Baker's Dirty Dozen: Principles for Financial Independence

By Joe Baker MBA and Lindsey Baker

Baker's Dirty Dozen Principles for Financial Independence is a lighthearted and inspiring financial guide. No highfalutin economic theory or fancy schmancy money formulas. Just a simple recipe for financial independence that have been tested through personal experiences and teaching personal finance for over twenty-two years.

This book will help you:
Find the path that fulfills you.
Identify financial minefields to avoid.
Not be a slave to debt.
Set up your 401(k) and Roth IRA.
Find the right house and pick the right mortgage.
Protect your assets.
Make a difference in your family, community, and place of worship.

• Language: English
• Publisher: BookBaby
• Release date: Jan 11, 2022
• ISBN: 9781667819679

Book preview

FOREWORD

By Dr. Mary Ann Campbell, CFP®

a.k.a. Dr. MAC, MoneyMagic.com

MY NAME IS MARY ANN, and I’m a SALE-aholic. A bargain is something I don’t need at a price I can’t resist. If it’s a 1⁄2 of 1⁄2 sale, I struggle to maintain dignity.

I’ve tamed my cravings through a lifelong commitment to financial education. Having taught personal finance at the college level for 38 years, been a fee-only certified financial planner practitioner for 35 years, and earned my PhD with a personal finance focus at Iowa State University, I am a committed money educator.

Joey Baker is the kind of personal finance educator from which I wish our 3 boys had been given the opportunity to take a class. In fact, our granddaughter, Whitney Campbell, did take his class during her final year at the UAMS College of Pharmacy. Whitney would light up when she talked about Joey Baker’s class and what she was learning. He actually showed us his Dillard’s credit card statements and what he and his wife spent their money on. I’m not sure his wife knows how much he shares. I look forward to his class and am learning things I’m going to use!

And that is what you’ll find in this book—now and in the future—to improve your financial life. You’ll put it down refreshed and not feel at all beaten up for past mistakes. Although raised on a farm and spending more time on the same farm since his recent retirement, he serves no bull in this, his first book. He is direct, to the point, and serves up pertinent information derived from years of experience teaching personal finance to third-year pharmacy students and observations of the quirky things we all do with our money. To be more relevant to multiple generations, Joey Baker’s book is cowritten with one of his two beautiful daughters, Lindsey Baker.

Read this book and reap a sense of security, financial well-being, a comfortable retirement, peace of mind with your significant other, and smiles—many chuckles and smiles as you travel Joey Baker and Lindsey Baker’s life experiences managing their money. The lessons are so profound and poignant that you may want to share them with those you love and care about. So dig in and enjoy Baker’s Dirty Dozen Principles for Financial Independence.

FOREWORD

By Timothy Ulbrich, PharmD

YourFinancialPharmacist.com

IN 2012, I HAD a humble realization that despite making about $500,000 of income since graduating from pharmacy school, I had a net worth of negative $225,000.

A net worth of negative $225,000 put a spotlight on my spending habits and forced me to face the reality that I wasn’t making much progress on paying down my debt, let alone growing my assets.

Having a net worth of negative $225,000 was the motivation I needed to change my financial situation. I would never look back from this point in time.

Besides the mountain of student loan debt I had accrued (about $200,000), there was one main obstacle standing in my way to financial freedom: a sub-par education in personal finance. Yes, I had lots of obstacles in my way (lots of debt, poor spending habits, and lack of savings, to name a few), but underneath all of these was a poor foundation in my knowledge and application of sound financial principles.

As I read through Baker’s Dirty Dozen Principles for Financial Independence the first time, I thought to myself, Where was this book when I was in pharmacy school?! This book would have transformed my understanding of personal finance, and I’m confident it will do that for you as well.

Baker’s Dirty Dozen Principles for Financial Independence provides a simple and engaging way to learn personal finance principles that will set you free. This resource is overflowing with Joe Baker’s wisdom, his life experiences, and his more than two decades of teachings.

As you begin reading this book, take time to reflect upon the following question: What does it mean to you to achieve financial independence?

My personal experience teaching thousands of pharmacists about this topic suggests that the answer to this question is different for everyone. Taking the time to reflect upon and answer this question is foundational to the rest of your financial plan. It will be your guiding path and motivation when things get tough. It will also define the milestones that deserve pause and celebration along the way. And, last but not least, it will be the place from which you will inspire and teach others.

As you dive into this book, I encourage you to first read through in its entirety and then keep it handy for a specific Baker’s Dirty Dozen Tip (or two) that is most timely and relevant to your current situation. I have realized that the learning never ends when it comes to personal finance. I plan to keep this book nearby and hope you will do the same.

As you turn the page and get started, know that you are beginning a journey that will forever change your life. After reading Baker’s Dirty Dozen Principles for Financial Independence, I’m confident you will never look at your money in the same way.

Onward to financial freedom!

TIMOTHY R. ULBRICH, PHARMD

Co-Founder & CEO

Your Financial Pharmacist

INTRODUCTION

My Story

I GREW UP ON a small farm just outside of Emerson, Arkansas. The city of Emerson had a population of 393. The population at our farm was five, not counting the dogs, chickens, cows and horses. I can’t say that

I was born and raised in a barn, but I can say that we did not have the luxury of indoor bathroom facilities until I was 9 years old. Somehow, it never crossed my mind that we were poor because we had an outhouse with two holes as opposed to one! Interestingly though, I don’t remember ever actually sharing it with another person. I do, however, remember the Sears catalog.

Even though it never seemed to me that we were poor, I did ask about the Magnolia Country Club one day as we were driving by it. My Granny Bradley said, Oh honey, you have to have a bathtub full of money to go there. That statement has resonated in my psyche to this day.

I graduated from Emerson High School in the top 10 of my class. Not the top 10%, but the actual top 10 students. Granted, we only had 28 students who graduated in 1973.

Congratulations to Joe Baker on finishing in top 10 at Emerson School!

Fine Print: Only 28 in class!

College was never on the radar for members of my family, but I was determined not to work in the construction business with my dad or end up hauling square bales of hay for 6 cents a bale. The 6 cents came from working for other ranchers because my dad paid me nothing, saying, I’m paying you every time you stick your legs under my table. I made sure I was paid overtime whenever I ate at his table.

I was able to go to college at Southern Arkansas University, which was 15 miles up the road in Magnolia, Arkansas. If it had not been so close, college would not have been an option. And you can forget about student loans. My dad thought it was a waste of time for me to go to college in the first place, much less borrowing money to do so. But I looked at college as a fresh start. I got involved in college activities while balancing two or three jobs at any given time. Despite that, college was fun—maybe too much fun. I didn’t finish in the top 10 (or top 10%!) of my college graduating class of 1977, but I was elected Student Body President for my senior year. Even though history was my first love, I majored in business. Growing up poor, I was less concerned with studying something I found interesting than making sure I could make a living.

I’m not going to bore you with all the jobs I had before I got married at age 30 because life doesn’t really get wild and crazy until you have kids. My biggest financial accomplishment came from marrying a high school math teacher. When we met, I was a 29-year-old who had only the following possessions: a bed (without a headboard), a TV, and a VCR (you can Google VCR). I also had some credit card and car loan debt. But there were two things my future wife saw in me that she liked: (1) she didn’t have to worry about mixing and matching my furniture with hers, (2) she saw potential; or as they said in the movie, O Brother, Where Art

Thou?, he’s bonafide. She pretty much worked me into financial shape. Most of my adult life I worked for Pharmacists Mutual, a company that specializes in insurance and financial services for pharmacists. During this time, and after 22 years removed from my undergraduate degree, I obtained my Master of Business Administration (MBA) from the University of Central Arkansas. The most valuable part of my MBA education was knowing the importance of a financial calculator and terms such as time value of money and opportunity cost.

Utilizing my book knowledge and relying on the financial osmosis of being married to a math teacher, we have been able to build a comfortable and happy life. This is our financial timeline and one I use to mentor others:

30 years old: I got married having nothing but some debt. What a catch!

31 years old: The only debt at this point is mortgage.

31 to 50 years old: We consistently contributed 10%+ of our income to our 401(k), 403(b), etc. We also continued living below our means.

50 years old: We became totally debt free by paying off the mortgage.

52 years old: Our liquid net worth reaches the top 8 percentile for the United States.¹Liquid net worth includes monetary assets, such as retirement plans, savings accounts, etc. It does not include house, farm, land, car, or other similar assets.

59 years old: Our liquid net worth percentile increases from the top 8% to the top 4% in the United States. It took 52 years to get to 8% and only 7 more years to get to the top 4%. The significance here is the result of no debt.

The key to our financial progress was minimizing and eventually eliminating debt, making it so that we did not have to sacrifice much to achieve financial success. We have vacationed around the world and put both our daughters through private undergraduate and graduate schools without student loans. We also have a nice home in West Little Rock and continue the upkeep of a farmhouse and 25 acres of land where I was raised near Emerson, Arkansas.

It may sound like I’m bragging but there are actually a lot of things I should have done better. In hindsight, I could have easily doubled our wealth accumulation by utilizing more of the strategies I laid out in this book. My financial eyes are so clear now that I’m in my sixties, and my new mission is to give back by tackling the widespread issue of financial illiteracy.

Whenever I run into my former students, they usually repeat a story along with the lesson I taught in class. Stories bring financial terms to life. That’s why my book is filled with them, many of which are humorous. The book is composed of over 30 stories from contributors that reflect real world scenarios to offer valuable lessons to the reader. There are no big secrets in what I am about to share. The sad reality is that very few people know how to follow the path of financial responsibility—avoiding debt along with applying tried and true financial principles. This book will show you the path for your own financial independence.

I am writing this book as if for my own two daughters and son-in-law who were all liberal arts majors. While they often excel at creative and critical thinking, their formal education did not include learning about practical financial matters. My thoughts were that if I wrote a financial book accessible for liberal arts students with no training in personal finance, then I might be able to reach much of the younger generation regardless of their educational backgrounds.

One of the common responses I receive from my daughters is, I don’t know anything about that. Hey, Brooke, did you pay your property tax to get your auto license renewed? I don’t know anything about that. Hey, Lindsey, did you sign up for group disability insurance at your work? I don’t know anything about that.

My response every time is, Just because you don’t know anything about it doesn’t mean it doesn’t need to be addressed. Their response? OK, boomer.²

Okay, so maybe they don’t really say that. But these generational differences have given me resolve to partner with them to combine our expertise for a more varied generational approach. Their contributions help align baby boomer money-savvy understanding and lifelong experiences with the purpose-driven and conscientious Gen Z and millennial generations to make up a beautiful composite to better prepare individuals for financial independence.

This book is written in conjunction with the Your Financial Pharmacist team.³ With my extensive background teaching pharmacists and pharmacy students about personal finance, I was asked to write a book outlining my thoughts on how a young professional may achieve financial independence. However, this is not just a book for pharmacists. It is a guide to any person, despite his or her income range, to achieve financial independence.

I have not and will not receive any remuneration from any company or organization that I mention in this book. I am pure as the driven snow—financially speaking, of course!

Baker’s Choice!

"A group of 13; a dozen plus one: from the former practice among bakers and other tradespeople of giving 13 items to the dozen as a safeguard against penalties for short weights and measures⁴."

BAKER’$ DIRTY DOZEN PRINCIPLE #1

Find a path that will fulfill you

ACCORDING TO THE highly undervalued and often criticized online encyclopedia, Wikipedia, self-actualization is described as becom[ing] everything that one is capable of becoming.⁵ It was the American psychologist Abraham Maslow who first developed the idea that each individual has a hierarchy of needs in which the ultimate goal is to reach self-actualization, or transcendence. (No, I didn’t learn this at Woodstock since I was only 14 at the time.) In order to reach any kind of fulfillment in life, a person must first have all basic needs met, such as those needed for survival and safety. If any of these needs go unmet, a person will be unable to focus on anything else until they have been secured. Only then can he or she seek out avenues for meeting psychological needs such as creating intimate relationships and building self-esteem. It is only after all of these levels are reached that a person can ultimately find transcendent fulfillment. Maslow referred to transcendence as the very highest and most inclusive or holistic levels of human consciousness, behaving and relating, as ends rather than as means, to oneself, to significant others, to human beings in general, to other species, to nature, and to the cosmos.⁶

Now, I’m no guru that will give you the elixir to pure happiness, self-actualization, and innumerable wealth. And there is no secret formula I can provide you to reach your potential overnight. It took decades for this barefoot boy from the Deep South to forge his own path to attainment. But my hope is that the financial plan I have laid out in this book will help guide you to financial freedom sooner rather than later so that you may have fulfillment in many other aspects of your life.

Notice that the title of this chapter is "Find a path that will fulfill you and not Find a job that will fulfill you. It is interesting that one of the first questions we ask a person after exchanging names and pleasantries is What do you do?" Maybe it is because we desire to label, categorize, and put people into pretty little boxes. But not everyone will be able to pursue a career path that will bring them absolute happiness and reflect their perceived self. However, the good news is that the world is rapidly changing, and it is easier than ever to weave your passions and talents into a career path.

Since the turn of the millennium, people have designed imaginative—and sometimes ingenious—ways to make money. For the first time in history, individuals have used social platforms to construct their own brands and establish job titles such as an influencer. They have invented new words like vlogging and podcasting, while creating a vibrant internet and texting culture with almost an entirely new language made up of different grammar variations, abbreviated speech, and new uses for old words. While the workforce is changing and many old jobs are becoming obsolete, there are increasingly new options available to those who seek them out. Modern technology provides opportunities to use your passions to fund professional and personal endeavors. In seeking a career path that will make you happy, perhaps the first step is to start small and identify what leads to fulfillment for you individually.

Maybe you would like to travel the world for a sense of perspective.

Maybe you would like to write a best-selling book.

Maybe you would like to make your own home HGTV worthy.

Maybe you would like to open your own brewery.

Maybe you would like to invest in your local community.

Whatever you decide to do, whether it centers on your career or your personal aspirations, you will need to implement a financial plan to reach that goal.

Think of money as a tool, a multifaceted tool that can give you the freedom to do the things that you want to do in life, things that fulfill you. Financial plans are pretty much give and take. I will not tell you what you can and cannot buy or what to spend money on, but I do want you to understand the cost of those decisions. There is an old adage, choose your battles. Much is the same here. Choose the monetary decisions that will give you the most out of a life that you aspire to have.

CAREER PATH

It was during the Industrial Revolution that the 8-hour workday became standard. Robert Owen coined the phrase Eight hours labor, eight hours recreation, eight hours rest, dividing the day into three equal 8-hour parts. ⁷However, today a 40-hour work week has become only a minimum for those who strive to get ahead in our economics-driven society. Because a job is such a huge aspect of most people’s life and a part of Maslow’s hierarchy of finding security and accomplishment, it is important to find one that brings positive aspects into everyday life.

Now, hopefully you are part of the minority that loves their job since you will be devoting a third of your life to it. But it is also very likely that you may hate it. If you are in a place of hating your job, don’t panic; you are not the first. Take inventory of what your best skills are and what you love to do, then find ways to make money while exploiting those things.

How do you know if you hate your current job? You may already know for sure, but some signs include the following:

You are not excited about your job or the organization you work for any longer.

You are no longer inspired by the product/service you are promoting.

You are not as good at your job as you once were—lack of interest.

On Sunday night, you start having anxiety about going to work on Monday morning. Notice I emphasized work, because that is what it will become after a short time.

You start having ailments or illnesses and start taking more sick or mental health days from work. Or maybe on weekdays you have high blood pressure, but on weekends it alleviates.

You start having accidents at work. A friend of mine, Mo Lester (yes, that is his real nickname) was working as a junior accountant at a large corporation. He was not too thrilled about his job at the time, so he daydreamed a lot. One day while shredding papers with the large industrial shredding machine, Mo’s mind drifted to other things when all of a sudden his tie got caught in the machine. As it pulled him into the mouth of the large sharp cutting blades, he did his best to pull himself free. Fortunately, another coworker came to Mo Lester’s aid and unplugged the machine just in time. Mo considered it a sign to cut his ties with the corporation and move on.

The bottom line is this: Does your job contribute to your fulfillment?

I once started a job where I sat all day in an office cubicle and found that it made me miserable. I struggled to find the motivation to get up and go to work every morning. It was then that I realized that this kind of job wasn’t for me. So after only 6 weeks, I left to pursue a career in a similar field, but this time as an outside salesman. I felt free!

Now I realize that finding a job that fulfills you is a privilege not everyone has. But the following are some guidelines to consider when contemplating a career change to something more meaningful and financially rewarding.

Ask yourself, Am I burned out and just need a break? Since the outbreak of the COVID-19 pandemic of 2020, many people who were forced to take a work hiatus realized that their physical ailments were actually job related.

What are some things you can do if you find yourself burned out?

Change your work around. Discuss your situation with your boss and find out ways you can make your job more fulfilling, which in turn will make you more productive for your company or organization. Make it a win-win situation. Some ideas might include working more from home, having a flexible schedule, scheduling in times to get up and move around, organizing fun events with coworkers, or even receiving free food and snack perks. Some studies