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March 9, 2022

Episode 17: Pursuing College Savings For Kids

Episode 17: Pursuing College Savings For Kids

   Brad Baldridge is a College Funding Specialist who has helped thousands of families plan and save for college with smart and proven strategies to save time, money, and stress.
   As a financial expert, blogger, and host of the Taming the High Cost of College podcast, Brad has been sharing his college planning insights with clients, subscribers, and listeners for nearly 20 years.
   He teaches parents the best ways to save and pay for college, including how to find the right school, maximize financial aid and scholarships, avoid student loan debt, and make your children’s college dreams come true without wiping out your finances or retirement.
   Since 1998, Brad has become one of the nation’s leading college planning and college finance experts. He offers life-changing advice through his private practice, his online platforms, and at numerous workshops, seminars, and events each year.

Connect with Brad here:
email: brad@bradbaldridge.com
website:
TamingtheHighCostofCollege.com
Facebook:
Taming the High Cost of College
LinkedIn:
Brad Baldridge

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Transcript
Melissa:

Hello, and welcome back to the pursuing uncomfortable podcast. I am your host, Melissa. parents. How much time do you spend thinking about. How you're going to put your kids through college. Are you going to put your kids through college? Are they going to go through college? And if they are, they're going to go to junior college, to a university, a state school, a private school. There's so many questions. And so many unknowns out there. Today it is my privilege to introduce you to Brad Baldrige. Brad is an expert in helping parents plan to put their kids through college. He helps you figure out all of the questions and. Manage and balance all of those answers and find what works best for you. And your child. Hello, Brad. And welcome to the pursuing uncomfortable podcast. How are you today?

Brad:

I'm doing pretty well. Thanks for having me,

Melissa:

Brad. I am so thrilled to have you on this podcast. As you know, many of the folks who listened to the pursuing them uncomfortable podcast have kids. And these kids go to school. Eventually they're going to grow up and they're going to want to get a job. And perhaps college is a big part of that and you happen to be an expert in how that can happen. So I'm thrilled that you're with us today.

Brad:

Yes, it's great to be here

Melissa:

now. I'm Brad. If I'm a parent and I need to plan for college, how do I even start? Where do I even begin?

Brad:

That's a great question. So, I mean, obviously you start at the beginning, but what does that mean? Well, it really depends on what we're talking about as far as college. So there's two stages to college planning. The first stage that most people either do or don't do is what I call early stage planning. So if you've got a newborn. Four year old, a 10 year old. And you're saying, well, colleges in the future someday, maybe we should say, save money for college. Or how are we going to handle that many people put that one off though, but eventually you get to what I would call late stage college planning, which is, do you have a high school? Sophomore, junior, senior. And now you're trying to figure out how do I actually deal with college? And you're going to have to do a lot more than just decide if you're going to save or figure out how to pay, because there's also college visits and choosing majors and the application process for the student and testing. And, you know, mom and dad are getting to get involved in visits and perhaps have opinions about what colleges are a good fit and all that type of thing. So. Late stage planning is where I spend a lot of my time helping families where it, where the rubber meets the road. So to speak where you're saying, okay, we've got to figure all this out. And again, some families have done a great job with the early stage, right? So they set up a savings plan early, and they've got a big pile of money. They're all set. As far as thinking they have enough, although most, a lot of times people are shocked at what it costs and what they thought would be great amount of money. It turns out to be not still. Um, but many families are coming up short again cause nobody really thought it was going to get as expensive. It is as it is. Um, so then it's that process of, well, are we going to use loans to fill the gap as are we, as parents gonna figure out a way to supplement more? Um, because the student is going to take on some work or some loans themselves. So there's all kinds of ways to. To work it out. Um, so I guess that's kind of a long answer to a short question.

Melissa:

Well, I would think that if you had skipped to the early on planning that this part of the planning, the late stages planning might be more of the holy Moses plan to get your kid into

Brad:

college. And I think we get that reaction. You know, almost across the board, you know, many different income levels, many different preparedness of, wow, this is going to be, you know, a lot of work and it really depends on your student as well. Right? If your student is, you know, likely to go to the local four year state school, or maybe the local two year school, but you're not really looking far and wide, that's a lot different than you have the student that's, you know, Top three of their class and looking at some really big name brand schools and saying, well, I could go to Stanford and California, right. Go to Harvard. Or I could go to now all of a sudden we're looking across the country, we're considering major road trips. If we're going to visit, um, we're looking at very expensive prices. Of course, we also have access to need-based aid and merit aid in different ways that could substantially help pay. Where perhaps we don't have to pay that full amount. Um, so yeah, so that's, you know, again, it gets a little bit more complicated, so to speak

Melissa:

well, and like most things we, college is a way of investing in ourselves. So part of that planning process along the way is deciding how much do I invest in this. Well, this, give this investment. Will it give me a return on my investment? And I'm guessing that when people get to conversations with you, they have answered that question as, yes, this is an investment that is good to make and my child, and yes, I do expect there to be a return to my child on this investment. Yes.

Brad:

I mean, for sure. Um, but you'd be surprised on how many people. Also, you know, again, that that's the logical side, but there's a huge emotional side where parents are going to do it anyway. Even if it didn't make sense, potentially. Um, certain majors as an engineering, major nursing major, even elementary ed where it's like, all right, you do this degree. You get that job. Well, you can at least have a shot at doing some math, right. And say, well, if the average engineer makes this kind of money and the school cost this much, and I borrow this much and I have this much in payments and so forth, the math will generally work out pretty good. Um, but as parents, a lot of us did that hard left turn in our career where maybe we're not even using our degree anymore. And those kinds of thoughts really freak out parents. It's like, well, they're going to spend all this time and we're going to spend all this money so that they can get some sort of degree. Then they change careers and don't use it. Why would we do that? But in the end, if you talk to most parents, especially that are successful, even if they're not using their degree, they don't regret the degree typically now.

Melissa:

Right. I have a degree in. I love my degree in biology and I used it for awhile. That's not the area that I'm working in this day, but it has equipped me for a lot of the things that I faced today. Biology may not be the content, but certainly learning about biology was a transferable translatable part of what I do today. So yes, that was worth the investment for me.

Brad:

I mean, one of the things that they're talking about in higher education is we need to have students and ultimately workers that are, you know, that can do critical thinking that can, you know, continue on with continuous learning, because the reality of it is. A lot of what we've learned in college gets stale pretty quickly because technology moves so quick. Um, and you see that when someone says, well, I was out of the workforce for 10 years and when I got back in the workforce, the job was completely different, right. It just kind of swept me, you know, kind of left me behind and I don't, you know, I'm not current. Right software or the right techniques or the, whatever it might be. Um, so we're always going to be learning. And I think that's where most employers are saying, we don't need a robot. That's going to do exactly what we tell them to do. And that think about it and not improve the process or not do anything, but just show up and do what they're told and then go home. Employers are really looking for someone that can improve the process or. Have a more complex process where the, you know, where it could be adaptive depending on what's going on at that particular time. Um, and those skills are what college, some colleges especially are trying to instill some more successful than others. Of course.

Melissa:

Absolutely. And it's more than just checking a course off the list. I remember when I was in college, it just seemed like a huge tsunami. I needed to create a tsunami of work and inspiration and motivation, all of those internal things to make that push, to be the person who could do the projects, who could take the tests, who could complete all of those courses. It's not just a matter of passing a course, but there's a ton of personal growth and development in order to be the person who can do all of those and to do the critical thinking. And have the money and resources available to complete it and to have a plan afterwards. Right.

Brad:

Right. Exactly. So when you start, you know, referring to college as an investment, that's where you can potentially argue one way or the other of it's worth it, or it's not worth it. Um, but again, most parents are looking at the broader picture. If not college, what then that's the other challenges? Is it the school of hard knocks? Is it some sort of trade or apprenticeship? And in the U S we've been pretty strong on the college for everyone equal success, um, which is not accurate in my opinion. And there are a lot of different paths to success. And there's a lot of careers as an example where nobody cares if you have the degree or not. You know, if you're a graphic designer, often when you get hired, they say, show me your work. Oh, I like your work. You're hired. There's no question that well, did you go to the right school to learn how to do that? You could have learned how to do that on your own. You could have learned it in college, you know, whatever, but as long as you can deliver, that's ultimately what many employers are looking for now on the flip side. Is that demand, thou shalt have a four-year degree or you cannot work here. And that is what frustrates a lot of people.

Melissa:

Absolutely. And I have children and I have a child that's 12 years old now. I don't know what his path is. He doesn't know what his path is at 18. I don't know if any of us will know what his path is, but I want to be prepared. What are some strategies I can do now? To ease that pain later.

Brad:

Right? Well, I think first thing is to put college planning in perspective in that I've had a lot of people say, wow, this is overwhelming. I started this much too late. I've never ever had anybody say, well, I started this too early, not once. Um, so that's the first thing is to kind of. Reset. The parents thought processes and a lot of parents went to college and a lot of parents went to college, kind of stumbled through it late junior year or even into the senior year where they just kind of, oh, I picked a couple of schools applied to three, one of two of them accepted me and I picked one. Well, did you visit, did you, how did you, oh no, I just kind of stumbled through it and that's, and then it took me seven years to graduate because I changed schools a couple of times and, you know, Laissez-faire attitude doesn't work today. College is crazy expensive. You don't want to spend seven years to get a four-year degree that you know, that extra cost is, would be crushing. So I guess the first thing to think about is when we say that transition from early stage of, you know, someday we're going to have college, potentially, we want to be prepared going to the next stage, which is let's start working on it. That can be as early as freshman year of. Hmm, ideally sophomore year of high school, right. Where a lot of parents are just saying, well, we're just getting acclimated to high school and you want us to be thinking and working on college. Ready? Yes. Unfortunately I do. I mean, I didn't make the rules and I didn't make the situation, but that is the solution. And if you start earlier, you can spread out the work and that, you know, one of the biggest things we see around college is all the. And the reason it's so stressful as you've got all this stuff to get done and looming deadlines, you know, students need to write essays and get all these applications in by this date and they didn't see it coming, or maybe they did, but they procrastinated parents that are under the same pressure. Right. It's like, oh my God, I didn't realize it was so expensive. I have no idea how we're going to pay for it. It's like, okay, well, you could have looked up the cost as a soft, when you had a sophomore, then at least you knew it was. Right. And you can start saying, as a parent, will I qualify for need-based aid? Will we qualify for Meredith? What does the local state college actually cost? What types of loans would be qualified for? Are we interested in loans? Do we have a big enough pile of money? Times the number of kids that we have to make this all work? So there's lots of, kind of prep that you can do, but it's big and it's scary. And the simplest solution is doing. Until we have that junior or senior, and then it blows up on us,

Melissa:

always a solid strategy. Just ignore it. It'll be fine. What I have heard some friends say who have older kids is they did that. They looked on the website, they've found the plight price of the college that their kid wanted to go to. And they did all the planning only to find out that that really wasn't the price. And they were shocked. What do you do in that situation? All

Brad:

right. So that's the, where the rubber meets the road again, where, um, you know, at my website, we've got a lot of resources, but that's the big challenge to the process. The way it stands today is you visit, you do academic research, you do your testing and you do all of that. And then you pick your list of schools. Then you apply. Then you see what they cost and then you've struggled to figure out if you can afford them or not. And, you know, the costs come in at the very end and you just like surprise. Sometimes it's sometimes, you know, maybe there's a great, great answer in there, but not always. And where I encourage families now to understand, again, will I qualify for need-based aid and merit aid? You can do some predictions about what a college net cost. Right. So the typical state average state school is about 25, 20 6,000 right now. And the average public school is about 54,000. Now that's average public schools and you see being the private schools that I may have said the wrong thing there, but the average private school is 56,000. But the most expensive private schools are, have crossed 80,000. Now, now that all these numbers are what I would call cost of attendance, which is tuition room and board books, fees, beer, and pizza, the whole cost of an average, you know, average student at that school. And that's the other thing is a lot of statistics are based on averages. Your student is probably not average. They're going to be above average or below average. So can eat a lot of pizza. Exactly. There you go. Right. So understanding that there's different types of colleges out there with different target markets and different pricing and realizing that, you know, not all the schools work the same, you know, again, as an example, Harvard. A number of the elite schools do not offer any sort of Meredith. So what does that mean? Well, that means in order to get accepted, you've got to be that rockstar. And they've decided that they don't want to try and pick from among the rockstars to say, well, you're the rockiest rockstar. You deserve a bigger scholarship. And they just say, well, we're not going to do that. Instead, what we're going to do is offer all our aid based on need. So what happens then is for students that have. Low-income they look at that price tag and go, well, $80,000. There's no way we can't afford that. And the reality is that college actually, it would be very affordable because Harvard would give you a $75,000 scholarship at an $80,000 school. If that's what you actually needed to make it work. So Harvard could be the lowest cost option for the very neediest families. And most people don't realize. Of course, you got to get accepted to Harvard to make that work right on the flip side, there's a lot of wealthy families that at the end of the process, when Harvard says, oh, we're full price. They're like, they're shocked. They're saying, well, my kid's brilliant. And he deserves scholarships. And it's like, well, we don't offer scholarships. And based on mom and dad's assets and income and that kind of stuff you could afford to pay, therefore you will pay. Go somewhere else. I mean, that's and again, that's where many families say, well, okay, is it really worth 85,000 a year? Go to Harvard when I could go to X four, you know, local state school, or I could go to wherever for 30 or 50 or some lower number. And, you know, again, that's a judgment call. Um, that's the other thing that, you know, when we started talking about, is it worth it? Um, I think it really matters a lot is. What you're willing to give up or what you are giving up in order to pay for college. So if you're giving up the lake home, because you want to spend more money on college, more power to you, but if you're like delay, you know, messing up your own retirement, or you're putting huge debts against your home, that you'll never get out of, that's a different, is it worth it kind of question. Probably the answer's no.

Melissa:

Right. And I'm glad you mentioned that because I was thinking about retirement that if I have, let's just say hypothetically, this isn't specific to me, but say I have two or three kids and you know, maybe that young one came a little later in life. W do I have to put off my retirement to send my kids to see.

Brad:

No. Uh, I work with families all the time that are right, that are already, or will retire during the college process somewhere. Um, often we, you know, there's, you know, weird situations, right. Where perhaps they adopted kids later in life or just had kids later in life for that matter. Um, but I've had many. Parents that say, well, I will be 59 and a half or 60, which gives me access to my retirement plans while the kids are still in school. Should I put college money in the retirement plan based on that. And that's a much bigger question obviously, but the point is every family's a little different. So if you can afford to retire. That's kind of a separate calculation or it could be a separate calculation then how do we pay for college? And if you can afford to do both well, that's easy, right? If you did the math and said, well, I just built a retirement plan that says I need to save 12% of my salary into my 401k and put 500 a month into a Roth IRA. And I'll be set for it. And then I just did all the math on my college plan and I need to put another $700 a month into college savings. And if those, and you say, okay, and I can afford to do all of that, it's like, okay, well that's worked out pretty well then where we see the challenge. Perfect.

Melissa:

I can go and I can serve pizza to my kid and be there with them while they're in college. Everybody was.

Brad:

Right. But the challenge is, comes in again, when people say, okay, well, I can't do all of it. Now I have to decide, should I put less than retirement and delay retirement? Should I have the student take on more debt? Should we find a school? That's a more reasonable price. Um, and again, so there's constantly that balancing act. And the important thing to realize is you need to base it on reality. I mean, I'll have parents all the time. We're not paying for any college whatsoever. And if they have a middle-income or up, typically the colleges are going to expect them to pay some, and there's going to be a gap. So they're going to apply to the state school that costs 25,000, the student can borrow 5,500 and work for another, say 5,000. So that's 10 out of the 25. And that state school might say we expect mom and dad to pay that 15. If mom and dad say no, Well, then I guess the student's not going because there's no magic way for that student to fill the gap. Um, now mom and dad could help and cover that 15,000 with their own income, their own assets, their own savings, or they could sign or co-sign alone if they don't have it, but they are, have to be part of the process for the typical 18 year old rolling out of high school, going to college.

Melissa:

No, we're at a point now where online learning has all of the technology and the tools have caught up to that possibility. And even before the pandemic, there were college courses and even college programs and diploma degree programs that offered online learning. How does that factor into this college planning formula?

Brad:

Yes. That's a great question. I think so the education, as we know. In my opinion is kind of ripe for a revolution. Kind of like what happened with the newspaper industry, where, you know, it just kind of changed dramatically education, but education is slow to change because there's a little bit of nostalgia and there's a lot of large institutions that are trying to keep it the same. So we see that a lot in the higher ed for, um, returning students, adult learners, and that type of thing, where. They're not necessarily looking for their college experience, they're looking for the degree and or again, sometimes they need the piece of paper. Like my boss says I can get promoted when I have a four year degree, but until I have a four year degree, I'm stuck where I am. Okay. So I, wherever I can get that piece of paper, the easiest and cheapest way, that's what I'm going to do. Okay. Then there's. You know, adult learners that are saying, I actually would like to learn something while going to college. So I'm looking again to become a software programmer or something where I need to learn the skills that I then will use in my next career. But in all those cases, it's like, I'm not all that interested about being on a campus and living the college life. I've, you know, maybe you've already done that or I've got kids now and I'm at a different place in my life that I'm just not interested. So there's all kinds of different online programs, you know, hybrid programs where it's online, but you go in on a random, you know, every other Saturday to do all your lab work. So you can, you know, you're doing something where you need hands-on, you know, biology as an example, right. If you're gonna do a microbiome. And play with test tubes. It's, you know, it's hard to do virtually it's much more rewarding to do it in person. So the lab time. Exactly. So, you know, so understanding the differences there. So some of them, it can be completely online. That's coming, I think, to undergo. Um, and to, you know, the, the 18 and 19 year olds that are going back to college, again, back to the well I'm after just the skills. Am I after the piece of paper? Of course, there's a lot of parents out there. They're saying I want my kids have the college experience and that's regardless of, you know, hopefully they'll get a net, they'll get the piece. And we'll get an education, but on top of that, I'd also like that they have the college experience. I enjoyed it when I was in college and I think they'll enjoy it. And I want to be able to give that to them. And there's enough parents that it can pony up. That's why college has gotten so expensive, right? Is we offer the college experience if you want it. We just raised the prices and the kids still came. So they raised the prices again, and the kids still came and they raised the prices again. And the kids were now finally getting to the point where they raise the price, but they have to raise the scholarship in order to get the kids to still come. So they've kind of tapped out so that scary college has been growing at X percent. Yeah, much faster than inflation has been true, but written the last few years has not been true where, um, the prices have not gone up and with the pandemic, a lot of, you know, there's a lot of change going on because of the pandemic colleges obviously are struggling to get students to come to campus and they've switching from online to imburse it and back and forth. And. Some of the S you know, some students are disenchanted with the idea that I just spent, you know, 60 or $70,000 to sit at home on zoom. Um, I could do that from any college. What, you know, why am I paying so much and et cetera, et cetera. So I think there's a big, big opportunity how quickly it'll come. I think I've been saying this for 10 years, so, um, maybe the pandemic will be the. Kicks things over. Um, but I could see a situation. You know, another thing that is weird is there's no consolidation among colleges, right. They could get economies of scale if you know, 10 colleges banded together and said, okay, well, we're just going to have, I mean, we see a little bit like NYU now has a Dubai campus and Shanghai or something where they're. Going global, but what they're not doing is saying, well, we want, we have NYU in New York and NYU, Chicago, and NYU, whatever right. Where maybe they buy a school or merge with a school and say, you know, we're gonna take the best of everything and that's just not happening yet again. But I think it might. Um, so that's another interesting challenge. If you had a two year old, it's hard to predict. What things are going to be like now, if you have a 16 year old or 12 year old, even there's a good chance you're going to get what we see now or something pretty close to it. So you may as well start learning about it.

Melissa:

There is so much that goes into this. The deciding is this investment of worthwhile investment. Uh, which school, what will be available? Private school, public school, all of the different options, the surprises along the way, the different strategies investing early investing later. It's almost as if you need somebody to help you help guide you through this whole process.

Brad:

Uh, yes, for sure. Um, and obviously that's what I do. Do I help families? Courses on my website for few, just want, you know, kind of a, I call it the jumpstart. It does it can't do everything that I can do if you're working with me directly. But at, at least gives you some, you know, the basic framework of what I do. And how do you do school research? How do you do visits? How do you figure out need-based aid and merit aid and how do you build some basic spreadsheets and plans around college? Um, but there's all kinds of professionals now that are out there because it's going to becoming a bigger endeavor and it's getting more expensive. You know, there's people out there that will help your student in the application process. There's people out there that will help you with the testing, right? Tutors have been around a long time for, you know, getting the best you can on the tests. Well, now the tests are maybe going optional or going away altogether. Um, so maybe that, that need will, will diminish. There's also a professionals out there that will help your student figure out what they want to be when they grow up again. If so having the student do that process with someone that's done it before and knows, you know, it's kind of their specialty, you know, if it increases the ads that they actually stick with the. School and or degree they pick and get it done. That could be a huge ramifications on price, you know? So the kid that's showing up undecided. That's good. You know, and that's the way we did it when we were kids, you know, again, I'm probably a little older than you, but that was not uncommon to have someone on your dorm that you know, how long you've been here. Oh, six years. I've had seven majors so far. I still haven't found the one. I like, um, so I'm going to keep going until I figure it out.

Melissa:

Um, movie son-in-law. Oh, I know about that. I majored in it for half a semester.

Brad:

Exactly. Right. So that again, that's just not a. A great way to do it these days. So there are people there's, you know, I, I, my podcast, I've interviewed a couple specialists that have, you know, self-directed courses, I'm helping you work through the process taking like an there's these various interest tests and skills tests, and then interpreting those said tests, um, and figuring it out. And again, working with someone that has experience and how to ask the right questions can be invaluable. Um, myself working with parents and that's, you know, I focus on the parents side of it. I don't help your student with essays, or I'm not the one to talk to about what they want to be when they grow up. That's not at all in my wheelhouse. What I work with parents on is how much can we afford and how much should we spend and will we get need-based aid? Will we get married eight? Can we predict, you know, we're looking at these five schools, can we. I had a time, what they might cost the answer is yes. And we do that. And then maybe you say, well, based on those predictions, we need to find different schools or more schools like this one instead of that one. Um, so again, it's a whole process. And if you think about it, it's just like everything else in the world. Your kid's baseball has just gotten more complicated. It used to be when we were kids. If you wanted to play baseball, you grabbed your bat and gloves. You went to the local park on Saturday morning and whoever showed up, played ball. Now, if we play baseball, we gotta hire some umpires and schedule some games and hire some coaches and set up some practices and reserve the field and get the volunteer mom to bring the snacks and.

Melissa:

Or do I join the travel team?

Brad:

Exactly. And then if right, and then if you say, well, I'm a better player than that. And I want to get some coaching, you know, higher end coaching. You know, one level is just a random dad saying, I think I'm the coach now because nobody else will do it. But then there's the professional Peewee coaches that say, you know, I do this for a living almost, and we're going to get, you know, batting practice and pitching. That's going to cost five or 10 or 20,000 a year to do all these traveling teams and all this fun. Well,

Melissa:

Brad, you bring a tremendous skillset to what you do. And in the show notes in the description, I have links to your website and to, for people to connect with you on social media and. After listening to this, I really see tremendous value in having someone direct you as a parent through this entire process. So thank you for all that you have shared with us today. I am sure we could talk for days on the strategies and tips and get into this a little deeper, but I'm going to let people contact you and have those conversations in a more specific. Right. So as we conclude today, what three nuggets of wisdom would you leave with us?

Brad:

Uh, yeah, I would say don't procrastinate. If you've got a freshmen, sophomore, junior, it's really as time to get at it. Um, you'll never regret it. Um, probably, you know, get the facts. It's really hard to. Compare yourself to the, you know, again, most parents have limited access to information. They can talk to their school counselor, and maybe they've got an older brother or sister who has had older kids who kind of can say, this is the way it worked for us or whatever the challenge is. It's probably not going to work the same for you. So you really need to figure it out specifically for your situation and not rely on secondhand rumors and that type of thing. Um, And what would the third one be? I guess again, from a high level, again, you need to really understand the timelines, you know, by the end of the junior year, you should have a good school list. You should have a scholarship plan. You should have a testing plan. You should have a list of schools that you want to attend, et cetera, et cetera, because there is no. No, but don't deadlines through the junior year. You make your own deadlines. You decide how to do it on your own. The first real deadline is applications are due X in the senior year of high school, but there's a whole lot of prep that should have been done before you start submitting applications.

Melissa:

So what I hear you saying is don't procrastinate, get facts and make a plan. Yes. Sounds like solid information. And again, all of the contact information to get ahold of Brad is in the show notes. Brad, thank you so much for being with us today. Thank you for having

Brad:

me