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.

Middle Age in the Free Money Era

Controlling my greed is a useful first step.

But how does one do that?

Build a peer-group with better ethics, and less financial wealth.

Then let human nature pull me where I want to go.


Looking around, with my 1990s financial up-bringing, many popular assets look expensive at half their current values. That said, people are making big money and this can be tough to watch.

I work on creating a vibe that I can afford to miss out and seek to temper my envy.

I acknowledge I’ve done enough winning.

So. Much. Winning. 😉


Yesterday, I shared thoughts for my younger self. What about this time in my life?

I’m not young enough to earn it all back, nor am I old enough to lock-it-in and forego further capital appreciation. I checked our joint life expectancy and we’re 50/50 to get another 40 years.

Given that I’m debt free, I’m hurt more by a doubling, after selling, than a halving, and still owning.

Think that through – it goes against every emotion I have with regard to money (and I’ve had a lot of training).

Married, at 51, I need to be taking a 30-50 year view.


Accept the reality of my personal situation and remember the financial reality of near-zero rates.

  • Stay invested
  • Lean into severe downturns
  • Maintain options, and skills, to add value-added work
  • Stay debt free – while this is a great time to borrow against cash flow, borrowing against margin is nuts – at some point, the debt cycle will snap back and I do not want to get closed out in a sell off
  • Keep my spending choices in check – know that every choice I make sets a baseline for my kids to follow AND creates a cash flow requirement for the rest of my life

Here’s the key lesson from my early retirement => If I’d gotten spooked and sold out (I get nervous in rapidly rising markets) then I wouldn’t have had the capital to buy back my existing positions, which remain “good enough” for my needs.

In a Free Money Era, the risk many of us face is acting on our fears and being priced out of a portfolio we never needed to leave in the first place.

Control your risks by focusing on skills, spending, relationships and daily exercise. These are things I control. Global macroeconomic policy, less so.

Tomorrow, why the heck are people buying non-, and negative-, yielding assets at current pricing?


Sorry about the dud link yesterday at the bottom – it was the same as the one at the top of the page, which worked. Here is is again, it’s the link to a calculation which led to some major changes in my life. Putting a price on my time.

The Declining Value of Ownership

Yesterday, I described the forces creating rapid lifestyle, luxury good and financial asset inflation.

What to do?

Aspire to skills, ignore asset-driven status.


Near-zero yields have created a very different world than I grew up in.

  • The skillful can easily lease their needs, at a tiny fraction of the cost to acquire.
  • Businesses, like property management, that charge based on a %age of revenue are bargains, for both sides of the relationship. Managers can scale valuations at PE ratios over 50x net earnings. Owners pay 0.1-0.25% p.a. (of capital) for expert services. Both sides of this equation were unimaginable 30 years ago. Another way to look at this => “Vanguard” pricing is moving across asset classes.
  • In a world with tiny cap-rates and huge PE ratios, Human Capital is very, very valuable.

Let’s look at an example.

I like to follow real estate, particularly Luxury and Vacation markets. In these markets, there are many people who own $1-10 million places.

Annually, these places cost $15,000 – $100,000 p.a. (cash) to own and, often, sit empty. The cost to hold is not a big deal for these owners because they can afford it.

I’ve always wanted to visit Jackson, WY so I jumped on Airbnb and had a look around. I can lease a Jackson Hole penthouse, roughly equivalent to my net worth, for a few days.

My cost is…

  • 1/20th of the annual cost to own,
  • 1/1000th of the capital cost, and
  • maintenance is someone else’s problem.

Thanks to Airbnb, there’s real value here, especially as I am the one who keeps his freedom.

  • freedom to leave
  • freedom to change my mind
  • freedom to allocate time, share of mind and capital elsewhere

This will be rolled across every under-utilized (negative-yielding and/or depreciating) asset class within our economy. Airbnb’s $100 BILLION market cap, Free Money and the 1000-fold increase in VC gains will make it happen.

Don’t get caught up in the ridiculous valuations we are seeing – what’s important is understanding the process of change.

In a micro-yield world, it costs me 1/1000th of the capital value to get all the annual consumption I desire.

The only reason to buy is to show off, and that’s what humans do. Actually, there is another reason to buy and I’ll touch on that in a couple days.

Given we will stay human, I do not see these changes as a bearish case for asset values, which are driven by the price of money, mood and scarcity.

However, I do think it changes the mental calculus for a young person. In a highly mobile, rapidly changing environment, the assets your (grand)parents aspired to own are a lousy place to put your financial capital.

Tomorrow, some nitty gritty for 16-21 year olds.


PS – I didn’t book the penthouse. I went for a (refundable) 3-bed condo across the street from a playground. I make most decisions assuming they will be multiplied (x3) by my children when they grow up. I like to leave my kids room to (hedonistically) improve on my choices.

Family Financial Structuring

Following on from my Estate Planning Docs post.

Trust vehicles can be useful to your family and I will illustrate with a couple of stories.

First thing to remember => trusts work best if you set them up long before you “need” them.


Grantor Trust

Part One: Around the time I turned 40, I found myself in a situation where I had joint & several liability with a business partner who’d made poor choices. As fate would have it, these choices were made inside an insolvent group with over $100 million of borrowings.

Now, the banks were not going to be getting their money back by suing me but (even the remote possibility of) being wiped out late in life was highly unattractive.

Part Two: Long time readers will remember that I used to do bike-focused training camps with top age-group athletes. I would ride, on open roads, with doctors and CEOs who were completely exhausted. If an athlete was killed, or permanently disabled, then it would be easy to prove a large financial cost to their family.

As a business, we dealt with this risk through waivers, event-specific insurance and a family-level umbrella insurance policy.

When I added up the cost/time/worry of this approach it was expensive, even more so once I had my own family to protect.


Take the two parts together => I was working in two fields. The first field was similar to being a director/fiduciary of a company. The second field is similar to being a professional exposed to allegations of malpractice.

One day, I was talking to a tax accountant about what was going on in my life, and the changes that were expected in Estate Taxation. He recommended I speak with a local trust attorney.

An initial meeting showed me that the cost to set up a new structure would be the same as one year’s insurance bill. Because I have the skills to run the fiduciary aspects, the ongoing cost would be a fraction of what I was paying my insurance company.

Step One was setting up something called an Intentionally Defective Grantor Trust. From a layman’s perspective, I put my share of my house and rental property into a trust that benefits my spouse and kids. I retain the tax liability for the trust, for my life.

From my point of view, the main asset I am left with is my earning capacity, balanced against future tax liabilities. I’m a much less attractive target to any potential litigant.

From my family’s point of view, the trust is similar to an annuity, tied to my life. When I die, they can sell assets and/or move into a small rental property, while living off the rental income produced by the larger rental property.

The specifics are technical, there’s a bunch of tax considerations and you should take expert local advice.

This change gave me a more secure feeling than the insurance policies.

Over time, I exited the disaster-prone aspects of my life and that helped too.


Irrevocable Family Trust

I’ll illustrate with a recent example – my brother-in-law died and his balance sheet will flow into my wife’s family.

What follows isn’t what is going to happen, but it could have => check with an expert in your jurisdiction if this seems useful.

Here’s a story… assume Andy had a brother called “Dude” (he didn’t).

Andy had planned ahead and wanted to leave assets to Dude. However, Dude didn’t need the money, or Andy didn’t like Dude’s wife, or any number of reasons Andy might not want to support Dude’s personal balance sheet.

So Andy set up an Irrevocable Trust. Let’s call it The Dude’s Trust => Dude, and Dude’s descendants are the beneficiaries.

Andy then drafted his will, or his Living Trust, to leave everything to Dude, but gave Dude a specific power of appointment to nominate The Dude’s Trust in his place.

Before Andy dies, he would also have the ability to make gifts to The Dude’s Trust.

Did you see what happened? Andy was able to achieve what he wanted => money to Dude. Dude is left with a choice to inherit directly, or into a family trust.

In a world with an unknowable future, this is a valuable option.


The current Estate Tax Threshold is $11.58 million per individual, double for married couples. I’m far, far below that threshold.

However, that limit sunsets in 2025 and who knows what tax regime will be in place when I turn 75 (some time after 2040), or beyond 2080 when my kids age up.

I can imagine we shift to a regime I’ve worked with outside the US => deemed sale at death, zero personal exemption, no step-up in basis, the estate pays capital gains tax and the net flows to the beneficiaries of the estate. It’s simple and I like tax simplification.

In that scenario, trusts that were established prior to the change in rules could be grandfathered, particularly if they already own assets. To get around assets sitting in a trust “forever,” the IRS might create a rule for the deemed sale of trust assets, this rule exists in jurisdictions outside the US.

Even if everything stays the same… given the asset protection benefits of a trust, and the ability to “finance” the structure through reduced insurance payments, it made sense for my family.


This is not legal, tax or accounting advice – seek local experts.

Combination article, with chart, from 2013 is here.