Katherine “Kathy” Bays Armstrong: “Investing During The Pandemic; What Should I Do With My Money Considering All of the Volatility and Uncertainty Today”

I would embrace the concept of Save, Spend, and Share for every family. This means that when you plan your annual budget, identify the income needed to cover your essential living expenses and debt. With your remaining income, reserve some for short- and long-term investing, such as saving for a house, car, college education, and/or retirement. Share the remaining funds with those less fortunate. We can start this simple concept with our children so that they practice it instinctively when they become adults.

As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Katherine “Kathy” Bays Armstrong.

Kathy a manages a successful financial planning practice at Heritage Financial Consultants in Hunt Valley, Md. She specializes in providing comprehensive financial planning in the areas of wealth management, retirement planning, education funding, personal risk management, business succession, and estate planning. Committed to the individual needs and priorities of her clients, Kathy delivers objective, straight-forward strategies to help them achieve their lifetime goals.

Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

I’ve always been a numbers person. Majoring in economics as an undergrad and earning an MBA shortly thereafter, I started my wealth management career with a local bank. Alongside this banking career, I also became a faculty associate teaching financial planning courses at the Johns Hopkins University in Baltimore. All was going along swimmingly well until I suddenly found myself in the midst of a personal crisis in the mid-1990’s. An unexpected divorce threw my life and bank account into tumult, and it wasn’t until that moment that my life priorities came clearly into focus. When we experience life-altering events — whether a divorce, premature death of a spouse, or even COVID-19 — it’s critical to immediately shift into an “urgency” mindset for planning. In my case, I did an assessment of where my family’s finances were at that time and then looked forward to what I wanted that to look like in 20 years. Those answers became the foundational cornerstones that provided a roadmap to follow in subsequent years. And it worked!

With that evidence of success, friends began asking me to help with their own financial goals and retirement strategies. I would respond, “sure, come on over on Saturday night; we’ll open a bottle of wine and figure it out together.” And with a yellow legal pad and a calculator, we would get to work!

Those trying years helped me discover my true passion of helping individuals and families build a financial plan that would help lead them through a retirement of financial independence. In 2004, I took the leap to open my own financial planning practice at Heritage Financial Consultants and have never looked back.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or takeaway from that story?

I am a creature of practicing what I preach. I taught my children at a young age the importance of financial responsibility, including the simple concept of saving, spending, and sharing what we are fortunate to have. As I look now at my adult children, it’s as if I’m looking at my reflection in a mirror. It is gratifying to see them raising their own children with those same important values. The lesson: Don’t underestimate your kids. They watch everything we say and do as role models.

Are you working on any exciting new projects now? How do you think that will help people?

I have established a “Multi-generational Program” for my clients. This means that while I work with my clients on their own situation, I also encourage the engagement of their adult children and their aging parents, where applicable. This does not mean that I share any personal information amongst the generations, but it opens the dialogue to fiscal responsibility. Parents of adult children are often worried that their kids are making the right financial decisions. I become that resource for them. Similarly, they worry about their aging parents running out of money. I work alongside my daughter, Elizabeth (also a CERTIFIED FINANCIAL PLANNER™ professional), as a mother-daughter team. Since I am a baby boomer and Elizabeth is a millennial, we are able to “connect” with them as peers specific to that generation — we personally understand the road they are walking down because we’re on that same road.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful toward who helped get you to where you are? Can you share a story about that?

Without question, my mother was my consistent champion. She gave me the confidence to pursue anything I wanted and convinced me that I would be successful at it. Her words are still with me today — never gossip, instead be a person of character; always do your best; strive to be a respected leader. If I was singing in the church choir, she said I had the best voice even if I couldn’t carry a tune. It was no surprise to her when I became the president of my church choir. When I joined the high school yearbook staff, I became editor-in-chief. When I was in college, I was elected a student senator. When I joined the Junior League, I was elected president. And a few years ago, Governor Hogan appointed me to the Governing Board of the Maryland Transportation Authority. I credit all of these successes to my mother.

Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?

I can certainly identify with the anxious feelings surrounding our country with the coronavirus pandemic. The uncertainty has created a mixture of loneliness, anxiety, and worry on many levels. This troubling time brings new meaning to “we’re all in this together.” For our family, we listen carefully to all of the directives from the White House and from our Governor. Primarily, the message is STAY HOME! Here are a few things that we are doing and recommend to support each other during this difficult period:

• Go through childhood family recipes and recreate them for your family. Share your family stories of what it was like in those years enjoying that delicious meal at your family dinner table and compare how it was then vs today.
• Connect regularly with children and grandchildren via phone, FaceTime and Zoom. It’s especially important to chat frequently with senior citizens. They feel isolated, lonely and confused.
• Send care packages to family members, including ingredients to make crafts.
• As long as everyone has quarantined for 14 days (yes, that even means the grocery store), get together with close family and friends for pot luck dinner and game night.
• Discover a new hobby.

Our family welcomed a new puppy, Sophie, into our home and we’re spending time together training her.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know, the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long-term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?” What would you say to them?

Portfolios are designed with uncertainty, market volatility and client objectives in mind. During times of uncertainty and market volatility, while it is prudent to “stay the course,” it is also prudent to review investment strategies (e.g., “What is my risk tolerance? When will I retire? When will I need this money?”) to ensure the most appropriate path. A new course of action is only warranted if it is more appropriate than the current path. Determining an optimal asset allocation based on one’s own situation, investment horizon and circumstances is the primary decision to achieve your goals. Bailing out of the markets is typically an imprudent action, often detrimental to reaching future long-term goals.

Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality, might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?

Rather than recommending any one sector, I would encourage the investor to hold a diversified portfolio that is properly allocated for the risk tolerance and time horizon for their own situation.

(*Note: Diversification may help reduce, but cannot eliminate, risk of investment losses.)

Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?

I would recommend diversifying across multiple sectors, rather than picking any one of them.

Are there any alternative investments that you think more people should look more deeply at?

Alternative investments are financial assets that do not fall into one of the conventional investment categories, such as stocks, bonds, and cash. Whether alternative investments are appropriate for an individual’s portfolio is a case-by-case situation. There is no “one size fits all” when designing a portfolio. To determine if alternative investments are appropriate, the investor should discuss the pros and cons with their financial advisor.

If a person in their thirties or forties came to you today and said that they have $10,000 that they want to put away today for a long-term investment, what would you advise them to do with it?

This is an important question for this age group because they typically have competing for financial needs, such as daily living expenses, college education, retirement planning, and perhaps credit card debt. Even with all of these financial priorities, time is on their side from an investment standpoint because they have decades ahead of them before entering retirement. If they truly have $10,000 available for long-term investing, I would encourage them to discuss their personal situation with their financial advisor, who can design an appropriate allocation for them based on their risk tolerance and time horizon. They may want to consider dollar-cost averaging the $10,000 over four months to even out some of the volatility. Where appropriate from a tax standpoint, they might also consider the advantages of investing in a Roth IRA, which would provide tax-free growth.

(*Note: Dollar cost averaging is a technique for lowering the average cost per share over time. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets. Dollar cost averaging involves continuous investments over time regardless of fluctuating price levels. The investor should consider his or her ability to continue to invest in periods of low price levels.)

OK, thank you! Here is a more general finance question. You are a “finance insider.” If you had to advise your adult child about five non-intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?

• Don’t close out old credit cards if they have a good payment history. Most of us have opened credit card accounts for unique purposes over the years. I opened my first credit card when I was in college because it provided a base for a credit score when I graduated and wanted to rent an apartment. However, years later we often are tempted to close out old credit cards because we are not using them anymore. Remember that once you close that account, you are deleting all of that good credit history you’ve built over the years. If you have old credit cards that have a good payment history, they should remain open.
• Prepare for the unexpected. People tend to think of themselves as invincible. And yet, we all know people who have lost a job, become disabled, experienced divorce, or had a premature death. To prepare for these unthinkable events, we suggest several things:
• Establish an emergency account of 3–6 months of living expenses. Hold this in a liquid account, and not in the stock market. Cash is king for an emergency account!
• Take an insurance audit to be sure your family is adequately protected in the event of disability or premature death.
• Update your estate planning documents.
• I’d like to share a quick story that illustrates the importance of risk management. This is about a woman named Helen, who was 58 years old and had been married to a very successful physician, Rob, for many years. Rob passed away eight months earlier of a heart attack, and for the first time Helen realized that she was almost bankrupt. How could this have happened? She and her husband had never gotten around to doing their estate documents (i.e., will) and they didn’t think they needed life insurance because the kids were grown. They lived in a $3 million house which, Helen discovered, had a remaining $2 million mortgage. With no income, Helen had no resources to pay that monthly mortgage payment so she had to sell the house. However, this was in 2008 and the housing market was depressed. Moreover, their home was collateralized on a loan Rob took out to open a new medical practice which was now defunct. Helen had assumed that Rob would take care of her but he had not prepared for the unexpected.
• Pay yourself first. What does that mean? It means pay yourself pre-tax, before Uncle Sam takes his bite out of your paycheck for income taxes. When you contribute to your employer’s traditional 401k plan, you are paying yourself first. Also, most employer retirement plans provide a matching contribution. This is effectively “free money.“ To learn about the details of how much (if any) contribution your employer will make, contact your employer’s HR department.
• Financial planning doesn’t require a fortune teller. As a child, you may have had a Ouija board game. It was an entertaining way to pass a rainy afternoon with friends, guessing what your future may hold. Have you thought about the future you want for your family 20 years from now? No matter your age, having a plan will result in a far more comfortable future.
• Put time on your side: To have $1 million by age 65, you would only need to invest $4 a day, or $1,440 a year, if you start at age 20. If you wait until you are 50, though, you would have to invest $95 a day, or $34,200 a year, assuming a 10 percent annual return.
• Getting started: An important first step is to discuss your goals and your plans with your family. Talking about money is difficult for many couples, so focus on what you both want for your lives and your future, rather than the dollars. Then, once you have an idea of the future you would like to have, you can work backward to create the financial plan that will get you to your goals.
• It also helps to engage a financial planning professional. He or she can give you a realistic picture of what your future will look like given different scenarios. Some will even help you establish a budget to make sure you spend less than you make.
• Leaving your financial future to chance is as risky as depending on that Ouija board for advice. Having a plan in place won’t guarantee that all of your dreams come true, but not planning will almost certainly result in not realizing them.
• Teach your kids financial literacy. Young parents often ask me how to teach their kids about money. As a CERTIFIED FINANCIAL PLANNER™ practitioner who raised three kids of my own, I fully understand the importance of that question. I recommend the three-jar approach. It’s a simple, creative, and fun project to teach kids about money. Here’s how it works: Give each child three jars, labeled ”Spend,” ”Save” and ”Share.” When they receive money from allowances, chores or gifts, they deposit money into the jars in a predetermined way. For example, if Tommy receives a $1 allowance, he might put two quarters in the “Spend” jar, one quarter in the “Save” jar, and one quarter in the “Share” jar (which the parents might even match).
• The concept behind this method is to teach your children to use their money wisely, spending some for the items they’d like to buy, saving some for large future purchases, and sharing some with those who are less fortunate. The three jar approach not only teaches fiscal responsibility and philanthropy/compassion, but also basic math skills and resource prioritization.
• The lessons that children learn from this activity will contribute to a strong foundation of financial knowledge and instincts as they become adults. In my case, I have confidence that all three of my adult children are fiscally responsible and are providing this same training to their own kids. In fact, today I work alongside my daughter, Elizabeth (also a CFP), in our intergenerational financial planning practice.

Can you please give us your favorite “life lesson” quote? Can you share how that was relevant to you in your life?

Just do it! (Nike)

I remember one rainy day at the beach in the Outer Banks, NC. I found myself at the bookstore perusing the self-help books and stumbled upon the NY Times Bestseller ”Take Time for Your Life“ by Cheryl Richardson. Over the following days, that book took me on a personal journey. A single mother of three teenagers, I often found myself tirelessly balancing family essentials, work demands, and personal needs while working toward financial independence. I discovered that my own journey, my story, would be invaluable to many individuals in a similar place in their lives. I was in my late 40’s at the time, and vice president in the Wealth Management Division of a major bank in Baltimore. I defined my personal goal: To help individuals achieve financial independence. To that end, I pursued the CERTIFIED FINANCIAL PLANNER™ certification even though it was not required for my job duties at the bank. As I approached my milestone 50th birthday, I remember saying to my kids, “If not now, when?“ And on my 50th birthday — on that exact day — I opened my financial planning practice at Heritage Financial Consultants. Just do it!

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger.

I would embrace the concept of Save, Spend, and Share for every family. This means that when you plan your annual budget, identify the income needed to cover your essential living expenses and debt. With your remaining income, reserve some for short- and long-term investing, such as saving for a house, car, college education, and/or retirement. Share the remaining funds with those less fortunate. We can start this simple concept with our children so that they practice it instinctively when they become adults.

*Kathy Armstrong is a Financial Planner with Heritage Financial Consultants, offering comprehensive financial planning services through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor. Heritage Financial Consultants LLC is not an affiliate of Lincoln Financial Advisors. CRN-3052201–042120