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This post is the latest in a series from friend of the blog, Chris Pascale. While his previous posts were mostly about the often strange intersection between life and money, this one is about fiscal planning.  Specifically, it’s about how your plans need to change to remain relevant when confronted with new circumstances. It’s a theme that fits in particularly well with this blog for several reasons:

1. 1. I’m a big fan of planning in general, and fiscal planning specifically. So much so, that I dedicated a whole section of this blog and my book to it
   2. Chris’s article is proof of Dwight D. Eisenhower’s paradoxical quote that I’ve used multiple times on this blog: “Plans are worthless, but planning is everything“
   3. Chris’s fox-like method of adjusting to new circumstances is the type of thinking that Nate Silver advocates for in his book The Signal and the Noise, which is a great book and listed as a must read in my financial independence book review article.

As always the words are his, but the pictures and (somewhat witty) taglines are mine. So, without further ado, I turn it over to Chris.

– GM

How to Optimally Ruin All Your Plans

Many are familiar with the quote: “If you want to make God laugh, tell him your plan.”

Over the past couple of years, I’ve published pieces stating: that a rental property I owned was part of my long-term retirement income, my kids are definitely going to community college after a year of some sort of service, I’d never sell my house, and that I won’t fix my van but will drive it until it dies.

And then in 2020,

• • I sold the rental
  • My oldest decided not to join AmeriCorps, then chose not to join the Navy Reserves, and then decided on a 4-year school
  • I sold my house
  • The van has a new engine

Am I an idiot or liar? Not entirely.

Plans are based on current reality. When that reality changes, you need to make a mature decision if those changes necessitate an adjustment.

Here is what happened.

Rental Property

Hurricane Florence hit North Carolina straight on, destroying Jacksonville and surrounding towns, stranding many families for months. My home flooded. It was not in a flood zone, hence why I always say you need flood insurance. The storm drain collapsed, and the nearby creek overflowed. This combination brought 2 feet of water into the house.

Financially, things weren’t so bad. I was more than halfway through a 15-year mortgage, so I thought that with the re-build, we might relocate back there, pull a geo-arbitrage, and perhaps FIRE into part-time teaching. But upon re-visiting the neighborhood to meet with my builder, I saw that several storm drains collapsed. The city’s rules clearly stated that I owned the storm drain. Yes, that’s right. You might not know that you were reading the work of an infrastructure tycoon, but you are. Now, sure, maybe I could not collect a storm-drain toll or get a grant based on my service to the homes on that street, but I did have the privilege of fixing the storm drain……out of my own pocket.

In addition to this, Wilmington, once a city my wife and I loved visiting, seemed very depressed, and possibly without the ability to rebound. I wanted to fix and keep the house, partially because it was our first home. But also, it was around this time that I’d heard of the concept of geo-arbitrage – that you could move somewhere cheaper and just live how you want to live.

However, upon further evaluation, we concluded that we should fix the place, try to get the city to repair the storm drain, and sell.

Following landscaping (which included storm drain repair), we sold it in January 2020. For the first time in 10 years, we were not upside down on this property.

Purchase and Rental Background

August 2007: Purchased for $113,000 (appraised for $109,500).

January 2009: Left Jacksonville for DeRidder, Louisiana. At $900/month with a $778 mortgage payment, the property was cash-flow-positive.

2011: After the housing crash, many active-duty families couldn’t sell after only living in the area for a couple years, so they rented to avoid foreclosure. The sudden glut of rentals on the market drove down rental rates.

Year after year, the home dropped in value, once as low as $60,000.

2020: The home is all fixed up and sells for $131,000. It appreciated at a rate of 1.1%.

Kids & College

I’ve said it before, and I’ll say it again, my kids are going to community college! And only after a year of some type of service.

Now, let me tell you about how great my oldest is doing in her SUNY program……

With low enrollment during the pandemic, I didn’t teach enough classes to qualify for free tuition for my kids at the community college. As such, the incentive to force the issue was less. Additionally, my daughter obtained a couple small scholarships, and can’t stay in dorms on campus due to COVID, so the cost is not much more than her attending community college.

Regarding her year of service, she put an online inquiry in with AmeriCorps and also called. Still, COVID appeared to have delayed their recruitment efforts. Then she was talking to a Navy recruiter. We worked out for several months to get in shape, and 2 days before her MEPS appointment, the MEPS station was shut down. We kept working out through the summer, and at one point, she said, “I don’t think I want to join the military,” to which I said, then don’t. Because it’s hard enough when you want to do it.

And so she became a full-time gardener for our town, then got accepted into a 4-year public university about 2 hours away.

So to answer the question of what happened? Partially, COVID happened. But then she moved forward regardless of it instead of letting it dictate her future.

Our Previous and New House

In my last “Worth It” article about cutting things out of your life, I mentioned that we sold our 5-bedroom house and moved into a 2-bedroom apartment. Very recently, we closed on a 3-bedroom condominium in a terrific community.

I told people I would never sell my home in previous conversations. I said that partly because it was a good deal with a 15-year mortgage that I could pay off before 50. I’d seen other families sell up and move from a small home to a big one, parlaying the gains until they achieved a dream house – with a big nightmare of a mortgage.

For me, the dream was no mortgage.

However, as mentioned in the other piece, my house needed a good deal of work, and the price tag was way too much. Doing the math, for an extra $70,000, we bought what would have cost $247,000 to build. On the one hand, I could save money while not having any construction. On the other, I could make a terrible financial decision.

And so, we sold.

Van

I said I wouldn’t fix or replace my 2010 Honda Odyssey, and I meant it!

Parts were getting shoddy, and it was driving a little rough, but if it kept going, that would be great. I figured it would die in a whisper along some highway on the way to work or the store, but then COVID happened.

With no need to drive much of anywhere, I kept bringing it for oil changes because of the oil leak. And then, around Christmas, my mechanic found an engine with under 50k miles. The price: $3,500.

And that’s the whole story. It made sense when the cost was so low compared to the value.

Conclusion

It was easy to contradict my past statements for several reasons:

1. 1. I’ve often been wrong, so I am not embarrassed to do the right thing when new data comes my way
   2. I’m not married to all of my ideas – they are not my identity
   3. Circumstances change; we should join them when it makes sense

Initially, this piece was meant to poke fun. I originally intended to state that the optimal way to ruin all your plans is to blog using your actual name, tell people your plans, and watch as those plans are overcome by events as life intervenes.

But that’s only about half of it.

The other half is that circumstances will change.

You need to change with them.