Ski Math

The tiny dot in the middle of the frame is my son hiking up from a yard sale, in a gale, at the top of Pali Chair. FIVE minutes later he said, “Dad, I’m glad you’re as good a skier as me.” I’d kept my skis during the traverse! They have such short memories.

Our family ski experience is like my Pandemic Predictions => I got a lot wrong.

When I was shelling out for childcare/preschool, skiing struck me as a very expensive way to do a lot of driving, without much cardio.

Not interested.

A friend, with four kids (and a jet), made the observation… “you gotta be able to do something as a family.” Given his role, as the smartest guy I know, we decided to give it a try.


My wife didn’t believe me when I said, in advance, “We’re making a million dollar decision here.”

Frankly, I took it easy on her. The math is daunting…

But wait, there’s more.

Add-in the inflationary effect of surrounding yourself with the largest spenders in our society.

And… have a look around the parking area, with the smell of legal weed wafting across the empty beer cans… Is this an environment where I’d like to leave my teenaged kid unsupervised?

Still… “you gotta be able to do something as a family”.



$175,000 worth of opportunity cost later, I can ski any run, with any member of my family. This makes me happy during a time of year I used to dread.

Total immersion (5 million vertical feet, in three seasons) let me achieve my goal quickly… Something outside, at a high level, with any member of my family.

Unexpectedly worth it… but only after I figured out our family’s cash burn.


I cope with the “demographic” by focusing my energy on seeking to ski like an instructor, with the fitness of a ski patroller. These goals provide structure for my athletic year.

Like much of my outdoor life, my participation is conditional and always one major crash away from ending.

Stay variable.

Vacation Property 2021


One of the topics from our recent Couples Retreat was vacation property. I needed some time to show-my-work for why I’ve decided to stay variable.

The question, in the context of both buying and not-buying, was…

Will it make a difference?


The question gives me an opening to share some things I’ve learned from 25 years of real estate investing.

1/. I have yet to regret not-buying a vacation property. When vacation markets appreciate, so do investment markets.

2/. The ones-that-got-away have three main attributes: well located, easy to find tenants and decent cash yield. Vacation properties usually only have one attribute… well located.


I’ll share insights about capital allocation:

=> No one in the company is likely to care more about capital allocation than the boss – the CEO sets a cap on how much people will care about capital, and everything else for that matter.

Extend into your marriage, and family….

=> No one will care more about spending and capital allocation than the individual responsible for earning the income/capital in the first place.

Similar to work ethic… the actions of leadership set a ceiling on what to expect. No amount of legal documentation, and pontificating, can overcome this reality.

Don’t waste energy fretting about the way things are.

Be grateful when you’ve been able to create a team that, largely, follows your lead.


Now the math!

I’ve updated my #s for the two markets I follow most closely.

  • A vacation market with an effective yield of -3% (cost to own). I avoid fooling myself that I’ll be able to short-term rental myself to breakeven.
  • An investment market that is generating net cash flow of 2% per annum.

To “get my money back” in the vacation market, the value of the asset needs to grow by 2.5% per annum.

Money back does not mean purchasing power back. The “same” dollars in 15 years time will buy less due to inflation – just look backwards to 2005 in your home real estate market and see what your current place was worth.


We have no idea about what the future holds and 2.5% market growth is probably looking tiny when compared to what you’ve seen over the last year (+30% in my zip code).

You could be right.

I do, however, know markets that are just getting back to their 2008 peaks. In a negative cash flow scenario, that’s a painfully long time to hold.


My goal isn’t to predict an unknowable future. My goal is to answer the question “will it make a difference?”

In the get-your-money-back scenario (2.5% market growth):

  • Take time to calculate your true cost to hold.
  • Make sure you’re OK with permanently increasing your burn-rate, especially if there’s debt service.
  • Know your alternative use of funds => the investment property returns $1.75 for each $1 invested & Vanguard’s VTSAX is currently yielding 1.4%.
  • The vacation property requires an extra $0.45 for each $1 invested. This is before you decide to renovate and burn $$$s on rugs, curtains and furniture!

For that vacation property, here’s what I do…

  • Take the purchase cost
  • Make sure I’m OK with annually spending 5% of purchase cost, forever
  • Consider if I am OK with writing-off the equivalent of 50% for customization, the cost of ownership and agent’s fees

Then remember:

  1. My personal utilization of past destinations has been 15-45 days per annum.
  2. The future risk to my family is we are priced out of our home market (not that my spouse and kids might have to unpack/pack up from a rental).
  3. I tend to change my mind.

Feelings!

One of the challenges with new deals is my feelings are dominated by the expectation of the asset making things better.

I also enjoy the feelings associated with being able to provide for my spouse and kids.

Making things better & doing right for my family => it’s difficult to feel the benefit of doing nothing.

Once I have a good-enough position, the only person who can screw it up is me.

Property 2021

My favorite real estate can’t be bought – Collegiate Peaks Wilderness Area

Our local property market has popped 30% since the start of the pandemic.

I did not see that coming.

Here’s a key insight => my lack of foresight had no impact on my family => our success does not rely on directional bets.

We establish a good enough portfolio then focus on: (a) keeping our cost of living in line with our cash flow, (b) shared experiences and (c) staying the course.


A recent John Mauldin note reminded me of two components of real estate.

Shelter – a place to sleep, ideally in a great public school district (links to my post on supporting public education)

Investment – the potential for reliable cash flow and long term capital gain

To those I would add:

Signaling – an example from my own life. Before my wife was “my wife,” I bought a townhouse in Boulder. It showed her, I was committed to Boulder. It showed her family, I had the funds to take care of their sister/daughter.

Asthetics – worth between “a lot” and “nothing” depending on my stage of life. As I age, increasingly appreciated. I was 50 before I could relate to the concept of a $1,000,000 view.

Community – In my early 30s, I found myself in Christchurch, NZ. The community was an excellent fit for the life I wanted to live (sharing outdoor activities with friends, elite triathlon). The South Island of New Zealand has always felt “right” to me. On the other side of the equator, was Boulder, Colorado. There I found love and decided to establish my family.

I didn’t need to own real estate for love, community or family. some qualities work best when inverted.

Location inverted => The principle here might be don’t invest anywhere your spouse won’t live.

Asthetics inverted => Absent financial duress, locations you can buy cheap tend to stay cheap.

You can extend to secondary markets.

My family loves Vail.

Rather than buying a 40 yo condo for close to a decade’s worth of core living expenses… we allocated 2% of the capital and joined a world-class ski club.

My annual family ski budget, including club and rental housing, is about the same as what the old condo would cost to own. The principle => don’t capitalize luxury expenditure.

I made this decision because I’m not confident about my life 10 years from now – when I’ll be an empty nester.

In making a decision to “not buy” I have maintained: (a) a cheap option to change my mind in the future, (b) I’m still debt free, and (c) my capital is available to be used elsewhere.

About elsewhere… I am very confident that my children are going to be grateful that I kept the family invested in the Boulder real estate market. Hedge the risk your family will be priced out of the place your kids grew up.

Of course, this assumes you are living in a place you don’t want to leave. It’s not just your spouse you should pay attention to…


The above components can work against each other.

For example, signaling vs return on investment. I’ll give an example…


Trophy house was 55 bags of leaves. Current house 5 bags. Little things have a big emotional impact on me. I love low hassle ownership.

After we married, I bought a very large house, not far off the size of a small school. The bills, and constant yard work, took the fun out of ownership. Being a big shot turned out differently than I expected.

This experience nudged me into a principle, apply the minimum capital to achieve the goal and pay attention to the cost of ownership (money, emotion, time).

And that’s really the point I wanted to make.

In a hot market

  • Consider the need you are seeking to fill
  • Pay attention to the cost in time, emotion and ownership
  • Remember that capital is precious and leverage can trap you in situations where a renter can easily exit
  • If your time horizon is less than a decade then rent

All of this is easier to see when you’ve been through a few recessions. At the start of 2009, I promised myself to never opt-in to avoidable financial stress.

The tough part is building the capital and credit capacity to be able to buy.

Whatever you were seeking to achieve, you achieved it BEFORE you purchased.

Hope this helps.

Creating A Better Reality

Ask a good looking tennis pro to offer their view on the sanctity of marriage and you might be surprised. Away from prying eyes, there is a fair amount of “but we never hooked up” going on.

At it’s core, this post is about keeping your home life a mile away from an unfortunate outcome.


Circa 2014… My phone buzzed when I was out-of-town. You can see my son hiding from his sister. She was bleeding a minute later… smashed her face when she fell off the couch. My memory of this moment was thinking how great my wife looked.

About the time our first child was born (2008), I found my financial life under pressure. The approach we took was unconventional.

We downsized and, effectively, spent half the proceeds from the sale of our home on childcare. I did this with the full knowledge of the annuity math underlying our financial lives. Over a decade, our childcare bill was the equivalent of ~5 years worth of current living expenses.

Most financial advisers would advise against selling a house to pay for childcare. Many families go the other direction => up-sizing: (a) complexity, (b) bills and (c) financial stress… when the kids arrive.

Downsizing was one of my best decisions of the last 20 years. It enabled me: (a) to get help to directly improve the quality of my marriage, (b) to give my wife some space, and (c) to maintain some form of personal life, at a time of great change.


This is fine – I was out of town for this one as well. Check out the baby, she’s purple.

This next one was a happy accident – I just wanted the kids out of the house.

My wife found an outstanding preschool. The lesson: socialize your kids as early as possible.

While my kids don’t always get along with each other, they are experts at getting along with others. Not spending this money would have been a false economy.

=> Total here was equivalent to another year of current living expenses.

Unexpected bonus from this choice => spending time with outstanding preschool teachers made me a better parent AND give me a deep respect for the quiet achievers in childhood education.

Because we focused on socialization, all three of my kids started Kindergarten behind their peers. We didn’t panic and this worked itself out by the middle of Grade Two. We gave a big push in Grade One to support our son learning to read – lots of little lessons at home and at school.


So it worked out to ~50% increase in Core Cost of Living for a dozen years.

Another way to quantify for you… finish college debt free, save $1,000 a month for 20 years, roll the capital into a good real estate deal… Gone by my 50th birthday.

The Lesson: the skills required to accumulate Financial Capital are different from what it takes to develop Human Capital (kids and marriages).

I don’t miss the “half a house” – it was an excellent trade.


Childcare, early education and health insurance => if you want to bring something to your adult kids, without creating incentives for consumption, then these items could be a good place to start.

It’s easy for a well-intentioned, conventionally successful family member to create lifestyle inflation for their entire family system.

Helping pay for preschool seems a pretty safe bet for help-without-harm.


PS: If you spend your weekends out of the house then remember my warning about your spouse “not hooking up” => most bad things done to me, have a seed in choices made by me.

Family Spending Principles

West Ridge, Eldora

An observation that I am trying to pass along to my kids.

My never ending desires are rooted in a false idea of what will make me happy. I have a clear idea about the structure of the days that are “better.” Achieving better is easier, and more rewarding, than chasing pleasure from purchases.


To help me achieve “better”, I have a series of principles.

1/ Visible spending for wife, first // This works on a number of levels.

  • Don’t buy something for yourself that you wouldn’t buy for your entire family.
  • It easier to be value conscious when I remove myself from the purchase equation.
  • It’s just good policy.

2/ The minimum outlay to meet the underlying need

Strangely, I got this via Joe Friel on coaching masters athletes => the minimum, and the most specific, training to get the desired physiological adaption.

Capital takes time to acquire and is easily squandered (spendthrift heirs and lottery winners are common examples).

A default to the minimum reduces the scale of my (inevitable) errors and increases the ability to change my mind later.

3/ Do not sweat the small stuff – set a Give A Hoot threshold (links to Marriage Money article)

Set an annual plan, track the cash quarterly and promise you will not sweat the small stuff. Good people are made miserable by tracking every nickel.

Stay out of the weeds so your mind is able to think and get the big things right.

4/ Avoid Choices That Have A Material Cost to Hold => this applies across domains (assets, leases, friends, family, commitments, Facebook/eMail). The math from yesterday.

There are many ways to find yourself over-extended… debt service, cash flow, emotion & time.

Exit bad decisions => they crush you on all levels.

Mark Allen on pacing…

just because you’ve made a bad decision, doesn’t mean you have to continue it


Combine these principles and you’ll find the sum is worth more than the parts.


Dropping into West Turbo. Pali Chair, A-Basin.

My son asked about the last big purchase I made, other than real estate.

My off-the-cuff answer was “we don’t spend much money” but that didn’t line up with what I know about our cash flow statement.

So I spent January thinking about it. Next time, the best financial choices I’ve made across my marriage (16 years this summer).

Family Financial Review: Portfolio Allocation


Thursday, I shared my thoughts on the real risks I face. That’s where the action happens in my life.

Still, this is a financial review, so it’s the right time to consider asset allocation.

Having spent 30+ years locking in my Core Cost of Living, the main choice I face is how much cash/bonds/no-return assets to hold.

Here’s how I approach that topic.


There is a cost to holding cash, especially today. Zero, or negative, yield.

Cash is exposed to the “ravages of inflation” – on one side.

Cash earns nothing, while you watch bitcoin, prime real estate and other asset classes skyrocket – on the other side.

Against those costs there are benefits. The three biggest (for me) are:

  • a call option to benefit from a future crisis
  • serenity
  • cash/bonds dampen the volatility of my portfolio.

Now, here’s the questions I ask..

1/. How many “years” do I need to feel serene? This will depend on your psychological make-up, earning capacity, earnings diversity and age.

Getting my net-cashflow-burn down is the only way I’ve been able to feel serene. I just don’t have the psychological make-up to soothe myself via luxury spending, more assets or more income.

2/. How many dollars might I need to capitalize on the coming apocalypse? Being able to buy real assets in a down market will make you happy for a long, long time. I’m still happy about a couple purchases I made in 2010.

My financial assets provide me with an opportunity to get out there and live my life. Financial assets provide very little inherent satisfaction – this is a good thing as I can remain (mostly) detached in downturns.

Our actions in the real world provide satisfaction => share experiences (ideally in nature) with people you respect and love.


BTW, here’s a 2019 article I wrote about wealthy people talking about cash. Back in 2019, many wanted to be in cash. Roll forward to 2021, some of the same folks want to be out of cash! Personally, I’m about the same. I spent the intervening period paying off my mortgage and clearing my car loan.

Family Financial Review: Risk, Worry, Ruin


I ended Wednesday by asking, Am I worried about the right things?

It’s easy to get distracted by the noise surrounding our lives.

Do you know your key risks?

It varies between people and over time => focus on habits that might lead to ruin (leverage, lack of impulse control, smoking, substance abuse…).

See also my review from 2019.

Set your financial life up so it runs on autopilot.

Did you read the PDF from yesterday? Good reminders at any age, as well as an embedded reading list.

Things I focus on more than my portfolio…

  • Near-term: keeping up with my teenagers – what is it going to take to share the outdoors with my family when I’m 60?
  • Medium-term: personal engagement when my kids are gone – what will I do with more time, and less energy?
  • Health: poor choices increasing my risk for cancer and other health issues
  • End of Life: my body outlives my brain

My actions today reflect awareness of the real risks in my life.

My portfolio? Good enough is good enough. Avoid unforced errors and keep on keeping on.

Don’t assume these answers.

Do the calculations from Wednesday, reflect on your life, write it down, review annually…

Then get out there and enjoy 2021.

Family Financial Review: Time


Tuesday’s post ended with the observation that I pay myself in time.

So, how much time have you got?

Let’s find out.


Scale It => Relate Your Exposure To Your Balance Sheet

I recommend you look at things a few different ways. Print this out and write your numbers on the page.

Make it real, especially if you’re financially fearful.

  • Gross assets / Core Cost of Living = years
  • Net assets / Core Cost of Living = years
  • Net assets / Net annual cash movement = years
  • Net assets / Net annual cash movement (excluding active income) = years
  • Cash / Core Cost of Living = years
  • Cash / Net annual cash movement = years
  • Cash / Net annual cash movement (excluding active income) = years
  • Cash / Gross assets = percentage
  • Cash / Net assets = percentage

I include bond holdings in cash. I focus on the BOLD, while considering each line.

Armed with the above, you can get a feel for how much time is available to you, based on how you are living today.

It’s easy to get fixated on income/spending and lose track of time. The best investments I made in my 30s involved trading money for time.

We tend to over-value money vs time => you can do great deals for yourself once you prove your worth to your firm.

Related => it doesn’t take much time to greatly increase the quality of your personal life. As a triathlon coach, I’d get my athletes to carve out one weekday morning per week where they’d start work late. This would enable us to make Sunday life-focused and spread their training load.

Discretionary/Luxury Spending – will fall outside your Core Cost of Living. My advice here is “pay yourself first” – slice your investment program off the top of each paycheck before you get a chance to spend it.

Don’t borrow any money (personally) until the first credit crisis after your 30th birthday. Then, borrow modestly to purchase real assets that are being priced down due to a banking crisis.

Across the 40-50 years of your working life, you will not miss luxuries not purchased.

As for overall strategy, there is a great PDF here. As the PDF will explain, don’t get distracted, by those who want to profit from complexity!

Focus on what matters: (1) spending vs new capital saved; (2) learning to think in time, not money; and (3) good enough is good enough (low cost, persistent investment, across long time horizons).

Maybe I should add #4… the best stuff in my life happens between people – shared experiences with those I love.

People, not portfolios.


To get ready for tomorrow…

Ask a confidant… When I talk about money, what do you hear?

With your financial concerns… Am I worrying about the right thing?

Family Financial Review: Winning


Monday’s post here – tomorrow we will start using the data you’ve prepared.

Before we get into the analysis, let’s discuss the game.

My game is NOT won by building income, assets and spending.

Something I hope to teach my kids about money:

Any choice made to appear rich has an underlying effect of reducing family wealth.

My game => increase discretionary time while getting the net burn to zero.

I’m willing to wager you will not feel free, or serene, until you get close to that point.

“That point” being where you can sit back and not care about the ups and downs of the world. Being able to sit with equanimity will improve your thinking, and your relationships.

It’s going to take a while to get there. Here’s something I wrote in 2016 about the process.

I hope you read the link – I chipped away for 31 years and am a better man, on a smaller balance sheet.

The main thing to remember is each time you get an attractive opportunity to lock in a piece of your core cost of living, take it.

Pay yourself in time.


Philosophy of Status

Don’t think I have transcended my human drive to compete for status.

What I’ve done is (try to) channel it away from external approval, virtue signaling and consumption.

Needing a place to allocate this drive, it goes into my writing, marriage, quality of thought and daily actions. For a long time, my drive went into my sport.

Redirection is a whole lot easier than transcendance.

Family Financial Review: Set Up


The picture is what it cost to send a first class letter when I married my lovely wife. The 55c cost today (+34%) is a reminder that inflation ticks away one penny at a time.

When it comes to inflation/deflation, I like to maintain a neutral position. More broadly, I seek to avoid the need to pick winners.

I also avoid making predictions about an unknowable future. Most importantly, because it’s impossible (!) but also because I have no idea what my life is going to be like ten years from now.

What follows is present-focused.


Quantify Your Exposure

Start with your core cost of living – that’s what’s going to inflate and outliving your money is a key risk.

What’s in my Core Cost of Living?

  • Healthcare ($19,300 of premiums and $7,200 to a family HSA for a plan with a $14K family deductible) – this sector is ripe for disruption, I get little for my spending
  • Taxes, Utilities, Car Costs and Insurance
  • Food, Clothing and Kid Activities
  • Childcare – a massive line item 2009 to 2019, now a source of income for the family, our middle-schooler is a sitter
  • Mortgage, rent, car loans – my main project from 2010 to 2020 was getting this down to zero – once that was achieved, I went a step further and turned it into a source of income

Next, consider your sources of passive and active income. Rents, royalties, dividends, interest (at least in the good old days), consulting and any other forms of income. Write it all out.

Compare your Cost of Living with the Sources of Income and calculate your net burn rate, or your net annual surplus.

Net annual surplus gets routed to discretionary spending, luxury items and/or new investment capital.

The best investment decision I ever made had nothing to do with asset allocation. From 1990 to 2008, I routed 50% of my gross income to new investment capital.

In my early 20s – healthcare costs were peanuts, no childcare costs, living in a shared apartment… I saved a ton. Good thing, too. I had no idea how much my cost of living would pop when I had kids.

My 40s (2009 to 2018) saw unexpected unemployment combine with a big jump in childcare, healthcare and housing costs. This resulted in a burn rate that forced us to make a series of changes, and choices, which proved quite useful in hindsight.


Also write out your balance sheet – assets and liabilities.

Include a liability called “deferred tax and agent’s fees“. Estimate this liability as 6% of the gross value of all the real estate you own plus 25% of all the capital gains in your portfolio (exclude the exempt portion of the gain on your primary residence). Making this number real will help you avoid incurring unnecessary expenses by tinkering with your assets.

The best time to sell great assets is never.

Let it roll.