Episode Summary: Financial New Year’s Resolutions That Work with Peter Mallouk

Podcast Information:

• Title: Money Rehab with Nicole Lapin
• Host: Nicole Lapin
• Guest: Peter Mallouk, President and CEO of Creative Planning
• Episode Title: Financial New Year’s Resolutions That Work with Peter Mallouk (CEO of Creative Planning)
• Release Date: December 30, 2024

Introduction

In this episode of Money Rehab with Nicole Lapin, host Nicole Lapin engages in a comprehensive discussion with Peter Mallouk, the President and CEO of Creative Planning, an esteemed wealth management and investment advisory firm managing over $300 billion in assets. The conversation centers on effective financial New Year’s resolutions, strategies to achieve financial goals, and common investing pitfalls to avoid in the upcoming year.

1. Making Financial Resolutions Stick

Nicole opens the dialogue by highlighting the high abandonment rate of New Year’s resolutions, particularly financial ones, noting that "61% make money-related resolutions" but many do not follow through. She poses the question to Peter on how to ensure these resolutions are actionable and sustainable.

Peter responds by emphasizing the importance of consistency and persistence over mere motivation. He states:

"The real way to win isn't motivation, it's the consistency and persistency. So the things you can do to put that on your side are to make things automatic."
— Peter Mallouk [04:19]

He advocates for automating financial actions, such as setting up automatic transfers to investment accounts, to overcome the inertia that often derails financial plans.

2. Breaking Down Financial Goals

Addressing the challenge of lofty financial ambitions, Peter advises breaking down large goals into manageable steps. He explains the concept of "reverse engineering" financial targets:

"If the goal is to become a millionaire, then you start to back into how much has to be put away to do that... If your math says you've got to save $500 a month to get where you want to go... It can be a small amount today and as your income grows, make it bigger."
— Peter Mallouk [05:39]

This approach makes significant financial objectives attainable by starting with smaller, consistent contributions that can be increased over time.

3. Common Investing Mistakes

Peter outlines five prevalent mistakes investors make, providing insights on how to avoid them:

• a. Market Timing ([06:12]–[09:00])

  Peter critiques the strategy of trying to predict market highs and lows, labeling it as a common but flawed approach:

  "The probability you're going to stick with it is going to be pretty low."
  — Peter Mallouk [07:54]

  He highlights that market timing often leads to missed opportunities and subpar returns, advising investors to maintain a consistent investment approach regardless of market conditions.

• b. Active Trading vs. Investing ([09:00]–[12:04])

  Differentiating between active trading and long-term investing, Peter warns against frequent buying and selling of stocks:

  "70 to 95% of professionals losing the market over a 10 year period."
  — Peter Mallouk [11:15]

  He explains that active trading can result in higher taxes and "cash drag," reducing overall investment performance, and recommends a disciplined, long-term investment strategy instead.

• c. Misunderstanding Performance and Volatility ([12:04]–[13:20])

  Peter clarifies the distinction between market volatility and actual investment risk:

  "The market does not go up and down. The market goes up with brief periods, sometimes severe and dramatic, but brief periods of pullbacks."
  — Peter Mallouk [08:53]

  He underscores that while markets experience short-term fluctuations, the long-term trend is upward, and understanding this can help investors avoid panicked decisions during downturns.

• d. Behavioral Biases ([15:19]–[18:53])

  Exploring psychological traps, Peter identifies biases like recency bias, confirmation bias, and the endowment effect that hinder disciplined investing:

  "If you can become aware of these biases, it makes it easier to become a disciplined investor and stick to your plan."
  — Peter Mallouk [17:00]

  He suggests strategies such as writing an investment policy statement to stay aligned with financial goals and mitigate emotional decision-making.

4. Economic Outlook and Personal Finance Strategy for 2025

Nicole and Peter delve into the broader economic landscape, discussing the impact of political dynamics and inflation on personal finances:

• Navigating Economic Noise ([19:22]–[20:08])

  Peter advises investors to "ignore the noise" from politics and social media, focusing instead on personal financial goals:

  "Make your investing about you and your goals. And not who's the president, not who's in Congress, not what someone saying someone tweeted yesterday."
  — Peter Mallouk [19:22]

• Inflation and Its Implications ([22:37]–[24:34])

  Addressing inflation, Peter explains the difference between inflation and deflation, emphasizing the need for a balanced, "Goldilocks" scenario where inflation is controlled, allowing wages to rise without escalating prices excessively:

  "The dream scenario is inflation's just under control and we can get wages to rise without the price of all these goods to continue to go up at the same pace."
  — Peter Mallouk [24:10]

  He anticipates some missteps as the Federal Reserve adjusts policies but remains optimistic about achieving a stable economic environment.

5. Conclusion

Nicole wraps up the episode by reinforcing the strategies discussed and promoting Creative Planning’s services for personalized financial planning. She encourages listeners to take actionable steps towards their financial future by scheduling consultations with Creative Planning.

Notable Quotes:

• Peter Mallouk [04:19]: "The real way to win isn't motivation, it's the consistency and persistency."
• Peter Mallouk [05:39]: "We don't have to start really big, we just have to start now and we have to have it be repeatable."
• Peter Mallouk [07:54]: "If you don't automate it, the probability you're going to stick with it is going to be pretty low."
• Peter Mallouk [11:15]: "70 to 95% of professionals losing the market over a 10 year period."
• Peter Mallouk [08:53]: "The market does not go up and down. The market goes up with brief periods, sometimes severe and dramatic, but brief periods of pullbacks."
• Peter Mallouk [19:22]: "Make your investing about you and your goals. And not who's the president, not who's in Congress, not what someone saying someone tweeted yesterday."
• Peter Mallouk [24:10]: "The dream scenario is inflation's just under control and we can get wages to rise without the price of all these goods to continue to go up at the same pace."

Final Thoughts

This episode provides valuable insights for listeners aiming to set meaningful financial resolutions for 2025. By addressing common investing mistakes and emphasizing disciplined, goal-oriented strategies, Nicole Lapin and Peter Mallouk offer actionable advice to help listeners achieve lasting financial well-being.

Additional Resources:

• Creative Planning: For personalized financial strategies, visit creativeplanning.com and schedule a free 15-minute consultation.
• Contact Money Rehab: Submit your financial questions to moneyrehab@moneynewsnetwork.com for potential discussion on the show or a one-on-one intervention.
• Follow Us: Stay updated with exclusive content on Instagram @moneynews and TikTok @oneynewsnetwork.