Loaded Questions: Should I buy a new boat?

Replace the word, “boat” with any luxury toy. The question becomes, “should I buy an RV/dream car/vacation home/float plane?” Last week I talked about the number one question that I received in 2020: “Should I retire early?” Well, the second most asked question this year is “Should I buy a -fill in the blank-?” The pandemic means that people are spending their money in different ways. Instead of going on vacations, people are wanting to buy a luxury item to occupy their time and recreate. If you are one of the people asking this loaded question, stay tuned for my three thoughts to consider if you are one of these people.

Hi, I’m Christina Gamache, founder of Audax Wealth Management. Last week I posted a video about my number question I received this year, “Can I retire early?”. This week I’m going to answer the second most asked question I received this year, “Should I buy that Boat, RV, Vacation home, etc?”.

I’m not your typical financial advisor. I don’t earn a commission on any products that I recommend because I don’t believe in having a conflict of interest. I work with business owners, women and minorities. I help clients organize their financial priorities so they can take care of the things that matter the most to them.

I’m recording this video series to give you short answers to loaded questions. I’ve been hearing the same questions being asked over and over this year, so I wanted to address these questions in case you are someone who is also asking. Each week I’m going to post a video answering a new question. Most of the time when someone asks me a question, they oftentimes already know the answer to it, but they want to verify with an expert. I am here to be a sounding board for you and put some of these financial topics into perspective and in language that doesn’t go over your head.

Over the summer, I got a lot of questions that sounded like this, “Can we afford to buy a new RV, a new boat, a second vacation home? If we can afford it, should we buy it?”  As a financial planner and a fiduciary, I have three thoughts that you may want to consider if you are one of these people asking this question.

First, we always start with your goals. What are your long-term goals in life and with your finances? Don’t let short-term instant gratification come in the way of your goals. I would ask you questions like, “when do you want to retire?”, “how much do you need to live on in retirement?”, “how much do you already have saved for retirement?” Will this purchase put you on track or derail you from these goals? Then, we would talk about what I like to call the “savings chain”. Have you saved for your retirement using the proper vehicles, whether it’s a 401k, traditional or Roth IRA, deferred comp plan, HSA accounts? Do you have enough in emergency savings? Do you have a lot of debt that should be paid off?

The second thought is this – I’m going to quote a show from HBO – “if it drives, flies, floats, or” something else, you probably should lease or rent it. Do some really basic math here. What’s the total amount of the item, plus maintenance, storage, insurance, etc? Divide that number over the number of times you will actually use the item before you sell or get rid of it. Is the daily rate of the item more or less than what it would be to simply rent that item when you need it? In some cases, owning this luxury item would be more than renting it. In other cases, owning this luxury item would be less than renting it. Definitely go through a similar exercise to determine the actual numbers.

The third thought is this, “what is the emotional value of the item”? Financial planning is an art, and I am here to be your guide on your journey. Will this item bring joy that can’t be priced? Will the memories your family makes using this item be worth every penny? I’m not trying to talk you into purchasing something, but I do recognize that kids grow up really fast, and the time spent with them is so precious. I bet you probably didn’t think I would say this, eh? But yes, life is short, and financial planning is all about balance.

So, three thoughts about whether or not you could or should buy that expensive item. Are you on track to meet your goals? What is the cost analysis of that item? And what is the emotional value of having that item?

If you would like to talk to me about it, at no charge, send me an email, give me a call, and I’m happy to walk you through this exercise or answer any other questions you may have.

Thank you for watching. See you next time.