APhA New Practitioner Network Financial Planning Strategies Workshop

1. APhA New Practitioner Network Financial Planning Strategies Workshop Timothy R. Ulbrich, PharmD, RPh

2. My personal journey to $200K in debt and back…

4. Learning Objectives At the completion of this session, the learner should be able to: • Explain the 5 building blocks to making a successful transition from student to new practitioner. • Describe the factors to consider in balancing competing financial priorities.

5. 5 Building blocks to a successful financial future • Establishing a budget • Paying off debt • Building an emergency fund • Having appropriate insurance coverage • Investing for the Future

6. Establishing a Budget

7. - John Maxwell “A budget is telling your money where to go instead of wondering where it went.” Cash budget = $6,000 Gifts Groceries Dining Gas Entertain. Student Loan Total of spending categories = $6,000

8. Only 52% of American households earn more than they spend Ref: 2012 Federal Reserve Survey

9. Zero-Based Budgeting Take home pay rent Car(s) Utilities Groceries clothing emer. Fund etc. $0 EXPENSES INCOME

10. Paying Off Debt

12. Upon Graduation, Jessica has $100K in student loans at 6% interest. How much would she owe in interest for the first months’ payment? • $100 • $300 • $500 • $700

13. How are we doing as a society? • The average household with credit card debt has a balance of $15,355 with a total debt by US consumers of $712 billion.1 • US consumers currently owe a total of $1.21 trillion dollars in student loan debt.1 • The median student loan debt for pharmacy students graduating in 2016 was $150,000.2 1Nerdwallet 2015 American Household Credit Card Debt Survey 2AACP Graduating Student Survey 2016

14. Reference: NY Times Student Loan Repayment Calculator

15. Loan Terminology • Principal • Interest • Subsidized • Unsubsidized • Deferment • Consolidation • Refinance

16. Know Your Loan Repayment Options (See handout)

17. Public Service Loan Forgiveness (PSLF) Program • Forgives loan balance on Direct Loans after making 120 monthly payments • Full time employment (30 hrs. or employer definition) required • Qualifying employer = Gov’t organizations, tax-exempt non-profit, AmeriCorps / Peace Corps • Loan repayment option = income-drive plan Reference: Federal Student Aid: An Office of the US Department of Education. Public Service Loan Forgiveness. https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

18. Determine Your Repayment Strategy vs.

19. Snowball vs. Avalanche

20. Know and Respect the Power of Compounding Debt

21. $150,000 of school loans at 6% interest for 10 years = $1,665 payment / month Total payout = $199,837

22. $150,000 of school loans at 6% interest for 20 years = $1,075 payment / month Total payout = $257,915

23. Building an Emergency Fund

24. How many months of expenses should you have set aside for an emergency fund? • 1 month • 3-6 months • 6-12 months • 12-24 months

25. How much do you have saved in asavings account? Ref: GoBankingRates.com

26. 30 million americans (13%) tapped into retirement savings to cover an unexpected expense (aka “emergency”) Ref: 2015 Bankrate Consumer Survey

27. Emergency Fund Questions • Should I save 3 months, 6 months, or somewhere in-between? • How do I build up an emergency fund? • Should I build an emergency fund in lieu of paying off high-interest debt?

28. Appropriate Insurance Coverage

29. Life Insurance Is life insurance really that important? After all, 30% of US households have no life insurance at all. (Ref: LIMRA Facts about Life 2013)

30. Life Insurance Questions • Will you have any student loans that would not be forgiven in the event of your death? If so, would that have a significant impact on your family? • Does/will your family depend on your income?

31. Life Insurance Tips • Coverage = 8-12x your income • Keep your insurance and investments separate • Term life insurance for 20-30 years

32. Disability Insurance More than 25% of today’s 20 year-olds will become disabled before the age of 67. However, almost 70% of those working in the private sector don’t have long-term disability insurance. (Ref: Social Security Administration)

33. Disability Insurance Tips • Short-term disability = % of monthly salary for pre-defined period of time (e.g., 6 months) • Short-term disability insurance often kicks in after any sick time used • Long-term disability insurance kicks in after sick time and short-term used

34. Investing for the Future

35. How confident are you that you can save $2 Million dollars (or more)for retirement? • Not at all confident • Somewhat confident • Confident • Very confident

36. Nest Egg Calculation

37. Nest Egg Calculation (Pre-Tax Income X % of Income to Live Off in Retirement) X Number of Years Expected in Retirement

38. Why Build Wealth? • Secure financial future for family • Be in a position to give • Generational impact • Demonstrate goal setting and hard work • Flexibility

39. The vast majority of millionaires (80-85%) in America are 1st generation rich. The Millionaire Next Door by Tom Stanley, PhD

41. Investing jargon 401k/403b Roth IRA Diversification Asset Allocation Stocks Bonds Mutual Funds Annuity

42. TAX ROTH IRA / 401 (k) / 403 (b) STOCKS REITs BONDS CASH EQUIV

43. Asset Allocation

44. COMPOUND INTEREST

47. Jonny invests $1,000 today in an account earning 10% interest. How much will that be worth (approximately) in 3 years? • $1,003 • $1,030 • $1,330 • $1,400

48. $500 saved per month for 40 years at 0% growth = $240,000. $500 saved per month for 40 years at 6% growth = $1 Million.

49. Barring any significant hardships, every pharmacist should (‘Needs’ to) be a multi-millionaire by the age of 65.

50. Case Study 30 years old making $120,000. Retirement goal of 60 years old. Currently have $50,000 in retirement. Invest 15% of His/Her income to retirement ($1,500/mos)