Should You Borrow?

Last year, 50% of my cost of living was related to preschool fees and childcare expenses.

This cost can be a source of anxiety, especially when faced with a grumpy toddler. Interestingly, the only cure appears to be: (a) train morning and night; and (b) write an article during the day. If I do that then life seems pretty good.

Another way to counteract the anxiety is to raise enough cash so that I’ve funded my childcare expenses from now until my youngest is in school, five days a week.

I’ve been looking at borrowing against an investment property. Even though it is irrational to borrow (now) to reduce anxiety about a future expense, I’ve been thinking about putting a loan in place.

Here’s my advice to myself. You might find it useful as debt markets improve for borrowers.


Should I borrow?
Generally no.

However, there are some exceptions that have worked for my family.

Housing – A 30-year fixed loan for a well-located home that has a cost of ownership (mortgage, taxes, insurance, repairs) that is materially less than your cost to rent. If you are unlikely to move for a decade then this type of loan can be a great deal.

There’s a lot in the paragraph above: location, buy vs rent analysis, likelihood of staying put and ability to hold long-term. To stack the deck in your favor, each of these characteristics is essential.

Saving – some folks struggle to save. So a mortgage, particularly a shorter duration one (like 15 years), is a form of forced savings that would not otherwise happen. Still, being locked into a location for 15 years is a big commitment, and inappropriate for most young people.

With real estate, on average, I’ve sold within three years. As a result, the investment return is greatly reduced by the large fees and expenses. To encourage myself hesitate, I assume that I’m losing 10% of the purchase price immediately after I buy. This makes it much more attractive to rent, and if that goes well, then buy small.


The freedom that comes from a debt-free life is empowering and, my willingness to do “no deal,” has saved me from many expensive errors.

My hit rate on offers has been less than 35% and I’ve been fortunate to miss out on some deals.


I’ve been thinking about taking out a loan on an investment property that I own. So, I asked my financial adviser his thoughts and he came up with:

Borrow to buy income

Borrow for specific purpose, say, in advance of money coming in later that will repay the loan

Borrow early in one’s career to buy assets that can be used to good affect and which will likely appreciate – eg home mortgages // but remember that being able to move at short notice can be a great way for rapid career advancement

Borrow to avoid selling assets at a bad time market wise – this one is huge and why I like to have a line of credit available to my family (as well as at least one year’s living expenses held in cash)

Borrowing to supplement cash flow is dodgy unless you know how cash flow is going to increase thereby enabling you to repay – this is the classic way the we end up underwater with credit card debt.

In private equity we had a saying – never fund operating losses. In other words, force yourself to cover your cost of living. If you can’t do that then scale back your living. With my childcare costs, I’ve been running an operating loss for five years and it is a source of stress. More debt, to facilitate more spending, is rarely a cure for financial anxiety.

It’s tempting to borrow when the debt markets are good. I’ve found debt to be most useful when:

  • It sits in a company and is non-recourse
  • It is fixed-rate and used to purchase assets that can generate a significant premium to my cost of finance

Where things have gone well, I’ve tended to take a binary approach. I will either invest in a highly leveraged company or, in the case of my personal portfolio, invest in the assets directly, without additional debt.

The key thing to remember is you don’t need to borrow and it’s awful to trade your freedom for something that doesn’t cure your condition.

Aside from professional education, most ‘things’ don’t make a difference – especially when compared to the health benefits of living a lower stress life.

Five Years A Father

Denver Zoo Spring Break 2014Five and a half years into parenthood, what stands out.

First, you don’t need to make the kids a priority. Babies, toddlers and preschoolers are extremely effective at expressing their needs!

Second, I’d strongly recommend being a binary parent with your core values. If you’re not into physical and verbal abuse – give yourself a blanket no hit and no yell policy. This saves you having to decide if a situation merits abusing your kids or spouse.

It’s surprisingly easy to fall into abusive habits. I’m a lot more aggressive than I realized pre-kids. Part of why I volunteer is to atone for the remorse I feel with regard to my thoughts about my children!

Don’t worry about the difficulties. Everyone deals with the same stuff and our minds do a good job of forgetting about misery. Two practical tips here…

Spend time listening to other parents talking about their situation. It will always make you feel better.

When fellow parents ask how you are doing, answer them “I’m OK now” or “I’m good now” or, perhaps, “I’m great now.”

The second tip is an effective tactic to avoid carrying the past into the future. Only a small minority of moments will be truly miserable. These moments can be high energy and, therefore, easily remembered. I can be bring myself to tears if I focus on my strongest memories of despair. Not a good habit. On the flip side, when things get so bad they become funny, those are the memories that make a marriage.

A Flower For DaddyOne of the most surprising things has been the moments of pure bliss. Sometimes I get so happy that my body tingles. Transcendental experiences.

Christmas 2013Take a lot of pictures. Print out the pictures that trigger joy in you – I can feel my heart as I look at the photos that I share this week.

It’s not possible to have too many positive triggers. There are days, and nights, when you’ll need them!

Screen saverBased on our home life, there are three things that you, and your spouse will be tempted to let slide: sleep, marriage and health.

Further, you’re likely to get so washed out, that you’ll be grateful if your spouse drops sleep or health to make your life easier.

Carving out time to maintain your marriage is inconvenient. However, it’s essential to avoid finding yourself lost. Your kids are going to keep on rolling either way.

Laugh as a family.

Losing Five To Ten


Every athlete that I’ve ever coached has thought that their life would be better if they lost five to ten pounds. This belief flows through most my friends, my coaches, my wife and myself.

Nothing in my life, requires me to be in a state of perpetually losing weight, yet I spend 95% of my year trying to whittle myself down. In case you’re wondering, the other 5% of the year sees rapid weight gain. My personal best is gaining more than 20 pounds in the two weeks after Ironman New Zealand 2004.

Similar to my athletic goals, my desire to be unnaturally lean has caused me to make poor decisions.

Where do my irrational desires come from?

Can I moderate the influence of irrational desire in my life?

As a recovering addict can tell you – if you want to make a change then you need to take a break from the sources of your addiction. The first step in freeing myself was changing my health club.

I used to train with the fastest group of triathletes on the planet. For an athlete with ample self-confidence, it is an ideal environment to motivate one’s self to do whatever it takes to win races.

As my life shifted, I noticed the group was having an adverse effect on my self-esteem and I was being a dick to people. I listened to how we spoke about each other and what we valued in ourselves. I’d get a kick out of the most-skinny triathletes in America commenting about which one of us was “too skinny.” Of course, Mr. Too Skinny would head out the next weekend and crush the field – reaffirming our collective desire to get lighter and lighter. With my pals, losing weight is always the right answer.

Here’s the lesson – the neuroses of our peers will become our goals.

We can’t create self-esteem by changing to match the requirements of others. However, we can change the people with whom we spend our time, and let behavioral psychology do the work for us.

What do you need more of?

Spend time giving to people with less.

Lessons From A Year Of Giving

GivingIn 2013, we decided to give away a small percentage of our taxable income. We’re going to try again in 2014. Here’s what I learned…

To make giving happen, I need a budget. Having the budget also makes me more willing to give because I don’t get caught in a cycle of thinking I “can’t afford” to help or thinking that our giving is too small to make a difference.

I need to remember the giving makes a greater difference to the giver than to the recipient.

The process we used was:

  • Decide on an annual amount
  • Split into monthly allocations
  • Give monthly

Small gifts offer the most satisfaction. This surprised me. The easiest way to describe the positive sensation is…

  • The spirit moves me to give
  • I’m open to that feeling
  • I give
  • I feel good (by not having to close myself to not give)

The size of the gift isn’t important for the “feel good” and I try to always have dollar bills with me. Here’s The Dollar Game that my wife and I played.

What seems to be most important is being open to receive a call to give, then heeding that call.

Giving is a learning process. I had some gifts that didn’t work out from my end and I learned from them. I can group them into categories…

Facilitating something I don’t believe in – giving money to alcoholics so they can buy booze, for example. That didn’t work out well for me. Sitting here now, I don’t regret those gifts but think it was a good decision to keep them small.

Some people, and institutions, don’t need help. An example, might be giving money to a wealthy alma mater, a for-profit corporation, or an inefficient charity. With individuals, struggle is what gives meaning to life, and valuable feedback. I’ve had a poor hit rate with individual sponsorships.

This year, 90% of the money and 100% of the time that we gave away worked for us. That’s an outstanding return for the first year. So I want to remember…

  • Have a budget
  • Keep it small and frequent
  • Stay open to helping
  • Learn from the process

More on Bike Trailers


Had some follow up questions on my Endurance Corner Article - Active Parents.

What’s the best trailer?

I use a double trailer as it lets me cram two preschoolers inside for a trip to school.

Double Trailer

When I’m going on a longer ride, I take one kid at a time and can fit in everything I need to keep her comfortable.



On my longest trailer ride (5 hrs total time), we climbed to 12,000 ft and she had lunch, blanket, iPad, pillow and headphones in with her. In the end, she ate a snack, played a little music on speaker and enjoyed the view.

Any tips to get started?

  • Keep it short – I started with 20 minutes and have found that under an hour is best
  • Keep it fun
  • Always be willing to stop – they settle eventually
  • Remember your passengers are in the shade and not riding – lots of clothing and blankets
  • If you are a keen cyclist then the high-end trailers are well worth the money

What bike is best?

I use a full suspension 29er mountain bike.

I have a triple front chain ring and a ton of gears.

Without the trailer, I can get up most everything in Colorado with my middle chain ring. So the smallest ring is for climbing steep stuff with the trailer and when I’m above tree line.

Don’t use a high-end road bike with thin walled tubes – there is additional torque that runs through the system that can ruin your frame.

If you’re doing a long mountain descent then the disc brakes are essential to control speed and avoid overheating the braking system.

I’m mainly on pavement but we will do some hard packed dirt occasionally.


Overall, the trailer is an excellent workout. I can blast myself with a 30-45 minute climb and be home in under an hour.


More Than Money – Family Succession Risk

My lawyer leaned across the table, apologized to my wife, and observed…

I don’t get it. Why don’t you just take the money.

I muttered something about Black Swans and protecting my kids. Later, I went home and ran the numbers. There was something I knew but couldn’t articulate.

Here’s what caught my eye

  • 45 year old man
  • Three young kids
  • What’s the probability that I don’t see my youngest graduate college?
  • What’s the probability that I fail to live long enough to train my successor?
  1. Of 100,000 men born in 1968, how many are still living? 94,507
  2. How many are forecast to be around when my youngest exits college? 80,308.
  3. How many are forecast to be around when my oldest is 35 years old? 62,761.

Source: Find The Best.

With a little bit of math, I can calculate my…

  • 20-year mortality => 15%
  • 30-year mortality => 34%

Those numbers are far higher than a Black Swan event. If I was on a board of directors then we’d be working to address the key-person vulnerability for the firm.

Fortunately, courtesy of my young wife, my kids benefit from a 90% expectancy of Mom or Dad making it for another 35 years. You can find a Couple’s Life Expectancy calculator here.

The risk to my family, comes from losing my skill set (financial, legal, strategic, accounting) before we have a succession plan in place. With a big age gap between me and any reasonable successor, the family needs a back up plan. However, my family doesn’t have the financial means to create a Family Office.

Life insurance doesn’t cover the skills and knowledge gap when your family loses an elder. It might give you money to hire outsiders but they nearly always work for their own interest, rather than the interests of your family.

What to do?

My answer has been to start a family council. The council consists of a lawyer, a doctor and a professional fiduciary. All of these individuals:

  • have known my family for 10-30 years
  • share the family’s values
  • have been seen (by our family) to do the right thing, even when inconvenient

I brief the advisers every 3-6 months about what’s happening in the family. I prepare documents for them that explain how we’re structured. I repeat myself a lot. My wife sits in on the meetings.

My annual cost is roughly equal to the Long-Term Care Policy that I carry. Additionally, I get frequent inputs of really good advice from a group of people that I trust to assist my family if I can’t.

When it comes to succession, I suspect that most of us do a better job for our firms than our families.