh, we’re gonna push savings rate when appropriate. Those things we’re gonna get right. Um, not a guarantee, right?
We can’t say that, but we’re gonna make sure that we’re technically sound. It’s the qualitative stuff that we can layer on top of and be really, really intentional with, which I think is, is the, is the difference between having a, a financial plan and not. It’s not the, it’s not the quantitative thing in my, my opinion.
Tim, great stuff as always. And, and I think my challenge for those listening, re- really a challenge for, you know, myself and for us collectively, is, you know, how often we ask ourselves this question or maybe find ourselves feeling in a point of [00:51:00] comparison or questioning, like, am I on track? And, you know, sometimes there can be a scarcity feeling that comes up through that.
May- maybe there’s feelings of guilt or fear or other things that are present. And as we described, you know, the missing piece of this is potentially a plan and clarity of where, where are we going and why are we going there? And as you said, how do, how do we develop a plan that addresses both the quantitative and the qualitative?
And so if you find yourself asking this question, you know, am I on track, and not really quite sure whether or not you are or what that is based off of, you know, might, might the missing plan be a piece that could be implemented? And what potential impact would that have as you look at, uh, the long term of this, both quantitatively and, and qualitatively?
So Tim, great stuff, and, uh, we’ll, we’ll be back at it here in a couple weeks. Guess I gotta start, start writing there, Tim. Let’s do it. Baker scripts. Here we go. Before we wrap up today’s episode, I wanna take a moment to recognize our ongoing collaboration and partnership with the [00:52:00] American Pharmacists Association.
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