The Human Investing Philosophy: A Conversation With Will Kellar

Will Kellar is a certified financial planner and partner at Human Investing, a financial advisory company based in Lake Oswego, Oregon. With 10 years of industry experience, Kellar is driven by the opportunity to serve hardworking people through advocacy, problem-solving, and advice. He is a CERTIFIED FINANCIAL PLANNER™ practitioner who takes pride in making a positive, tangible impact on his clients' lives.

Kellar has authored numerous articles for the Human Investing Blog, covering a wide range of financial topics. These include making the most of windfalls, recession preparedness, bear market strategies, retirement planning, and investment risks.

Human Investing manages over $2 billion in assets across 2,111 accounts, catering to a diverse range of clients, including high-net-worth individuals and charitable organizations. The company offers financial planning, portfolio management, and pension consulting services, with fees typically based on assets and hourly rates.

How to make the most of your windfalls

Receiving a windfall can be both exciting and scary at the same time. To make the most of your windfall, consider the following:

Build a financial plan

Creating a financial plan will help you avoid the pitfalls of emotional or poor decision-making by creating a roadmap. This roadmap will act as your guide, helping you stay on track and get the most out of your newfound wealth. By creating a plan, you will cover many topics that matter to you, such as your short-term goals, paying off high-interest debt, and building an investment plan.

Assess your short-term goals

Consider any to-dos that you would like to achieve within the next few years. For example, buying a more reliable car, taking care of house projects, or boosting your emergency savings fund. It is crucial to evaluate these needs before investing, as the funds required to cover these goals may need to be kept as cash.

Pay off high-interest debt

Focus on paying off any high-interest debt, such as credit card debt, some student loan debt, or personal loans. Receiving a lump sum provides an opportunity to reduce these debts aggressively.

Build an investment plan

Avoid analysis paralysis, which can lead to leaving your windfall as cash. Build a personalised investment plan that aligns with your goals and timeline to mitigate the permanent risk of holding cash. This is where a financial advisor can provide valuable expertise and advice.

Enjoy your windfall

Receiving a windfall should not feel like a chore. As you build your financial plan, it is perfectly fine to allocate some money for gifts and travel. Not only will this make you feel good, but it will also give you something to look forward to. Consider even small treats, as it will help you plan and budget for bigger things like travel. According to a survey by the Harvard Business Review, 80% of people derive a greater level of happiness when spending money on experiences rather than buying material things.

5 things you can do to get ahead of a recession

Will Keller is a certified financial planner and the founder of Human Investing, a fee-only financial planning firm. He is also a former financial advisor at Palmer Financial Group and has been featured in publications such as Forbes, CNBC, and Business Insider.

• Seek out core sector stocks: During a recession, it is advisable not to give up on stocks entirely. Some sectors, such as healthcare, utilities, and consumer goods, tend to be less affected by economic downturns and can provide investors with steady returns.
• Focus on reliable dividend stocks: Investing in dividend stocks can generate passive income. Look for companies with low debt-to-equity ratios and strong balance sheets.
• Consider buying real estate: A recession can present opportunities to invest in real estate. Lower home values during a recession may create buying opportunities for investment properties that can provide a steady stream of income through rentals.
• Purchase precious metal investments: Precious metals like gold and silver tend to perform well during market slowdowns, and their demand often increases during recessions, driving up prices.
• "Invest" in yourself: Use a recession as an opportunity to gain new skills or knowledge that could help you get a better job. Focus on paying down debt to reduce financial stress during an economic crisis.

It is important to remember that everyone's financial situation is unique, and it is always a good idea to consult with a financial advisor to determine the best strategies for your specific circumstances.

Do's and don'ts of a bear market

Will Kellar is a CERTIFIED FINANCIAL PLANNER™ practitioner and partner at Human Investing, a fiduciary advisory firm. He also serves as an adjunct professor of Retirement Planning at George Fox University.

Dos

• Take advantage of opportunities to invest cash and look for opportunities to tax-loss harvest.
• Keep an eye on your financial goals by rebalancing your investments and accelerating savings.
• Read a book about personal finance and investing, such as "The Psychology of Money" by Morgan Housel.

Don'ts

• Don't invest short-term cash.
• Don't watch your account or the market too closely.
• Don't panic sell—stick to your plan and remember that market declines are normal.

The risk of holding cash

Holding cash can seem like a good idea, especially in uncertain times. However, holding too much cash or cash-like investments, such as a CD or Money Market account, can be one of the most overlooked risks in long-term planning.

Inflation Creates Permanent Loss

Traditional wisdom says that holding on to cash is the best way to preserve your capital. While this can help reduce short-term volatility or loss of capital, cash is not as risk-free as it seems. Holding too much cash long-term can be costly. Inflation, defined by the Federal Reserve as "the increase in prices of goods and services over time", can silently and permanently deteriorate an investor's purchasing power.

Build a Diversified Plan

To combat inflation, investors need to think long-term and build a diversified investment strategy with an appropriate amount of stocks. While the stock market entails short-term volatility, it has never experienced a total and permanent loss.

This is not to say that holding cash is always a bad idea. Cash cushions are significant in financial plans, especially when considering short-term and long-term financial decisions. The amount someone should keep on hand depends on their living expenses, income instability, stage of life, and risk tolerance. This amount is typically three to 12 months' worth of living expenses. However, the risk associated with holding too much cash should be evaluated and mitigated through deliberate and personalised plans.

Advantages of Investing

The advantages of investing outweigh the perceived safety of holding cash. Investing is about preserving the value of your wealth against the erosive effects of inflation. A strategic balance between immediate cash needs and long-term investments is crucial for a healthy financial future.

Your pre-retirement checklist

Retirement is a significant milestone, and the transition into this new phase can be daunting for many. Here is a checklist to help you prepare for a financially secure and fulfilling retirement:

Understand Your Financial Landscape

• Take inventory of all your assets, including savings, investments, and properties.
• Review your investment strategy and ensure it aligns with your risk tolerance and timeline.
• Identify your retirement spending goals and create a realistic budget. Factor in essential expenses and discretionary spending, such as travel and leisure activities.
• Consider tax-deductible opportunities to maximize your savings and consult a tax advisor.

Plan for Healthcare Costs

• Understand Medicare coverage and enrollment options, and research supplemental insurance to address potential gaps.
• Set aside funds for unexpected medical expenses and consider health savings accounts (HSAs) for potential tax advantages.
• Evaluate long-term care insurance options to protect against significant healthcare costs.

Eliminate Outstanding Debt

• Focus on paying off high-interest debt, such as credit cards and loans.
• Consider paying off your mortgage or downsizing to a more manageable residence.
• Explore strategies to consolidate debts and minimize interest payments.

Define Your Retirement Needs and Income

• Decide on your desired retirement lifestyle and budget accordingly.
• Determine your income sources, including Social Security, pension, and other savings accounts.
• If you plan to continue working, factor in wages and create a paycheck replacement strategy.
• Assess whether you need to bridge the gap between early retirement and accessing Social Security and retirement accounts.

Estate and Insurance Planning

• Update your will and estate plan, including power of attorney and beneficiary designations.
• Review your life insurance policies and ensure they align with your current needs and beneficiaries.
• Understand your health insurance coverage, co-pays, deductibles, and prescription drug coverage.
• Explore Medicare options and supplemental plans to enhance your coverage.

Additional Considerations

• If applicable, devise a strategy for divesting from company stock or exercising stock options.
• Consider downsizing your home or relocating, and evaluate the associated tax implications.
• Begin developing a plan for a fulfilling retirement, including goals, purpose, and health.
• Practice being retired by taking an extended vacation and living within your retirement budget.

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