My Fixer-Upper Perfect Plan

We bought a fixer-upper. We had been crammed in a 800 square foot condo where we started our family, but when our third daughter was on the way we knew we wanted more space. We didn’t have much money and we had very small incomes. And while our extended families had done well to support us (taking us on vacations with them, and notable giving us a couple thousand dollars to upgrade our minivan) they didn’t have the kind of capital to help us with a downpayment as some are blessed to.

So we found a fixer-upper. The home was a sprawling mid-century style home built in 1979 with an addition on the back. It was 2,700 square feet and in a neighborhood that housed some of our closest friends. It was perfect. But it was indeed very fixer-uppery. It was a HUD owned home that had been foreclosed on, and though it had been well loved many years past, it was many years past-due on tons of routine maintenance. Among the usual problems you have with a house that hasn’t been lived in for years this had:

• Foundation sinking
• Rotten Siding
• Outdated electrical
• Tiny rooms
• Unfinished updates
• Old damaged windows
• Disgusting carpet
• Dated bathrooms

I had to make a plan to tackle this renovation. And because we didn’t have much money and also because my wife once remarked that I’m “not really a handy guy” I was going to do it all myself.

I started my plan by listing in a notebook every single thing I thought the house needed improved or replaced. Soon the list became overwhelming, so I made a spreadsheet. Now it was overwhelming and on a spreadsheet.

I froze. I thought, “This is too big. Too many variables. Too many options. Too many decisions. It’s never going to be perfect. I don’t have the time or money to make it perfect. I don’t want to start. I don’t want to fail.” I was frozen because it didn’t feel perfect enough to start.

I eventually did start. I did the really big, non-negotiable things first. The things that would make the most impact were what I focused on first. I got to the details later. I did hit many more snags and repeat my freezing a few times, but every time I eventually got unfroze by doing the next small step that was the most obvious thing.

In my years as a financial planner I’ve seen this happen with many folks as they consider planning for retirement. You’ve got Roth conversions to consider, Social Security timing, Medicare options, decisions on how to leave money to your kids, charitable gift giving plans, pension decisions, required minimum distributions, and so many other decisions to make. And what if the markets crash? What if I get sick? What if I die? What if I want to move, or a tornado takes my house, or we have to take care of grandkids or parents?

It’s not rare to freeze when confronted with all of these decisions all at once, doing nothing while thinking you’re pursuing the ‘perfect plan’. But here’s the truth: there is no such thing. Focusing on making a better plan, a plan that’s adaptable, and continually executed and reevaluated is the best plan.

Perfection is an illusion

Proverbs 16:9 (NKJV)

“A man’s heart plans his way, But the LORD directs his steps”.

James 4:13-15 (NKJV)

“Come now, you who say, ‘Today or tomorrow we will go to such and such a city, spend a year there, buy and sell, and make a profit’; whereas you do not know what will happen tomorrow. For what is your life? It is even a vapor that appears for a little time and then vanishes away. Instead you ought to say, ‘If the Lord wills, we shall live and do this or that.'”

Markets move up and down, and in-spite of the predictions of really smart people, they remain unpredictable. Tragedies strike and opportunities and windfalls pop up out of nowhere.

You didn’t wait for the perfect job to come along before you started earning, you did what you could at first and worked towards perfection. There can be long-term effects to waiting rather than risking making a slightly imperfect move.

• Roth Conversions: Converting soon may save thousands of dollars in future taxes, even if markets dip in the near-term or it costs you taxes right now. Waiting for the ‘perfect’ moment can mean missing the window entirely before tax-laws change or your pre-tax balance balloons preposterously.
• Social Security Benefits: While delaying often maximizes lifetime benefits, health changes or family needs can change things. You only get one shot at when to start this, so it does require some planning, but just taking it at 62 or 65 because of some poorly thought through reason isn’t the answer.
• Charitable Giving: Just giving like you always have may be leaving thousands or millions of lifetime taxes in the hands of the IRS rather than your church or charity.
• Gifting to kids: Giving now allows you to see them use the money when they likely need it the most and if they’re in a lower tax bracket gifting them appreciated assets may save on taxes, but if you wait longer it may be a whole lot more to gift.

These decisions have ripple effects over decades and it’s not one-size-fits all, there are different trade offs for every decision you make. Trying to do the perfect thing and sticking with that decision forever is a mistake.

Planning Better

Better planning is about crafting a solid starting point and executing it. Then, as life changes and time moves, the plan is re-crafted. Then repeat. Until the end of the plan happens (that’s financial planner code for death). Better planning focuses on the biggest and easiest changes, those that take little effort but yield big results. The overwhelm can be real, clients tell me they get exhausted or freaked out by the constant changes. That’s why it’s good to have a partner in this.

Proverbs 15:22

“Without counsel, plans go awry, But in the multitude of counselors they are established.”

Proverbs 11:4

“Where there is no counsel, the people fall; But in the multitude of counselors there is safety.”

Proverbs 24:6

“For by wise counsel you will wage your own war, And in a multitude of counselors there is safety.”

An advisor acts as kind of co-pilot or consultant. Helping you watch over the details and not getting as emotionally invested (though we usually still get pretty emotionally invested). We’re precise where it counts: harvesting capital gains and losses to minimize taxes, timing retirement withdrawals and charitable gifts to optimal tax brackets, analyzing which account to distribute money from and when. We accept imperfection because life isn’t perfect and things change, but we’ll keep optimizing along with the change.

Better planning builds in flexibility so you don’t need to be as worried about making a “wrong move”.

Taking the First Imperfect Step

Neil Peart

If you choose not to decide you still have made a choice.

Inaction is a decision too, sometimes a very dangerous one if you’re not counting the cost. So start simple. Dump out all of the decisions you have to make on a notepad. Put them in a spreadsheet (an advisor can help you put them all into a very fancy 100 page planning software). Execute the low hanging fruit first – the big ones and reassess and revisit.

Planning isn’t a one-time event. It goes on and on and on and on. So forget having the perfect plan and embrace better planning. Perfect is the enemy of good in this scenario. So get started, make mistakes, get messy, and get going.