Young and Profiting with Hala Taha - Peter Mallouk: The Path to Financial Freedom | E84

Episode Date: October 12, 2020

Are you ever confused or overwhelmed at the prospecting of investing?   If you are, don’t worry! Our guest today, Peter Mallouk, has simple strategies on how to invest and save as well as why it’s so important.   Peter Mallouk is the CEO of Creative Planning, a wealth management firm, that has been ranked #1 in America by outlets such as CNBC and Barron’s. Peter has been on Worth Magazine’s Power 100 rankings and has received other accolades such as the Ernst & Young Entrepreneur of the Year Award. He is also a financial industry thought leader and author. His upcoming book, The Path, is all about helping you achieve financial freedom and is co-authored by Tony Robbins.   In today’s episode, we’ll talk about common misconceptions that Peter has encountered in his many years in the financial services industry as well as his thoughts on the news and its impact on us as investors. We’ll also cover topics such as the importance of diversifying, the plans you should lay out before investing, and how to find the right financial advisor to meet your needs.   Links:   Follow Hala on Instagram: www.instagram.com/yapwithhala Reach out to Hala directly at [e-mail] Follow Hala on Linkedin: www.linkedin.com/in/htaha/ Follow YAP on IG: www.instagram.com/youngandprofiting Check out our website to meet the team, view show notes and transcripts: www.youngandprofiting.com   Timestamps:   01:11 - How Peter Met Tony Robbins and All About Their New Book 03:53 - Why the Financial Services Industry is Broken 05:00 - How to Find a Great Advisor 06:53 - Truth About Today vs. the Past 10:49 - The Contradictory Thing About Media and the News 13:36 - Why is Now the Best Time to Start Investing 15:37 - Why it’s Important to Diversify 17:49 - Real Life Example of the Importance of Diversifying 19:30 - The Six Human Needs 21:58 - The Power of Compounding 24:20 - Why it’s Important to Know What We Want 25:58 - Financial Independence vs. Retirement 27:15 - Important Plans to Have Before Investing 28:48 - Difference Between Brokers vs. Financial Advisors 29:50 - When Should You Get a Financial Advisor?  31:30 - Tips for Someone Working at a Corporation 33:34 - Advice about Insurance 35:08 - What to Look at for Financial Planning 37:20 - Peter’s Secret to Profiting in Life   Mentioned in the Show:   Peter’s New Book, The Path: https://www.amazon.com/Path-Accelerating-Journey-Financial-Freedom/dp/1642937010 Peter’s Website: https://creativeplanning.com/ Peter’s LinkedIn: https://www.linkedin.com/in/peter-mallouk/ Peter’s Twitter: https://twitter.com/PeterMallouk/ Peter’s Facebook: https://www.facebook.com/OfficialPeterMallouk/ Learn more about your ad choices. Visit megaphone.fm/adchoices

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hit the subscribe button because you'll love it here at Young and Profiting Podcast. This week on YAP, we have a turn guest on the show. None other than Peter Malook. Peter Malook is a president and CEO of Creative Planning. Creative Planning is a registered investment advisory firm that manages over 50 billion dollars in assets and serves clients in all 50 states. Both Creative Planning and Peter have been repeatedly recognized as industry leaders by organizations such as Barons, Financial Times,

and CNBC. RIA channel, published by Forbes, recently ranked creative planning as the number one wealth manager for 2020. Visit creativeplanning.com to review important information related to their industry recognition. Back in episode number 72, we discussed Peter's thoughts on how the economy will shake out in a post-COVID world. We got his perspective on how you should be investing during their coronavirus and his thoughts on speculative investments like

cryptocurrency. After this episode, I encourage you to go back and check out number 72. This time around on YAP, we're going to be taking a deep dive into Peter's upcoming book, The Path Co-Authored by Tony Robbins. We'll talk about why Peter thinks the financial services industry is broken, what plans you should lay out before you should even consider to start investing, and how to find the right financial advisor to meet your needs. Hey Peter, welcome back to Young and Profiting Podcast. Good to be back with you. Yeah, I mean last time that you were on, it was such a hit,

it was one of our most downloaded episodes ever, which is incredible. So thank you so much. I had to just have you back on now that you have a new book coming out with Tony Robbins on October 13th. It's called The Path. And I'd love to really focus on that. For those of you that missed it, Peter was on back episode number 72. It was called Post-COVID Predictions and Investing Tips with Peter Maluk. Like number 72. It was called post-COVID predictions and investing tips with Peter Maluk. Like I said, it was one of our most popular episodes and this time around, I really just want to focus on your book since we covered a lot of your career journey and things

like that in the in the previous episode. So let's get started. The path is called accelerating your journey to financial freedom. It's co-authored by Tony Robbins. It comes out October 13th and I was lucky enough to get an advanced copy so I got to read it and it was fabulous. There's a lot of great strategies, but let's start with your co-authored Tony Robbins. How did you guys meet? What was the motivation behind the book? Because you guys have a lot of financial books

that you've put out in the past. What makes this book different or new? And what was the motivation behind it? Well, the way I met him is a really interesting story, at least to me anyway. He had a 401k plan at his work, employed tons of people. And he met this guy, Tom Zagainer, who was handling independent 401k plans.

And what he basically found out was that he had been paying 2 to 300% more for his 401k. And his employees were paying 2 to 300% more than they needed to. So he wound up hiring Tom to handle his 401k. I didn't know Tom at the time. Tom works at Creative Planning now. But that really opened up his eyes. And so he called two of his good friends. I think they're also clients of his Ray Dalio and John Puth Tudor Jones, who are two of the greatest hedge fund managers of all time. And he has started asking him, like, what did he not understand? And they educated him a little bit on the investment world. And they also directed him to others.

And so he wound up interviewing Alan Greenspanpan who used to run the Federal Reserve, Charles Schwab, who obviously founded the company by the same name, John Bogle, who founded Vanguard, and you know, many, many others, maybe 50 people or so. And his advisor at the time had said, you should take all, I mean, no one's interviewed all these people. You should take all of these and turn them into a book. And he had released a book in 20, 30 years, but anyway, he wound up doing that and he added a lot of what he learned from talking to all of those people. And that book became wildly popular. And so

some of my clients would show up with this book, and I'd never met Tony Robbins or talked to him, but they'd have questions from reading parts of the book. And, you know, the shorter version from there is along the way we met, and then we wound up writing unshakeable together, and then I wrote the path that he covers a couple chapters here along with Jonathan Clements, who's used to write for the Wall Street Journal, who adds a chapter to the book as well. That's awesome. I mean, from my perspective, in the self-help world, Tony Robbins is like a legend. He's been doing it since he was 17,

like he's the goat when it comes to those things. So it's awesome that you got to work with him. And maybe one day you can introduce me to Tony Robbins. So you start off the book with a really bold claim. You say the financial services industry is broken. And you've had a career journey and experiences that really helped you see the financial services industry from a different vantage point. Tell us about that, how you were able to kind of see what was wrong with the industry,

and why in fact you think that is broken. We know it's funny because Tony learned about it by being on the receiving end and finding out that he was kind of getting screwed over and his employees were on the fees and their plan. I learned about it on the advisor end. I was doing planning for clients, but also did legal work for clients through other advisors. And I met a lot of amazing advisors

that were really, really good, but I also met a bunch that were really selling products and selling variable annuities and doing things that might have enriched them, but didn't really enrich the client. And it exposed a lot of the conflicts in the industry, which is most of the time when someone's paying an advisor, they're really paying them to then sell them

an investment product. And really, you want a separation of the product from the advisor. And that was my main takeaway from the beginning of my career. Yeah. So that's really interesting. And I think we can dig deeper later on

in terms of how to find the right financial advisor and things like that. Is there anything else in terms of the financial industry that you want to speak to in terms of why it's so broken? Like are there any other themes or trends that we should be aware of? Well, I think the main theme is you want to work with an advisor that's a fiduess, Sherry,

all the time has to act in your best interests on everything, all the time, every investment, all the planning, all of that. Second, it's great to work with an advisor that only gets paid one way, that they don't have an incentive to, they don't have an incentive to recommend one investment over the other. And you would, ideally, you're working with an advisor whose company does not own their own products, because otherwise that advisor is going to be inclined to use those products,

which may or may not be best for you, but you wouldn't go to a Honda dealership and pay a fee and ask what car should I buy. You'd wind up getting a Honda. So ideally, you have that separation. And I think all of those things together help. And if you want to go that extra mile, having a planning-led approach helps, so it's nice to have investments. But it's even better to have the investments pointed towards an actual objective, towards an actual goal.

And I think that's a very, very big part of making sure you're on the right path when you're investing. Yeah, totally. And I think it's important to note that most financial advisors out there or wealth managers, as they call them, they're really just salespeople. You know, at the end of the day, they're trying to push products, and you want an advisor, you don't want a salesperson who's advising your financial feature. Okay, so when it comes to money, mindset is everything. Let's talk about perspective because I know that you believe that having a balanced, accurate view of the world is important so that you can make good financial decisions.

We tend to view the past as the golden age. We're always wishing that it could go back to the way that it was, and we tend to look at the future very pessimistically. But you say life is actually better than it has ever been. So tell us the good news. Why is life so much better now than it was yesterday? And how can that help us get into the mindset in making good financial decisions? There's something about the human condition that we find a way to be pessimistic

when everything tells us all the facts point to constant progress and optimism. I mean, it's kind of amazing. I think it's funny that when people use like this phone, we call it a phone, but it's a super computer that can basically do things that you used to need 100 things or 1000 things to do back in all the way back in 2007. You know, you needed to have an at-list and an alarm clock and a calculator.

And I mean, we can do everything on this phone as more technology than what was used to land on the moon. And we'll use that phone to go complain about how bad things are today online, right? It's just, it's so crazy. And sometimes we'll do it while we're having lunch where we might have a salad that 15 different farms were involved in getting that salad on our table and we're paying less for it adjusted for inflation than people did 50 years ago. We find a way to complain

despite things being not just good but beyond the wildest dreams of everyone on earth 50 years ago. So there is no good old days. I mean, we've been around for tens of thousands of years. Only a completely insane person would say I would rather be alive in the 1800s or the 1500s or the thousands or whatever, back when there wasn't plumbing and heating and cooling and all the wonderful food we get to eat. I mean, just we can go see each other

more easily. Everything about the world today is better. But we're attracted to bad news, we're attracted to negativity. It's much more easy to sound smart if you're pessimistic than optimistic. And the media knows this and they feed into all of those natural biases that we have.

But if you look at everything, it's stunning the speed. Let's just take music as an example. I mean, you just have to be live and then we got to the H-track and records and we got to cassette tapes, then we got to CDs, then we got to MP3. Now, you know, we can get any song pretty much ever published in one second, right? Instantly in our in our hand. This was impossible to imagine 15 years ago. And we could do the same thing with movies and we can same, we can all quality of life from the average size of a home to the amount of money we have to spend on food versus things we enjoy, to the amount of money we all make, I just said for inflation, by every measure,

the world is better today than it used to be. And where it ties into investing is investing is really a bet on the future. Right? So if you bet the future is going to be bad, you're not going to invest in things like stocks and you're going to do very poorly. But if you accept not optimism but reality that the future probably is going to be better than today, just like every 50 year period tends to be, if we look 10 years down the road, 20 years, 30 years, is it going to be better than today. Just like every 50 year period tends to be, if we look 10 years down the road, 20 years, 30 years, is it going to be better? Most certainly, it probably will be, right? And if you believe that, then it becomes easier to be a good investor and I can shake it up by all the noise that's out there.

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of human progress over the past 50 years. He says in 2005, compared to 1955, the average human being on the planet Earth earn nearly three times as much money, adjusted for inflation, a one-third more calories of food burned one-third as many and buried one-third as many of her children as could, I'll redo this later. I just could expect to live one-third longer. I put your that, sorry, I'll redo that later. Yeah, so it's so clear that things are drastically improving. And I want to touch on one point That you made just a little earlier in terms of the news Let's talk about the media and the news for a second in terms of shaping our perspectives

In the book you mentioned that like really media is a for-profit industry, right? They're there to make money not necessarily to inform so tell us more about that and why that's a problem in terms of, you know, how it shapes our mind and behaviors for investing. Well, we think about how the media makes money. So the media wakes up every day and they have a fiduciary obligation to make money for their shareholders. So if you're a publicly traded company, you have a legal obligation to your shareholders. So those are the people that own the stock in the company. Well, whether you look at NBC, ABC, CBS, MSNBC, Fox, CNN, all of these places are part of publicly traded companies,

which means they wake up every day going, how do we maximize our return to shareholders? Well, how do these places make money? They sell advertising. They don't make money from news. They sell advertising. How do you get money from news. They sell advertising. How do you get more money from advertising? Well, you have to have more viewers.

A show with 10,000 viewers is going to be able to charge an advertiser more than a show with 1,000 viewers. Coca-Cola will play more money to hit more people, more frequently, right? So now, how are they going to get more viewers? Well, they have to have content that brings people back. Well, we know people are attracted to negative news more than positive news.

It's just a fact. And negative news is more effective. It's why for every positive ad campaign you'll see by either party and politics, seven will be negative. People respond to the negativity more than, fortunately, it works. They don't spend the money on negative ads just to be mean.

They're doing it because it works. So the same thing with the news. So the weather channels ratings are higher when the weather's terrible. And if it's a question, the weather channel is not going to put people at ease, right? The weather channel is going to keep this narrative going as long as possible because it means more eyeballs on the screen, which makes the ratings better, which gets more advertisers, which makes more money for the shareholders, and they've fulfilled their fiduciary obligation.

So if you can focus on that when it comes to investing, you know that when you're watching financial media, or reading financial media, there's a tremendous incentive for them to make everything into a narrative, into a story, into a new cycle, into a crisis that keeps you coming back for more, just kind of like a soap opera. And there is a tremendous, tremendous disincentive that can't be overstated to call anybody down. And so I think if investors understand that, they're less likely to make investment mistakes.

And the other side benefit is if all of us understand that, we're less likely to make, just get all worked up about everything, all of the time, you know? Yeah. So then tell us, you say that it's now is better than ever to be an investor, at least a globally diversified investor. So tell us about that. Why is now, I know you just kind of set the stage, but really drill it home. Why is now the best time to start investing?

If you think about what drives the market, the market likes to see technology and innovation. So they want to see our things, you know, getting better that make things easier. We know that as there are advancements, there's this myth that it kills jobs and it doesn't kill jobs at all. And the 1800s, one and two of us were farmers, you know, today it's less than one in 20, but we have more farm output and the job unemployment stayed the same. We then, if we go back to 1950, one in four of us was in manufacturing.

Today it's less than one in 20. Yet we produce more goods through manufacturing because of technology and unemployment has stayed the same. So the quality of life of everybody gets better with these advancements. But those things also drive markets. We need innovation to drive markets. So one, you have to ask yourself yourself am I living at a time in history Where there are advancements with technology and innovation? Any rational person has to say yes to that the second thing we need is we need people to buy this stuff

So we need the demographics to come into play Well, we know over the next 10 years we have 1.2 billion people emerging from poverty all over the world Well, what do those people do when they emerge from poverty? Well, they might buy Nike shoes, they might go to McDonald's, they might go to Walmart. These are all publicly traded companies. It gets reflected in the markets. So if you look objectively at demographics and innovation

and technology, we have to say not only is it a good time moving forward, but literally the best time ever to be alive with those factors mattering to the outcome. Yeah, I think that's a really good point. One thing that I want to talk about next is the SMP 500. So last time we talked, we talked about how the SMP 500 was a great thing to invest your money in.

And that typically year over year, it's an average of like eight to 10% to invest your money in. And that typically year over year, it's an average of like 8% to 10% return on your money when you invest in the S&P 500. In this book, you guys mentioned something about the lost decade. So that's between 2000 and 2009, a full 10 years, the S&P 500 produced 0% returns. This is much different than what I had thought. I thought the S&P 500 was like, safe. This is much different than what I had thought.

I thought the S&P 500 was like, safe, no matter what, you put your money in there and you're good, right? And I think a lot of people think that. And we've been kind of like taught that. And it's been like drilled down our throats the past couple of years in terms of, you know, young people investing their money.

You've got to do the S&P 500 blah, blah, blah. So tell us why, you know, this isn isn't exactly true and like why we need to diversify in order to mitigate any risks with putting our money in the S&P 500. Well nothing goes straight up and the S&P 500 definitely does not go straight up. So if you invest in the market, the S&P 500 today, the odds you'll have a positive return a year from now are three out of four, 75%. That's pretty good. No one wants to bet their life savings on 75%. But if you leave it in the market for three years,

five years, your odds have moved to 93%, 95%, 10 years, 98% plus. So it's really you've got to invest it and spend the time in there. And you've got to know that corrections are going to happen about every year, there's a correction. The correction is a drop of about 14% or more. Some years like 2020, there's a bear market, which is a drop of 20% or more.

The average bear market is 34%. Believe it or not, with the coronavirus crisis, the market dropped exactly 34%. It felt much worse because it was the fastest drop in history to that level. And there was a lot of uncertainty and it involved health, which is obviously the only thing to many people's scarier than losing their money. But in terms of depth, the average bear market. But like you just pointed out, there are very long periods of time where the market does not perform.

So from 2000 to 2010, that same S&B over 100 earned zero, something that normally would average 6 to 11% a year, average zero per year, over 10 years, but over the same time period, international stocks were way up, small stocks in the US were way up, small stocks are a seized way up, emerging markets, real estate and bonds were way up. So that's the importance of having your eggs spread out in several different baskets, instead of all and just one index.

Yeah. In the book, you have a story of, I think it's Tony's story about his friend Jason. Do you know a story of, I think it's Tony's story about his friend Jason. Do you know that story? And can you share that with us so that our listeners can really understand the point of diversification and its importance? Well, I think Jason had had, I'm familiar with this person, he had had a very big run with real estate and he really just thought he couldn't lose because history told him he can't

lose. And it kept going and going and going. And he just was one of those people that really wanted to have an entourage around him all the time and have a lot of things, had a lot of a very public way of displaying his wealth. Ultimately, he never diversified. And the story ended very tragically for him when the housing market and condo market blew up in the 2008-2009 crisis. And how do you just take in a little piece and diversify it?

Things would be a lot different. I mean, the more modern-day story of that is someone has a bunch of money in a tech stock. The tech stock takes off. If they hold it, will it keep going? Maybe for a while, but eventually every company does itself in. And you never know when that's going to be. And so, all we always encourage people just take something and diversify it so you're never at the mercy

of having all your eggs in one basket. Yeah, I think that makes sense. So the S&P 500 is really like US companies. So to mitigate that, we would choose international companies to invest in or real estate, like you just mentioned, or other avenues, bonds, whatever it is, something that diversifies your portfolio so that if something does tank or doesn't improve in terms of your return,

you have other options to make money. So that makes sense. So let's talk about our emotional needs and what that has to do with money. So in the book, you and Tony touch on six human needs, certainty, variety, significance, love, and connection, growth and contribution. Could you go over these human needs at a high level with us and let us know maybe what you prioritize in terms of your human needs? So I thought, you know, when he asked me, what do you think I should write about in this book?

I specifically asked him to talk about those things because the book is really about identifying your goals And he writes a lot he's written a lot in the past about well You really need to know what drives you a lot of people aren't really in tune with the drives them Some people are motivated by contribution which is they want to make a difference whether in their in their work or with their family or with Charities or in the community a lot of people feel that need to do that And if that's your goal, then you're driven to accumulate a certain amount of wealth,

it may be set up a foundation or free up your time so you can volunteer your time to the charities or others. Some people are motivated by certainty, they really need to know what's gonna happen and when it's gonna happen and otherwise they're anxious, that would really drive a lot about your investments too. So there's a whole chapter writing about these six basic needs

that we have and trying to identify in yourself, which needs do each of us have and having that get built into the financial plan. Yeah, and what are your, like, what needs do you focus on when you're considering your plan? Like, what do you care about? You know, I get one of the needs is certainty versus variety

and I'm definitely a variety person. So one of the needs is certainty versus variety and I'm definitely a variety person. So one of the things I love about my profession is that every day it's different. You know, you just never know what's, you know, what's going to happen or what's going to come up. And I enjoy that. I enjoy all of the change that comes with things. I'm very motivated by contribution.

I like making a difference in the community. I like making a difference for clients. I know that a lot of the people in our team are really motivated by that, and trying to lead the industry in a certain way, or at least put a dent in the industry. And so those are two very big motivators for me personally. Yeah, and speaking of contribution,

100% of your profits for the path with Tony Robbins is going towards feeding America. It's a charity. I think you guys have a mission of feeding one billion people or one billion meals. So that's awesome. Well, thank you. I think we're excited about that.

And in this particular case, a lot of it's going to the cities where we have offices, which are a lot of the major markets in the United States, as well as where headquarters is, and then to the national feeding America organization as well. So I'm very excited about it. That's cool. So let's talk about compound interest and why that's so powerful.

You have a great story in the book about Kodak that illustrates the power of compounding. Would you share that story with us and how they almost created the first digital camera and what went wrong there? So the idea of compounding is that things are going to double and when things double, they happen very quickly. So you think about codec doubling the quality of an image or most of us can identify with an iPhone, right? Like the speed with which the camera doubles or our internet speed would double or what we could hold on a laptop doubles and it doubles and doubles and it gets to a point where it's absolutely stunning what it can do and the same thing applies to money. You know if you have $10,000 in your 20 and you just earn 7% but when you're 30 it will double the 20,000 but when you're 40 it's 40,000 and when you're 50 it's 80,000

and when you're 60 it's 160,000 so that 10,000 has become 160,000 it's amazing what that power of compounding does because you're adding to a bigger number every time. It's a, the concept drives a lot of technology, it drives the speed with which we get technology, but it also has a lot to do with money. And so your listeners, I know your audience is very young in general, and they should really be thinking

about setting a site something no matter how small as soon as they can to get the advantage of compounding on their side. Yeah, do you have any examples in terms of your clients who have done this really well and have used compounding to their advantage? You know, the reality is a lot of people that come to creative planning, they start at older, you start thinking about retirement, you know, when they're in their 40s or later, and then they come to us. And when we're fortunate enough, you know, to get those 20% of clients or so that are starting in their 20s or 30s, it's incredible.

I mean, like all of their projections always work out because if you're saving for education or retirement and things like that at such a young age, you have the biggest advantage that exists when it comes to money, which is time. The biggest advantage that exists when it comes to money, which is time. The biggest advantage is time. If you don't have time, you've got to find a way to come up with more money or change your objectives or push off your retirement or something else to make it work.

And so if you've got somebody in their 20s or 30s that's willing to start, they should just open an account and start saving as quickly as they can. Yeah. OK, so let's talk about outcomes. You mentioned this earlier, the importance of knowing exactly what you want. So tell us, why is it so important to know exactly what we want before we actually start investing and start putting our money in stocks and things like that?

A lot of us just think, well, when we want to make a lot of money, that's what a lot of us think we want. And so we then go to somebody or we do it on our own. And so I'm going to buy things that make a lot of us think we want. And so we then go to somebody or we do it on our own. And so I'm gonna buy things that make a lot of money. But really, we wanna make a lot of money, why? You know, to do what? Is it to have 120,000 a year when you're 63? Is it to have the money to pay for someone's college,

whether it's public school or private school for four years? Are we gonna cover room and board or not? Is it because we wanna give 10% of our money every year to charity or something different? If we have those pieces in place, which should come first, if we know what the goal is first, it becomes very easy to reverse engineer our way

to how do we put the pieces in place to make those things happen? And sometimes those are aggressive investments. Sometimes they're not. Sometimes to increase the chance of hitting a goal, you get more conservative. So let's say you have somebody that's super lucky and they've got a million dollars, and they need 50,000 a year for the rest of their life and they're retiring today. Well, if they're super aggressive, they could actually screw up something that would work

out just fine if they were moderately invested. So we really have to know what the objective is because the objective is not always to create the biggest pile of money next year possible. It's usually to produce something you personally want and then you back into the investments that make sense to get there. Yeah, let's clear up some definitions because I think people get these confused. What's the difference between financial independence and retirement? Like, why are they actually different? Well, I think they're very different. So retirement is you're done working, right? Financial independence is you get up in the morning and whatever you're doing, it's because you want to do it. So if you go to work, it's because you feel fulfilled going to work. If you

are doing two jobs, it's because you have to. If you're writing a book, it's because you have to. Financial independence means you can walk out the door of your job, whatever you want, and go just do it, you know, golf or swim or vacation or whatever it is you want to do every day. So financial independence is a liberating feeling because it's hard to be anxious about anything when you know you're choosing to do it. No one's making you do it. Yeah, bam. If you're ready to take your business to new heights, break through to the six or seven figure mark or learn from the world's most successful people, look no further because the Kelly Roach show has got you covered.

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I think that's helpful. It's helpful when you think of your outcomes because it's like, are you really planning for your financial independence, or are you planning for your retirement or two different things? Okay, cool. So in your book, you talk about the need

to have a number of plans in place before we ever start investing. You talk about things like a network statement, retirement projections, education projections, insurance projections, risk management, estate planning. So so many different things that you cover. I don't think we're going to have time to cover all of them on the show. But what are some of the plans that we should really focus on before we ever start investing

our money? Well, I think you at least have two or three things clarified. So, I mean, what do you have today? What are your assets and what are your liabilities? That's all that that we're statement is, oh, I own a condo I have an IRA I have a 401k have an investment account. I have a car Maybe that's the network statement and and then the liabilities side of the network statement might be I have some student loans And I have a mortgage and I owe some money on my car and so the assets minus the liabilities gives us your net worth Some of those assets bring money to you and some take money away from you

So we have to distinguish between those two so a house might be an asset on the piece of paper But really we pay to have the house every month even if it's paid off We've got taxes maintenance insurance. We're paying to have that asset versus if we have an investment account or a rental property That's paying us usually you know every month something So we need to start with that and then we just have to do some simple goals. When do you want to be financially independent? Do you want to pay for your kids' college? Are you trying to get a debt free? Let's get two or three goals in place, and then let's say, okay, all these assets and liabilities on our network statement, how should we make those assets work for us to make those goals happen? And how do we get the liabilities contained so they don't get in the way of our goals?

Hmm, you rake it down so simply, but it seems so complicated at the same time. So in terms of somebody helping us make these decisions, I know the importance of an independent financial advisor is very important. Could you tell us the difference between what a broker and an independent financial advisor is? So a broker, you know, about 90% of advisors are brokers and brokers basically don't have a fiduciary obligation to act in their clients' best interest all the time. So that would allow them to use their own product when their own product might be a little more expensive or sell an investment with a commission when there's a way to buy that investment commission free. About 90% of advisors fall in that bucket and then about 10% are independent.

Independent advisors cannot make a commission on a mutual fund, for example. They wouldn't be able to sell a variable annuity, for example. And I'm not saying those things are always bad. I'm just saying, well, I guess commissional mutual fund is always bad, but most of the time they are. And so I think that if you have that independent advisor, you at least have somebody

who's legally obligated to pick the best investments they can for you. And that should, it's sad that that has to be the starting point, but that should be at least a starting point for choosing someone to work with. Yeah. And so for people around my age or younger, like when should we actually start thinking about having an independent financial advisor? Because from my perspective, it seems safer to do it by myself for now, right?

So is that the right way to think? Or is there like a certain benchmark we should hit before we actually go seek out an independent financial advisor? Well, I think if you can get a great advisor, you're almost always gonna be better off with that advisor. I think there think if you can get a great advisor, you're almost always going to be better off. With that advisor, I think there's a reason that the higher-net-worth people go, the more likely they are to work with an advisor because the higher-net-worth tend to be to know the difference an advisor can make.

But the problem is, most advisors will put you in a worse spot. So, if you're just starting out, it really is pretty simple, open-and-account, max out your retirement plans at work if you can, whether it's with a 401k or open a Roth IRA and put as much money as you can into those things. And if you have debts that are high interest rate, like if you're paying more than 6%, whether it's credit cards or somehow you have a mortgage or student loans or car loans at those rates,

pay those down before you invest. Because you've got to guarantee to 10 to 20% on those things. If those rates are high, it doesn't make sense to go invest if you got credit card debt at 15% because you're never going to be probably not going to invest you're in 15% year in and you're out. You may as well take the guarantee of paying down the card. So getting the liabilities under control and maxing out a 401k and Roth IRA and investing in indexes is probably what most people that are just starting out need to do. They get over $50,000, $100,000. They really should consider at least looking for an independent

advisor. I think that makes sense. So you just mentioned a Roth IRA and reminded me of something in your book. I think about more than half of my listeners probably work at a corporation. I work at Disney. What tips do you have for somebody who actually works at a big corporation in terms of how they should invest their money and what advantages they should take? Well, some corporations, not all, but if any of your listeners are fortunate enough to work for a corporation that has a match,

they should definitely take advantage of the match. So what I mean by that is if you have a 4-on-K plan at work, it means you're allowed to put money away without paying taxes on that upfront. So let's say you have a list there, they're making 80,000 a year, they pay taxes on 80,000. But let's say they take 10,000 and put it in the 401K. They won't pay taxes on 80,000 because that 10,000 goes into the 401K before that.

So only pay taxes on 70,000. So that's big advantage number one. I'm putting money to 401K is it's not going to be tax today. It's not tax to you withdraw it decades later. The second advantage is the money grows tax-free and the third advantage is we get compounding on our side by doing it earlier. But some corporations make it even better than that and say, look, if you put some money in the 401k, we'll match it. So you might say, look, the first 8,000 you put in there will give you $8,000. Well, that's 100% return on your money.

So all of your listeners should basically go to their employer and say, is there a match? If there is a match, they should at a minimum put that much in their 401k plan immediately. No matter what's going on with the rest of their network statement, they should be doing that. So even if like, because 401K for my understanding, they're actually like investing it in other stocks

and things like that, right? So like, no matter what they choose to invest that money in, you're saying no matter what, do it and get the match. That's right. If there's a match, it doesn't just definitely do it. And then from there, within the 401K, you get to pick as a Thesson P500 if that's of the plan or is it international stocks or Zipons or real estate the plan if it's a good one will have a multitude of options

But definitely don't miss out on that match Cool so the next topic I want to talk about is insurance I think that Millennials we don't really talk about insurance people tend to think about insurance when they're older life insurance Things like that what do we need to keep in insurance when they're older, life insurance, things like that. What do we need to keep in mind when it comes to insurance in your perspective? So insurance, if you don't have insurance,

the plan can really, really blow up. I mean, you can be on track for everything. And if you die and you have a young family, the young kids relying on you, what's going to happen to them? Yeah, maybe you're on track to be retired when you're 60, but if you get hit by a bus when you're 28, you've got two little kids,

how are they gonna go to school? How's that house gonna get paid off? How's your spouse gonna continue to live? Or they have to pay for childcare at home, quit the job, what's gonna happen? So you want to protect against that problem with a term insurance policy. A term insurance just means you're buying insurance

for a period of time or a term of time. It's not permanent. It doesn't stay with you your whole life, but if you're 30 and we know that your kids will be out of the house and your house will be paid for by the time you're 50 and you'll have savings to take care of your spouse when you're 50, well, we're not worried about 50 and later. Everything would be okay if you're around then. We just need insurance to get us from age 30 to 50. So we'd buy a 20 year term insurance policy. It costs very, very little, usually hundreds of dollars, and it solves a big, big problem. And you want to look at that through all parts of your life, whether it's about ensuring against the disability or your home burning down or a car accident

or whatever. We don't want the family to lose everything all of their wealth because you didn't get some low-cost coverage to protect you against a really adverse situation. I think that makes sense. So this really drives the point home in terms of having to look at your financial plan very holistically instead of in silos. Tell us more about that. What else do we need to consider when financial planning

and why is it so important to look at the full picture and not just little silos? Well, if you think about it, what people really want is they want to be secure and accomplish their goals. But to do that is not just one thing. It's not just saving money. It's not just a 401k. It's not just insurance. It's all the aspects of growing wealth. You know, what am I trying to do? How do I get there? It's all the aspects of protecting your wealth. How do I not lose my wealth because of a problem that happened along the way? Someone slipped and fell on the ice on my sidewalk.

How do I not lose all my wealth over that incident? And then it's how to transfer the wealth. If something happens to you early, whether it's an incapacity or death, how does that move in a low cost, private way to other people? And so all of those things are part of the same plan. And we have to be thinking about all of them. It's not as complicated as it sounds. I break it down, step by step in the path in the book. But you really have to look at all of them because if one thing goes wrong, it's

enough to derail the plan. Totally. Cool. So I think this was a great discussion. In terms of the book, is there anything else that you want to drive home to my listeners or anything that you think we should touch on? I've written in other books, the five mistakes every investor makes. I wrote another book with Tony, Unshakable. This one is really the first time I've written about step-by-step how to do all of these things. I try to make it very, very clear.

Here are the components of building wealth, here are the components of protecting wealth, here are the components of transferring wealth, and here are the things you need and why you need them to get them done. So hopefully I've laid that out really clearly. I did my best to do that. And your listeners can pick up the path on Amazon or any bookstore, and they can reach out to Creative Planning by going to our website, CreativePlanning.com, or they can follow me on LinkedIn, Twitter, or Facebook as well.

Awesome. Yeah, I highly recommend it. I read it end-to-end. I think it gives great strategies. A lot of this stuff we also covered back in episode number 72 in terms of how the markets work, what's the difference between a bear market, a bull market. So I would definitely recommend to go back and check that episode out. The last question I ask all my guests

is what is your secret to profiting in life? So I view profiting in life as more, just trying to enjoy life. And I think the secret is priorities, just knowing what really matters. I feel like I know what matters to me. And I focus my time and energy and The things that I'm thinking about in my mind on those things as much as I possibly can and it has resulted in me

You know enjoying life a lot more than before I really thought about it with that kind of clarity and just kind of got up and went about my day and so I think At least for me just really knowing what my priorities are, what I'm focused on has made a big difference. I think that's that's sound advice. And it goes back to what you were saying before, really knowing your outcomes so that you can have the right plan so that you can effectively achieve those goals. I think that's great.

Thank you so much, Peter. It's always such a pleasure to have you on Young and Profiting Podcast. We're so grateful to have had this conversation with you and we'll put the link for your book in our show notes. Fantastic. Thank you. Thanks, Peter. Thanks for listening to Young and Profiting podcasts. If you enjoyed this episode, please consider leaving a review on Apple podcasts or comment on YouTube, SoundCloud, or your favorite platform.

Reviews make all the hard work worth it. They are the ultimate thank you to me and the YAP team. The other way to support us is by word of mouth. Share this podcast with a friend or family member who may find it valuable. Follow YAP on Instagram at Young & Profiting and check us out at Young & Profiting.com. You can find me on Instagram at Yap with Hala or LinkedIn,

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