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Borrow Now… Sleep Later.

By Steve Toomey, CCIM

Last week Central Oregon’s business community came out in throngs to attend EDCO’s economic forecast luncheon at the River House Hotel and Convention Center to hear renowned economist, Mr. Alan Beaulieu of the Institute for Trend Research (ITR®) speak.  His projections (that carry a 94.7 success rate) for our economy were fascinating.

While acknowledging that a dark cloud continues to hover over the future of the U.S. economy due to unsustainable national debt, his forecast for the immediate future through 2018 is extraordinarily positive and full of opportunity. Given a recovering national economy and historically low interest rates, he went so far as to advise “Borrow until you can’t sleep at night”!

What an unexpected statement coming from a non-governmental entity. Especially considering the recent debacle we as a nation, and as individuals, are just now recovering from.

“Borrow until you can’t sleep at night”. It made me wonder: Is he insane? Does he work for the government? His past performance in predicting the economic future, and the rest of his speech, suggests the answer is no, he is not insane. I find no evidence that he is on the payroll of any federal or state government.

Who is he speaking to?

My guess – anyone who recognizes the rare economic climate we are in feels the need or desire to significantly grow their nest egg over the next several years and is willing to take significant risk to achieve that growth.

Remember,  not everyone has the same tolerance to risk, so significant risk will mean different things to each individual. Do I fit intothe above statement? Maybe. If I hope to retire in the next 10-15 years, but the current projections do not look good for me to achieve that goal, I might be tempted to take more risk now than I would normally be comfortable with.

What about my retired parents, who currently have enough income to maintain their lifestyle into the foreseeable future, but not a lot of excess cash? Should they borrow? Probably not.

How about my 30 something kids? Duh! He is definitely talking to you! Carpe Diem!

Borrow money to spend on what?

Bet on yourself by starting and/or expanding your business. Bet on a real estate market that is just now recovering. Don’t borrow for new cars, new furniture, travel, etc. That is not the kind of debt worth losing sleep over.

Don’t I need my sleep?

Yes you do. But you could probably sacrifice a few nights for a brighter financial future. Losing a little sleep is really the middle ground in judging risk threshold. If you are not losing sleep, you are likely not taking enough risk to reap the reward of significant growth. On the other hand, if you are lying awake all night, every night, with your eyeballs fixed on the ceiling, a bottle of Tums on your nightstand, and your family is threatening to leave because you cry all day, you’ve gone too far.

Steve Toomey, CCIM is partner and principal broker with Compass Commercial Real Estate Services in Bend.  He sleeps fairly well at night.