Doing the Wrong Thing

It is better to do the wrong thing than to do nothing.
– Winston Churchill

I have a strong tendency to overanalyze things, getting myself stuck without moving forward.

I first considered starting a Roth IRA in early 2007. It seemed like an easy move – just find an investment house, set up an automatic investment plan, and let it roll, right? Whenever I thought about it, though, I found myself engrossed in details. I read a ton of information about the specifics of Roth IRAs. I’d reconsider whether or not it was really the right option for me right now. I looked at a ton of investment houses. When I finally decided on Vanguard, I spent literally months looking at the investment choices and reading the specifics of their plans. The end result? I missed my opportunity to invest in that Roth IRA for 2007. Completely. It just went away. In effect, that’s a year of missed retirement savings.

When I began my financial turnaround, I made some moves immediately. I sold off a bunch of my stuff. I cut a lot of my spending. I started reading personal finance books. But when I sat down to come up with a debt repayment plan, I ran into trouble. I couldn’t figure out what the optimum plan was for me. I came up with a plan, tossed it, created another one, and tossed that one. It took me months to really decide on my plan – and that cost me quite a bit in interest payments.

Right now, my wife and I have been thinking about and shopping for a vehicle to replace my truck for almost a year. We keep going back and forth on what exactly we want. Right now, we’ve basically settled on a minivan, but we’re still talking in detail about whether we should consider a new one or simply go for a late model used, especially considering the current environment. We have a few models in mind as well. Another challenge: is it really time to sell off that truck? Has it really reached a point of diminishing returns? It’s twelve years old and has about 140,000 miles on it, but it doesn’t get used nearly as much since I started working from home.

These cases all have a few things in common. In each case, I know what I should be doing – starting a Roth IRA, paying down debt, and making a real decision about our vehicle situation. I also know the process I should be following. My real problem is that I get caught up in the details and choices along the way.

The end result of that analysis paralysis is that I end up making no choice at all – and that ends up being a worse mistake than making a poor choice earlier on.

Take my Roth IRA, for example. If I had just opened a Roth IRA with Vanguard early in 2007 and just dumped the money into a money market account while I figured out the investments, I would have been far better off than just doing nothing at all and losing my 2007 investment year. If I had just stuck with the simple Dave Ramsey debt repayment plan instead of stressing out about finding the “optimum” plan, I would have paid off several of my debts months earlier. And, while I haven’t been caught with regards to selling the truck and purchasing another vehicle, if my “analysis paralysis” continues unabated, I likely will wind up with a truck that doesn’t work (with significantly less resale value) and I’ll have missed many of the deals available at car dealerships now.

What have I really learned from this?

First, it pays to consider the worst case scenario if you move forward now compared to not doing anything at all. What’s the worst thing that could happen if I just started a plan with Vanguard and just put the money into a money market account for now? What would happen if I did nothing for six months? In that case, opening the account and getting started with a money market is far, far better than doing nothing at all.

Second, it’s useful to eliminate most of the options right off the bat and not worry about analyzing them too much. With our vehicle purchase, we’re pretty sure we want a minivan, so why not just look at the top five in terms of vehicle safety (our primary concern) and eliminate the other options right now? That would save a ton of analysis time right there.

Finally, there are situations where it’s worse to do the wrong thing than to do nothing. This is not a call to rash decision-making. Instead, it’s a call to really look at the penalty for simply doing nothing. There are times when that penalty isn’t as bad as making a poor choice now – but the fact that there are such situations doesn’t mean that you should always get stuck in analysis paralysis.

For us, I think it’s time to do some serious shopping for a new vehicle.

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