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Perfect is the Enemy of the Good

[/fusion_text][fusion_text]My wife and I have an odd decorative style. If you walk around our house, you will see entire rooms without anything hung. Sometimes there are paintings or a mirror leaning against the wall. My wife won’t let me hang them because she hasn’t made up her mind on exactly where they should go. She knows that once they are hung, I’m not moving them again. I, for my part, am really no help on this. I don’t know where it would look good to hang things. We are stuck and move on to more important things.

Our lack of hanging things has gone on like this for years. It’s a prime example of the old phrase “perfect is the enemy of the good.” You can see this same phenomenon in all walks of life. I used to see it all the time when I tried to talk to clients about financial planning. Of course I was trying to convince them to let me do a Monte Carlo analysis for them. Monte Carlo is a really great planning tool, but it requires a fair amount of time and effort from my clients. I could only get a handful of my clients to comply. The rest really had no idea if they were saving enough for retirement. That’s a major problem.

Then I met Keith in 2009, who is now my boss. Keith developed his own one-page financial plan. It’s an elegantly simple solution. We can take the facts we know about clients, add in a few estimated guesses, and present a starting point for the conversation that requires very little work on their end.

At first my analytical mind only saw the flaws with this new model. I could name a dozen different ways why a complete Monte Carlo analysis was a better tool than this one-page financial plan. Except I couldn’t get anyone to use Monte Carlo. So…I started introducing the one-page financial plan. My clients love it. Most people really do want to know if they are on-track to retire. There was just too much in the way of starting the conversation.

Now we have a model that works great for most situations. After all, any financial planning is more art than science because we can’t predict the future. We try to review the one-page financial plan once a year and make course corrections as necessary. Plus we always have the Monte Carlo for the advanced cases (and engineers). Most people don’t want it though.[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. ASA gathers its data from sources it considers reliable. However, ASA makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.