As we set new financial goals and resolutions for the year, this week’s episode explores the concept of resolutions and how to apply it to your 2025 investing strategy. We also share some quick money moves you could prioritize immediately so that you can start the year off right.
Presented by Creative Planning, each week Host and Managing Director John Hagensen cuts through the headlines and loud takes to challenge the advice you may have been given and reaffirm what you know to be true. Plus, don’t miss his weekly interviews with Creative Planning specialists as they cover investing, taxes, estate planning and many other areas that impact your financial life!
Episode Notes
John Hagensen: Happy New Year and welcome to the Rethink Your Money podcast presented by Creative Planning. I’m John Hagensen and ahead on this week’s episode, I’ll reflect on key financial lessons from 2024. We’ll explore why behavior often matters more than knowledge in achieving financial success and rethink some common money myths that could be holding you back. Plus, I’ll share practical strategies to help you set and stick to your 2025 financial goals with confidence. Now join me as I help you Rethink Your Money.
Let’s begin with a quick recap of 2024. You most likely intuitively know things were pretty darn good. The S&P 500 posted an impressive 23% gain on the year, the Dow Jones was up over 12 and the Nasdaq, driven by strong performances in tech, ended the year up 30%. But there has been a wide divergence of results across different sectors. On the surface, I had expected technology to be the top performer, maybe real estate to be last, but I was wrong on both accounts.
Communication services, where Netflix has had a strong year, was the top performing S&P 500 sector. In fact, there were only a few stocks within that sector that were actually down since January. At the other end, you have the healthcare sector, which has lagged many of the others with Moderna having lost almost two thirds of its market value this year. This is yet another reminder of why it’s so difficult to rotate sectors or try to purchase individual stocks with the hope of outperforming the broad markets, which have been phenomenal not just last year, but in 2023 as well, where the S&P 500 was up over 24% as well. You’ve got to go back to 1998. Remember when President Bill Clinton, he got impeached. Mark McGuire juiced up hitting his 70th home run against the Montreal Expos. That was the last time the market closed out a second straight year with a leap of at least 20%.
So a phenomenally strong run over the last 24 months. Hopefully you have benefited from that market growth by being properly and broadly diversified with exposure to the equity markets. It’s interesting because the stock market has returned roughly 10% annually over the last century, but rarely does it finish a year up 10%. It often soars well above like we’ve seen recently, or it drops significantly below the average, eventually correcting through a mean reversion. As a longterm investor, which I hope you are. Here’s the takeaway, and by the way, you may be in retirement saying, “Well, I don’t know if I’m a long-term investor.” You still are because if you’re 60, you need some of your money to be there when you’re 80, making you a longterm investor. And really what I’m referencing there is that you’re not someone who is actively day trading and thinking in the short term. But many of our clients here at Creative Planning need income or use of some of their investments, certainly if they’re in retirement sooner rather than later and that would be a justification for diversifying into investments that are more stable with the expectation that they will not provide as much longterm growth as a result of that increased predictability.
Well, as you focus your gaze to 2025, you can’t help but think about New Year’s resolutions. You walk into the gym, it’s packed. But let’s face it, they’re tough to stick to. In fact, in 2024, only 38% of Americans even made a resolution. Among adults under 30, that number rose to 66%. But the overall success rate was dismal. Fewer than 10% of US made it to the finish line by year-end. Here’s an even harsher stat. 23% abandoned that New Year’s resolution by the end of the first week. So as you’re listening to this, many New Year’s resolutions have already been broken here in 2025, and 43% have quit by the end of January.
I think the important question to ponder is why do we fail so often when it comes to sticking with these resolutions? Maybe our goals are too vague or too unrealistic. They’re too difficult. And that’s why I encourage you, whether you want to call it a goal or a resolution or a priority or an objective, make it SMART. And that’s an acronym. Specific. Clearly define what you want to achieve. Measurable. Make sure you can actually track your progress. Achievable. Set a goal that’s challenging, but realistic. Relevant. Ensure the goal aligns with your values. And then the T in SMART stands for time bound. Give yourself a deadline. And one of the most critical components of success once you’ve set a SMART goal is accountability. Share your goal with a trusted friend, with a family member or with an advisor. Maybe it’s a financial goal. Talk to your financial advisor about that who can help keep you on track. Creative Planning president, Peter Mallouk, and director of financial education, long-time Wall Street Journal columnist and founder of the HumbleDollar website, Jonathan Clements, had a discussion around practical financial actions you can take to potentially improve your progress in 2025. Have a listen.
Jonathan Clements: Let’s talk about charitable giving. Are there any New Year’s financial resolutions that listeners should adopt, Peter?
Peter Mallouk: Well, 91% of charitable giving is done with cash and the worst thing you can give to a charity financially is cash. Charitable giving, you want it to be things that have appreciated. If you have an investment account, it’s a taxable account, not an IRA, Roth IRA or 401K, but an account that’s subject to taxes. What you want to do is if you’re giving say $1,000 or $5,000 to a charity, instead of writing a check, take the stock that has appreciated the most and send that to the charity. You get the same deduction whether you give $1,000 of cash or $1,000 of stock, but you also escape capital gains taxes by giving the appreciated stock. So you get a double tax benefit for making the same gift. The charity then sells the stock and pays no capital gains taxes because a charity is tax-exempt. And so this is the kind of thing that you want to think about, not just at the end of the year but throughout the year. We don’t all do our giving in the last week of the year. So these tips we’re talking about, they’re a great way to start the year off and get that mindset heading in the right direction.
Jonathan: And something that we also mention quite frequently on this podcast is if you want to give appreciated stock, but you want to give maybe more than your charitable budget is for 2025 and you’re thinking about giving two or three years worth of charitable contributions, you may want to use that appreciated stock to fund a donor-advised fund. Put a big chunk of that stock into the donor-advised fund in 2025 and you might use it to fund your charitable contributions for the next three years.
All right, Peter. And finally we’re at that time of the podcast. Time for your tip of the month. What do you have for me, Peter?
Peter: All right. Take the bucket list that you have, that long list of things. Some people have five things on their bucket list, some have 25 and a lot of them are pegged to happen in retirement, and pull at least one of them up to the next 18 months. Find one of those things that you’ve been putting off, especially if you’ve got a long list of things, and there’s really not a legitimate excuse. If you have the money, if you have the vacation time, pull one of those bucket list items up. This is a very hard thing to think that a decade from now you would regret. How about you, Jonathan?
Jonathan: Well, before I get to it, Peter, I’m going to put you on the spot. So what is the bucket list thing that you’re going to do in the next 18 months?
Peter: I woke up here as I got older and realized my youngest kids just went to college. I’m like, “Oh, I’m going to finish seeing the world.” I feel like I’ve seen the world and part of that’s because I travel every week for work. So I have seen the whole country. I’ve been to all 50 states. Most of them, many, many times. It’s an incredible country. But I have not seen the world, it turns out. Japan, no China, no Asia, no South America. It really was eye-opening to see how much time I let lapse without really seeing the world. And so I’ve really bumped up to committing to getting a couple places outside of North America a couple times a year and I started that this last six months.
Jonathan: That’s great. And finally, my tip of the month. One of the things that I’ve been doing over the last couple of years is a number of home improvements to the home I have here in Philadelphia. And when you make those home improvements, it’s really important to keep good records of what you spend because you can take those home improvements and add them to the cost basis of your home. No need to be too persnickety about this. Just keep the receipts, put them in an email folder, whatever it is. Just have an ongoing list of the home improvements that you’ve done and down the road when you sell and depending on your tax status, whether you’re single or married filing jointly, you may have a gain that’s bigger than the 250,000 or $500,000 that’s allowable, and those receipts may allow you to pay less in capital gains taxes when you sell your home. And that’s going to be a big issue for a lot of people given the housing appreciation we’ve seen in recent years.
John: Great advice from Peter and Jonathan. If you’d like to listen to their monthly podcast, it’s titled Down the Middle, and you can find that on our website at creativeplanning.com or wherever you listen to podcasts.
We’re talking about investing resolutions for life. These are principles you can stick to for the long haul, not just for the new year. And joining me is a special guest, one of my friends, Kenny Gatliff. Fellow colleague here at Creative Planning, chartered financial analyst and senior portfolio manager. Kenny has nearly two decades of professional investing experience, helping clients build smart, disciplined investment strategies that stand the test of time. Kenny, welcome to the show.
Kenny: Thanks, John. It’s been a little while. I’m glad to be back on.
John: It’s great having you back. What’s the biggest investing mistake you’ve ever seen someone make or one of the biggest and maybe better yet one that you’ve made yourself?
Kenny: I started investments right before the global financial crisis, so I started in about 2007 managing portfolios, and the one that always sticks with me is we had a client that in 2009, right near the bottom, took their portfolio from fully aggressive, all into stocks, they had a long time horizon, and moved it almost entirely into bonds.
John: Wow.
Kenny: And at the end of 2009, John, if you remember, the market dipped March 9th, bottomed out. It was down about 25% for the year and then came back like gangbusters the rest of the year. And so this client calls me after the first week of January and says, “Hey, I’m looking at my statement. Something must be wrong. I lost, I think it was 15 or 20% on the year. What happened here?” And initially we were like, “Ah, it must be a clerical error or something.” And then we looked and it was just a result of he took on all of that downside risk the first few months there, got too scared, got out of the market right on March 9th, right at the bottom and missed that 50% increase. So in one year he underperformed the market by 50% just based on that one maneuver. And that really highlighted to me how quickly and easily you put yourself in a bad position just by making one honest mistake.
John: You could do everything right for 49 years and one of the 50 years you do what you just described and it blows up your returns. If someone could only stick to one investing resolution for the rest of their life, Kenny, would it be this stop market timing or what would you say that would be?
Kenny: I would say just in general, stay the course. And so whatever that course is, whatever you’ve decided is your investment approach, your plan, stick with it. The key to being a successful investor is not doing something dumb. But the caveat there is oftentimes the “dumb thing” is not something that would be traditionally considered dumb. I think a lot of people say, look, the market at 2008, everything was falling apart, the market’s down 40%. A lot of people would’ve said, yeah, the smart thing is take your chips off the table while things are chaotic. It didn’t seem like a dumb move. And I think most people say, “I didn’t buy this penny stock with my entire life savings or giving it to some con artist down the street. I didn’t do something really dumb. I was being prudent there. I was taking risk off the table.” And so I think that’s really-
John: Subtle mistakes.
Kenny: Yeah, it’s the subtle mistakes and that’s why you set that course and you stick with it no matter what happens. You don’t let the greed and fear drive your decisions.
John: Yeah. If you’re going to make a change, it would be due to situational change or objective change, not how most people are making those maneuvers, which is, I’m scared or I think the market’s going to do this, and then they’re switching their risk around. And it’s almost inevitable that they’ll do that at the wrong time because your emotions are going to want to get more conservative when the markets are down and get more aggressive when the markets are up because we’re human beings.
You just reminded me of something. Just this week I met with someone who’s done a fantastic job saving, but she basically has everything in CDs and she was bragging to me, “I’m getting four and a half to 5% on all of these CDs so I don’t have to take any risk,” in her mind, “and I can get these great returns.” She doesn’t need any of this money for decades. She doesn’t realize, again, to your point, the subtle mistakes, the last two years she’d be up 50 or 60%. In a portfolio with some growth, she’s up nine and doesn’t see that lost 40 or 50% of growth that will then compound the rest of her life that she’ll never have as a mistake. She didn’t get scammed. Her portfolio is still there and in fact it’s up a little bit. So she’s like, “I haven’t made a mistake. This was brilliant.” No, no. You’ve cost yourself a million dollars and then 30 years of that million dollars compounding.
Kenny: Yeah. Opportunity cost is as big or sometimes bigger risk than actual just downside volatility. I think that’s what a lot of people do get wrong is saying, “I would rather only make 9% and miss out on 50% than have that time period where my portfolio is down 30%.” But when you look at the history of the stock market, yeah, you’re going to have times where it’s down 20, 30%. Oftentimes once a decade we see that. But historically it’s always bounced back up. And so what is really the risk, having it go down for a slight time period when you have the time to make that back up or missing out on those gains that you’ll never get back. And that’s what I think people get wrong a lot.
John: What’s the biggest way people you think get it wrong when it comes to diversification?
Kenny: The idea of diversification is don’t keep all your eggs in one basket. You don’t want one thing to break all the eggs. You don’t want one market downturn. If you own one single stock, obviously you’re taking on a lot of risk of that one thing going down. But I think what people don’t realize is the idea of owning just a lot of stuff does not mean diversification. And we see this all the time, John. Hundreds, probably thousands of portfolios come through the door over the course of our careers and so many people own a bunch of individual stocks, sometimes 20, 30, 50 individual stocks and they come in saying, “I’m already diversified. I can check that box.” And then you look at their holdings and they’re all incredibly similar. And oftentimes what we do see is those names that everyone knows that either done well recently or are just well-known companies.
And so what we end up seeing is, well, they’re all US companies, they’re all large companies, they’re all growth oriented companies and oftentimes they’re all in the tech sector. So if you think that’s diversification because you hold 20 different names, what you don’t realize is all of those names oftentimes do move down together and so you’re not really protecting yourself. And so I think what we try to share with investors is you need to own a lot of stuff, but that stuff has to have some negative correlation, meaning it’s not going to always move lock and step with one another. You need parts of the market that when your growth tech stocks are going down, aren’t going to go down at the same time. And so finding those segments of the market that aren’t as highly correlated is really important for diversification and that is truly what gets you the benefit of diversification.
John: Kenny, for investors who are checking their accounts regularly, logging in every single morning, up with the market opening, watching CNBC, whatever it might be, and then they start freaking out when the market dips, what’s your best advice for them?
Kenny: Just like anything in life, it comes back to expectations. This is where if you create a financial plan or an investment plan, having those proper expectations as to over the course of this investment plan, whether you have five years, 10 years, 30 years, what are your expectations for what that portfolio is going to do. If you get in and invest all your money in the stock market and think it’s going to go up every single day, every single year, you’re going to freak out when you see those down years. And we know historically the market’s up three out of every four years, but guess what? That means one out of every four years it’s down. And as I mentioned earlier, usually about once a decade we see a year or two where it’s down 20 or 30% and those are going to happen and that’s kind of the cost of doing business. Risk and return are related and it’s that downside volatility that allows us to get the great returns we’ve seen in the market. But if you’re not expecting that, if you think anytime the market’s down 10% that’s a time to panic, you’re going to be in a world of hurt going through a lifetime in investing.
John: If you look at 10 year periods, you’re up 97 to 98% of the time historically speaking. Five year periods, about 90%. You just mentioned, one year periods about 70, 75% of the time you’re up. But if you start taking that all the way back to every day for people that are looking every single day, the market’s only up 52 or 53% of the time. The only difference in your happiness is how often you’re looking at it.
Kenny: If you’re invested in the stock market, you need to have a long time horizon in order to withstand the downside volatility. So that means at least five, sometimes 10 years to give your plan the time to go through those dips. There’s just a disconnect there. We’re saying, okay, yes, I’m invested for 10 years, but I’m going to look at the performance every day. I think once you explain it in those terms, people will say, “Oh yeah, that does make sense.” But I think most people just don’t connect those two ideas. They say, “I’m investing in the stock market. I want to see what my account balance is every single day.” And then when you have a bad day, most people are okay, but if you have a bad week, a bad couple weeks, well that’s where the freak-out happens.
And I think most people don’t understand how volatile the market is. One in every four years is down, people are like, “Oh yeah, I can handle that.” But I think even beyond that, even in years where the market is up, there’s a greater than 50% chance that at some point during that year, the market is going to decline by at least 10%. Let me say that again. If the market is up for the year, you’ve probably still withstood a 10%. The correction territory. So it’s more common than people think. The reason you might not even notice it unless you’re paying attention is just the fact that the market generally does rebound pretty well and if you’re looking at those longterm graphs of stock market, it looks like it’s that hockey stick growth, it’s just straight up, until you zoom in and do see that volatility.
John: Yeah. I mean, I don’t know many people that own a commercial property that they plan to hold for 20 or 25 years that ask to get it reappraised every single day. They know that it’s going to bounce around in value in the short term, but that it’ll probably do pretty well over the long run. And that’s where I think the liquidity of the stock market can be more of a bug than a feature. People think that’s such a great thing that they can click a button and liquidate a $5 million portfolio without any costs in a second, but that sometimes can be one of the negative aspects of the market because it allows us so much freedom to make changes on a whim that you wouldn’t do with other asset categories. For example, real estate. What’s your take on rebalancing, Kenny? How often should someone actually do it and what’s the risk if they don’t?
Kenny: Yeah. This is a really good question and I think there is some misnomers on this as well in that people say rebalancing is important. I think almost everyone agrees with that, but I think what people generally do is say once a year or sometimes once every couple years, just take a look at my portfolio, look at the targets and put it back into balance. And this 100% is better than not doing anything. If you’ve got some fixed income in your portfolio, well, one of the great things about we said the stock market is it does go up a lot and over time, if you have 50% in stock, 50% in bond, well that 50% in stock, because it’s growing faster than bonds, is going to represent more than 50%. If you let that hold long enough, 10, 20, 30 years, all of a sudden you’ve got a much more aggressive portfolio than you wanted to.
So rebalancing at any point is definitely good over the course of a lifetime. It’s important to take it a step further than that and say, when can rebalancing be actually additive to the portfolio? And that’s where having a random date the first week of January or whatever that may be is not the most efficient way of doing it. I talked about that client at the very beginning. We saw in 2009, we saw this again during COVID in 2020 where the market can drop 20, 30% in a month or two months and be all the way back up just a few months later. And so in either of those years, if you just rebalanced in January and looked at it again 12 months later, you probably didn’t even have an opportunity to rebalance. But if you’re actually looking at it saying, okay, well let’s look at some thresholds and if stocks are down, well that makes more sense to rebalance.
Take some of that dry powder from your bond portfolio and buy those stocks while they’re on sale. Well, not only are you mitigating risk by doing this through your lifetime, but you’re also being additive by buying those stocks when they are on sale, when they’re down considerably. And we did see a little bit of a performance boost. Pretty much anytime we saw a 20 or 30% market drop, if you run the numbers back on that and you rebalance during those times, not just at some random time during the year, it did add to the portfolio.
John: Kenny, if someone is listening today that feels like they’ve already made every mistake in the book … I meet with a lot of investors and they have a lot of trauma. They’re 60 and they’re like, “If I knew what I knew now, John, I would’ve done this, this and this totally differently.” And sometimes they feel a little bit defeated and I try to share with them, even our clients that have $100 million in the ultra affluent group, they all have situations now with hindsight that they go, “Well, I wouldn’t have done that the same.” So join the club if you’ve made mistakes. But can you give the listeners some resolutions that they can actually stick to not just for this year but for a lifetime?
Kenny: Yeah. I think it goes back to what said before is that there’s this idea that I’ve made these mistakes and it’s too late for me to do anything different. I’ve already missed the boat. That ship has sailed. All of the old adages that people talk about. I don’t think that is actually true. And I think no matter what age you are, no matter what mistakes you’ve made, it’s always the right time to start investing correctly or wisely or prudently, however you want to phrase that. And there’s a lot of mistakes to be avoided in the future. And so I think for this person who has made mistakes, do a couple of things. Number one, own those mistakes. Say, “You know what? I did make these mistakes in the past, but I can do the right thing now and move forward.” And then if you are prone to mistakes, if you are emotional with your investing, well that’s a great time to take yourself out of it and kind of what we said before, if you can find someone you trust, hire that out, create a plan, manage your investments, don’t interfere and trust that that plan that is in place for you is going to do what it’s supposed to be doing and realize that if you made mistakes in the past, most likely you’re going to in the future again if you don’t do anything different.
John: Kenny, thank you so much for joining me here on Rethink Your Money. I really appreciate you coming on.
Kenny: Yeah. Thanks for having me, John.
John: Let’s explore some pieces of common wisdom that while often true in part, deserve a deeper look. Let’s start with the notion that intelligence is the key to financial success. Warren Buffett said it best when he said the most important quality for an investor is temperament, not intellect. Why? Because your ability to control fear and greed, to stay calm during volatility, which is inevitable, and to stick to a plan is far more critical than knowing how to calculate discounted cash flows or a sharp ratio. In fact, in my personal experience as a wealth manager, many highly intelligent people actually struggle as investors precisely because they’re smart. They assume that if they work harder, they study more and outthink the market they can outperform. But unfortunately for you brainiacs out there, investing doesn’t work like that. Overconfidence, in fact, often results to over trading and research shows a clear correlation between higher portfolio turnover and not higher returns, lower returns.
Think of it like parenting. You might know all the latest child psychology theories, but if you lose your patience every time your toddler spills their milk, all the knowledge isn’t going to matter. By the way, I never lose my patience with our seven kids. I’ve heard of other people losing their patience. But isn’t that a great visual? Your disposition and your temperament as a parent is more important than every piece of parenting knowledge that you happen to have in your head. And the same goes for your portfolio. It’s not what you know, it’s how you act. And if your decisions matter more than your intelligence, then understanding why you make the decisions that you do becomes a very important question to ponder. Enter money scripts. Those subconscious beliefs that you have about money often formed in childhood through your experiences and your environments.
We all have them. My colleague Garrett Workman, a certified financial planner here at Creative Planning, wrote a fantastic article about money scripts. The word money itself can bring up negative emotions and feelings for many people. In fact, money is the most cited factor that negatively affects US adults’ mental health. The ripple effect of your money scripts impact things far outside of your financial world. Reflect back on your childhood. How did your parents think about money? What was your environment like, your socioeconomic status? For example, some children are taught that they should always save money and try not to spend it. In other households, money was taboo and it wasn’t discussed at all. You may have even experienced that when money was brought up, it led to arguing or it created tension in your family. There are also these financial flashpoints that have a significant impact.
I mean, think of it this way. If you grew up in poverty and having uncertainty of where your next meal would come from, having a parent lose their job or losing your house or parents getting divorced due to financial stress can obviously have a huge impact on your financial beliefs as an adult. And if you never reflect on that, you never identify those things, it can creep into your present relationships. And while there are several money scripts, there are four main categories, money avoidance, money worship, money status and money vigilance that I want to briefly describe, and think through as I’m doing so which category you think best describes you. So let’s start with money avoidance. People with this belief think money is bad or they feel they don’t deserve it. They might experience guilt about financial success or avoid dealing with money altogether. This often stems from seeing negative behaviors around money in childhood, as I just described, like arguments or maybe unethical practices.
Next, money worship. This is the belief that more money equals more happiness. And while money certainly can solve some problems, research consistently shows that after a certain point, once your basic needs are covered, additional income doesn’t lead to greater happiness. Money worshipers often fall into the trap of compulsive spending, retail therapy, trying to chase a satisfaction that will never ultimately come from their money worship. Number three, money status. This is the idea that, just like it sounds, your self-worth is tied to your net worth. This belief can lead to unhealthy competition or to overspending to keep up appearances. It’s like the person who upgrades their car every two years to stay ahead of their neighbors, even if it means taking on unnecessary debt. So we’ve got money avoidance, money worship, money status, and finally, money vigilance. This group believes money should be saved, not spent. And while caution is good, excessive vigilance can lead to anxiety and an inability to enjoy life’s experiences.
This is the person who has millions in the bank but won’t spend a dime on a vacation because you just never know what might happen next. And while these categories certainly don’t capture the full complexity of human behavior, you don’t fit perfectly into one of these boxes. It’s a useful framework for you to have some self-reflection here at the beginning of 2025.
Our next piece of common wisdom that I’d like to rethink. If I’m a family with special needs, well then I need a trust. Well, what type of trust? Just a revocable trust? Does it need to be an irrevocable trust? You see, estate planning is important for everyone, but for families with a child or dependent with disabilities, it becomes a completely different ball game. You can’t just throw together a regular trust and call it good because a poorly structured estate plan can actually accidentally disqualify your loved one from government benefits like supplemental social security and Medicaid.
So what makes a special needs trust different? Here are a few key benefits. The first is that it preserves government benefits, and this is a big one. It allows your loved one to continue receiving government assistance even if they inherit assets. Many of these benefits are income or net worth dependent. Meaning if you have too many assets, the government says, “Well, you don’t qualify. You don’t need this benefit.” But you can have your cake and eat it too if it’s structured properly. You want to shelter any inheritance from assets that will be counted toward their resource limits. Number two, it provides supplemental care. A special needs trust isn’t there to replace benefits, it’s designed to supplement them. Think of it as a way to provide extras like better housing, therapy, education, even trips to Disney World. Whatever it might be, the trust enhances their quality of life without jeopardizing that critical assistance.
It ensures control. You get to choose a trustee who will manage the funds responsibly and ensure that your loved ones’ needs are met for the longterm. You can customize care. Every family situation’s different. Maybe your child or grandchild, they have unique healthcare needs, or you want to ensure that funds are handled for decades to come. A special needs trust is flexible and designed to fit your unique family’s life. And finally, it provides protection from creditors and mismanagement. Assets in a properly structured special needs trust are often protected from outside claims and they can’t be squandered. Let’s keep with the estate planning theme and rethink briefly two other pieces of common wisdom. Really more misconceptions around estate planning. The first was a conversation that I just recently had with a client who believed that a financial power of attorney would still be valid after death. I think people intuitively understand this with a medical power of attorney because they don’t need any medical decisions made anymore once they’re gone, but they don’t understand this on the financial power of attorney side.
Imagine you’ve named your sibling as your financial power of attorney and they’re managing your accounts while you’re incapacitated, but once you pass, unless that person is also named as your executor or your trustee, they lose all authority and this is why it’s crucial to have a comprehensive estate plan that clearly outlines roles and responsibilities and you want that plan integrated with your financial plan. You want your certified financial planner talking with your estate planning attorney, talking with your CPA to ensure that all of these components that have significant overlap and affect one another, that they’re being coordinated.
Lastly, let’s rethink that an audio or video recording can replace a will. This one comes straight out of Hollywood. A tearful video confession might make a great drama, but it won’t hold up in court. For a will to be valid, it must meet specific legal requirements. I just read an article about this very thing happening and then everything was contested because look, they had this recording that I have, and the judge is like, “That doesn’t matter.” And the person says, “Well, look, clearly this is what they want.”
Sorry, but it’s not legal. It must be written and signed by the person creating it. It has to include the signature of at least two witnesses who are not beneficiaries, and then it has to comply with state specific laws. When it comes to estate planning, you have all the federal laws, but then also state specific laws, which is why, generally speaking, if you move your domicile, you lived in Minnesota your entire life, but now you’ve moved to Arizona and that’s your primary and legal residence, you want to meet with an Arizona attorney because there are differences between Minnesota and Arizona. The takeaway for you regarding this conventional wisdom that’s often wrong around estate planning, find an experienced estate planning attorney to ensure that your documents are legally binding and reflect your true intentions. Oh, and don’t forget, by the way, to review all of your beneficiary designations, which will supersede in almost all cases, whatever you have on your estate planning documents. Make sure those are current and up to date.
Over the past year, I shared 52 easy to execute, simple tasks to improve your financial situation. They’re practical, they’re actionable. Some of them only take a couple of minutes. Don’t worry, I’m not going to quiz you on how many you’ve actually completed, but I’m guessing it wasn’t all 52, and that’s okay. So here’s your task for this week. In fact, it’s your task for this year. Go back and review those 52 steps. They’re all posted to the radio page of our website at creativeplanning.com/radio. Maybe you’ve completed 20 of them. Great. That leaves you with 32 to tackle this year. You could knock out one every week or two and still make a meaningful impact on your finances by the end of 2025. I assure you, if you actually execute all 52 of those things, you will make tremendous progress from where you are today.
Now, as a bonus, here’s a great task to revisit as you start the new year. And it’s intuitive, it’s kind of simple, but that is get a game plan together for this year. Whether you’re figuring out where to save money, you’re deciding maybe a little bit more advanced between Roth or traditional side of your 401k or addressing your tax strategies, I want you to have a written detailed financial plan. Think of this like an NFL team heading into the playoffs. The stakes are higher. There’s no room for winging it. Every successful team has a game plan. And then you make adjustments and you analyze your opponents and ensure everyone is on the same page and your financial life deserves the same level of preparation and intentionality as your favorite football team. So if you don’t already have a written, documented financial plan, that’s the only task you need regarding your finances. That’s it. Get one from an independent fiduciary, a certified financial planner to create a plan that integrates your investments, your taxes, and your estate planning. Again, all of those 52 tasks are available on the radio page of our website at creativeplanning.com/radio.
It’s time for listener questions, and Britt, one of my producers, is here to read those. Hey, Britt. How’s it going? Happy New Year. Let’s jump into our first question.
Britt Von Roden: Hey. Happy New Year, John. Our first question of 2025 is from Jason in North Dakota. He mentioned that he sees the Fed’s cut interest rates again and wants to know if you can explain why and how when this happens, mortgage rates go up.
John: Well, the Federal Reserve cut rates in response to signs of a slowing economy. Now, I’m using that loosely because things are still pretty good. Maybe unemployment ticked up slightly or they’re trying to thread the needle certainly on achieving this soft landing, getting inflation under control without throwing us into a deep recession. Here’s the interesting dynamic. While the Fed may be cutting rates to stimulate the economy, the bond market operates on its own set of rules. Mortgage rates are tied more closely to the yield on 10 year treasury bonds, which are influenced by factors like inflation expectations and global demand for US debt. So if bond investors think inflation will remain sticky, they’ll demand higher yields to compensate, which pushes mortgage rates higher, even if this is happening simultaneously to the Fed cutting short-term rates. It’s like being at a party where the host turns down the music, but someone in the back turns it back up because they think the vibe isn’t quite right. Over the last year or two, I’ve answered this question a lot. You’d think they’d work together, but they don’t, and it’s why we often see mortgage rates stay high or even rise. During this time, the Fed has been cutting and that’s likely what’s happening now as well. All right, Britt, let’s go to our next question.
Britt: Our next question is from Jonathan in Austin. He also says, happy New Year, John, and wants to know if you have any advice on how he can grow his wealth this year. He shares that he’s 42 and married with no kids and that he has 114,000 in a 401k and $1,400 in credit card debt.
John: Well, Jonathan, it sounds like you’re building some momentum. You don’t have a lot of debt, which is great, but first I’d say you knock out that credit card debt. It’s only $1,400. It’s not a huge balance, but it’s probably at a high interest rate, so pay that off as quickly as possible while ensuring you’re still contributing enough to your 401k to get any employer match because that’s free money. It’s 100% return guaranteed, which you can’t get anywhere else, and so you don’t want to leave that free money on the table. Once the credit card debt is gone, then focus on building your three to six month emergency fund. This will ensure you don’t have to rely on credit cards in the future if an unexpected expense arises. In fact, if you had a lot of credit card debt, you’ll talk with different certified financial planners who are both smart, both know what they’re talking about, who differ slightly on this.
I personally like to have you build up at least three months of an emergency fund and make minimum credit card payments prior to paying off all your credit card debt, which mathematically doesn’t make sense because you’re certainly not going to earn in a savings account or a money market on that emergency fund as high of an interest rate as you’re having to pay the credit card company. But if you don’t get that emergency fund built up and you only focus on paying down your credit card debt, along the way, something unexpected occurs and now you have no way to pay for it other than that credit card. But again, your balance is only $1,400. I would just knock that out, then build up the emergency fund. After that, ramp up your retirement savings and aim to contribute at least 15% of your income. Maybe consider using the Roth side of your 401k.
Because as you mentioned, you’re married, so unless you’re making nearly $400,000 a year, you will be in a 24% tax bracket or lower. It doesn’t impact the match that’s being provided by your employer. And this allows you to pay taxes now and allows your investments to grow tax-exempt moving forward. And here’s a quote to keep in mind that applies well. The best time to plant a tree was 20 years ago. The second best time is now. Your financial tree has already been planted and now it’s time to nurture it by staying disciplined, avoiding lifestyle creep and investing consistently. It comes back to what I just encouraged all listeners to consider. If they do not have a written document, a detailed financial plan, get one. That’s what I would advise you do. Then you can reverse engineer exactly how much needs to be saved so that you accomplish whatever financial goals that you have. All right, Britt, who do we have next?
Britt: Tom from Chicago is our next question, and he shares that he is retired, debt-free and sitting on $200,000. He says that he has no interest in investing more money in the stock market, John, and wants to know if you have any recommendations on what he should do with this money.
John: Well, Tom, this is an impossible question to answer. I do appreciate the question, but it depends entirely on what you want that money to do for you. For short-term reserves or a specific purchase in the next couple of years, you’d want to keep it in something stable and also liquid, like a high yield savings account or a money market fund or short-term treasury bonds or short-term CDs. If you’re open to taking a bit more risk but still want income, you could explore things like private credit or municipal bonds if you’re in a high tax bracket. Those could provide some steady yields. For the munis, that may provide some tax advantages as well. But if you don’t need the money for 20 or 30 years and you’re adamant about avoiding the stock market, I’d say why? Why are you adamant about avoiding the stock market which has earned 10% a year for the last 100 years on average?
Of course, past performance, no guarantee of future results, but maybe you consider real estate or private equity or some longer term hold that has low correlation to the stock market. Because maybe the reason you don’t want to be in is because you already have a lot of money invested there. Those can offer the potential for longterm growth opportunities and they certainly come with their own risks and liquidity constraints, so time horizons would be important, but the key is aligning this $200,000 with your timeline and with your goals. Without knowing more about your specific situation, that’s the only answer that I can provide at this time. But I’d recommend sitting down with a financial advisor who can help you build a plan tailored to your needs and identify how does this pot of money fit into the bigger picture in the rest of your investments and your estate planning objectives. That might mean you’re giving objectives if you’re charitably inclined or your tax situation or your estate planning situation, your liquidity needs. This money is a small piece of a much bigger picture. All right, Britt, who do we have for our final question?
Britt: Our final question is from Nancy in Syracuse. She says that she took your advice, John, and encouraged a financial conversation with her family over the holidays. She shares that it went surprisingly well, but now she has a question for you. If she inherits her parents’ home, will she have to pay off their outstanding debts before she can sell the property?
John: This is a great question, Nancy. Here’s how it works. When someone passes away, their debts don’t automatically transfer to their heirs. Instead, their estate is responsible for settling those debts. So if your parents’ estate has enough assets to cover those debts, the executor will use those assets to pay off creditors. If the home is part of the estate and there’s an outstanding mortgage or other debts, those would need to be resolved before you could sell or keep the property. You might have the option to refinance the mortgage into your name or pay it off using other assets in the estate depending upon how it’s structured.
It’s also worth noting that certain types of debt like federal student loans are discharged upon death, but mortgages and most other liabilities are not. This is why having a well-structured estate plan is so important and ensures that assets are distributed efficiently and minimizes headaches for loved ones. Talk with a great estate planning attorney. If you’re not sure where to turn, we have 60 here at Creative Planning who would be happy to help as well.
If you have financial questions, you can email [email protected]. Let’s end with a reflection inspired by the great entrepreneur, Naval Ravikant, who said, “When you’re finally wealthy, you’ll realize it wasn’t what you were seeking in the first place.” Creative Planning president Peter Mallouk and chief market strategist Charlie Bilello, talked about this recently on their podcast. Have a listen.
Charlie Bilello: Let’s go to lesson number 10, and this is more like a philosophical exercise. He put it at the end of the tweet story. When you’re finally wealthy, you’ll realize that it wasn’t what you were seeking in the first place, but that’s for another day. And really, I think what he’s saying here obviously is find a higher purpose and I have this post that he put on X a few months ago of a man chasing money when he’s younger, he gets a little older, he’s still chasing it, and then he’s at the end of his life and he’s got all of the money. And then what?
Peter: Yeah. I think we’re all driven by success and we think that wealth will solve a lot of problems and people who say it doesn’t solve some problems are liars. It does solve some problems.
Charlie Sure.
Peter: You go to bed at night-
Charlie It solves your money problems.
Peter: Yeah, it solves your money problems and it solves a lot of emotional things too. It’s not just that you don’t have to make your kid choose one sport or another. They can do both sports if they want to, and you can afford to go to camp or you can afford to go on a vacation. That solves a lot of emotional things too. But Naval and every book on this subject that has even a slight philosophical bend shows that it’s not the solution, right? It does not breed personal contentment. And personal contentment is where happiness comes from, right? So that’s all about your relationship with yourself and others. So money can bring you some peace, it can help you have a lot more security and in many ways more fun, but it is not going to bring contentment for most people.
John: Thank you, Peter and Charlie. We often think wealth will bring happiness, but true fulfillment comes from deeper, non-material aspects of life. Comes from relationships and personal growth and pursuing passions. Money’s a tool and it can provide comfort and it can provide opportunities, but it can’t buy purpose or meaning ultimately in your life. I want you to think about the most joyful moments in your life. Were they tied to your bank account or were they moments of connection and love and personal achievement? As you embark here in 2025, remember to align your financial decisions with what truly matters to you. And as always, we are the wealthiest society in the history of planet Earth. Let’s make our money matter.
Announcer: Thank you for listening to Rethink Your Money, presented by Creative Planning. To hear past episodes or learn more about the topics and articles discussed on the show, go to creativeplanning.com/radio. And to make sure you never miss an episode, you can subscribe to Rethink Your Money wherever you get your podcasts.
Disclaimer:
The preceding program is furnished by Creative Planning, an SEC registered investment advisory firm. Creative Planning, along with its affiliate, United Capital Financial Advisors, currently manages or advises on a combined $300 billion in assets as of December 31st, 2023. John Hagensen works for Creative Planning and all opinions expressed by John or his guests are solely their own and do not necessarily represent the opinion of Creative Planning. This show is designed to be informational in nature and does not constitute investment, tax or legal advice. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on the show, will be profitable or equal any historical performance levels. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed. If you would like our help, request to speak to an advisor by going to creativeplanning.com. Creative Planning Tax and Legal are separate entities that must be engaged independently.
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