Five Financial Planning Takeaways from Peloton’s Meteoric Downfall

Pushing down on that speed knob and coming to a complete stop after all the Peloton drama.

If you haven’t a clue, clip in and I’ll catch you up.  Peloton is pressing that pause button on the production of its connected fitness products due to waning demand, and the market said, “Bye, Boo!

According to internal documents obtained by CNBC, Peloton has seen a “significant reduction” in global equipment sales due to consumers’ price sensitivity and increased competition.  Trading of PTON shares dropped 16% following the news, then trading halted twice on Thursday, January 20, 2022, before reopening at $24.02, down almost 25% from its IPO filing in September 2019. Peloton’s fall happens on the heels of news that Peloton execs and insiders cashed out on over $500 million worth of stock before the stock tanked, and a series of unfortunate and devastating PR events surrounding both the treadmill recalls due to the tragic death of a child, and the blowout from the Sex and the City reboot, And Just Like That…

Nevermore have I wished we were on an uphill climb ride instead of this tragic, descending recovery – nay, nosedive.

At first a fair-weather fan, I now admit to being a huge Peloton-head.  I follow instructors; post about rides, runs, and strength classes (sometimes the instructors write back!); give great high-fives on the leaderboard; I’m even featured on the Peloton Apparel website.  Don’t call it an obsession! Peloton has provided me an outlet to show up for myself in ways essential to navigating daily life during a global pandemic. Joining the Peloton community has been such a positive addition to my life, and seemingly, millions of other lives.

Peloton promotes self-empowerment and mind-body wellness. And while the news about Peloton is disappointing, I’m optimistic that they will harness these values and disciplined principles to recover strong.  As a financial advisor, I instantly drew a connection between Peloton’s challenges and our own financial setbacks, and how we, too, can recover strong.  Here are my five key financial planning take-aways:

  1. RECALIBRATE – It’s the start of the new year, which is a great time to check in with yourself. Didn’t max out your 401(k) last year but did sit on too much cash?  Max out those contributions at $20,500 ($27,000 if over 50), do that backdoor Roth IRA and put that money to work.  Ate outside the home for more than half of your weekly meals, including breakfast, lunch, and dinner?  Pare that back to ¼ of your meals or less, commit to meal prepping, and crack open those cookbooks your S.O. gave you as a *wink wink* *nod nod* Christmas gift.  Told yourself you’d work out more consistently but only threw on those Ross Rayburn sleep meditations to keep your weekly streak alive?  Prioritize your health and wellbeing by making movement part of your daily routine – studies show it could earn you more money!
  2. CHECK YOUR CADENCE, RESISTANCE, AND OUTPUT – We all want that PR (Personal Record) after a ride, but like the bike itself, overextending ourselves can get us nowhere. Peloton has worked to capture market share potentially to its own detriment.  Similarly, if we aren’t diligent and disciplined, we can lose ourselves in bullish market momentum, overbudgeted home renovations, or career plateaus.  Rebalance during market corrections and understand the risk implications to your portfolio if the market experiences downturns.  Consider various equity, fixed income, and alternative strategies that both support your lifestyle needs and prepare you for the unexpected, like Tabata intervals hiding in an Olivia Amato 45 min HIIT and Hills ride.
  3. BUILD YOUR STACK – A strong investment portfolio is built on the foundation of a healthy emergency fund. You add in those strength, stretch, and yoga classes to prevent injury.  Exercise discipline to save 3-6 months’ worth of your fixed expenses in a savings account (that doesn’t charge you for withdrawals).  You’ll want this ready when the layoffs.
  4. GET MORE BADGES – It’s bonus season! Celebrate those wins!  First, do a value comparison of an equity vs. cash bonus, if you are given the option.  Talk to your advisor about any tax implications related to restricted stock and vesting options as most have significant tax implications.  Second, consider this 80/10/10 rule.  80% of your bonus goes directly towards your financial goals (think padding your emergency fund, paying off high-interest debt, and maxing out your eligible retirement accounts followed by non-retirement taxable accounts).  10% goes to your favorite charitable organization.  And the remaining 10% – splurge!  Make making money more fun.  You deserve it!  When your money is managed well, you can spend guilt-free.
  5. GIVE HIGH FIVES – Giving leads to lasting happiness, according to research from the University of Chicago Booth School of Business and Northwestern University Kellogg School of Management. Similarly, a Fidelity study found that childhood giving traditions create happier, more charitable adults.  Consider ways you and your family can incorporate giving traditions into your lifestyle.  Volunteer as a group and socialize over service.  Another option to consider is establishing a Donor Advised Fund (DAF), which allows for an immediate tax deduction of up to 60% of AGI for cash contributions, and 30% of AGI for gifts of non-cash assets held more than one year.  This is a great option for those with significant cash windfalls who are charitably inclined.

As Robin Arzón, VP and Head Instructor of Peloton, says, self-care is never selfish.  Put yourself in a position to have options by staying financially fit and flexible.  Talk to us today and keep those wheels turning.

You can reach me at ben.galloway@greenspringadvisors.com and find me at #Bennydryl on the Peloton Leaderboard.  And yes, I PR’ed on Marcel Dinkins’ live run before writing this.

Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.

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