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  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

Can I Afford a Boat (or other splurge)?

John bought a boat! How do financial planners think through (rationalize?) if they or clients can afford a boat or other splurge? We discuss the happiness factors, the social factors, as well as the financial factors that play into boats, big trips, and fill in the blank--whatever you like to splurge on!

John talks about his experience with his twenty year old boat. He lives near a lake, owns a cottage, has kids who are just the right age. He says he knows what he's getting into.

There are proven happiness factors that come from being around the water. Here's a book that details the advantages of water:

But you've got to be mindful of the negatives of boat happiness. Boats can be ripe for easy social comparison. These thoughts can reduce the happiness that you get out of a boat!

Finally we talk about how to pay for it. You don't want buying a boat or other splurge to reduce your happiness or cause regret. We talk about how to avoid it! #happymoney#boat

Here's Bridget's firm website:

John's firm website:

For advisors around the US:

Thanks for watching and please subscribe!


Bridget: John just bought a boat! On this episode of Friends Talk Financial Planning we'll talk about how to optimize the financial and happiness aspects of owning a boat if you are ready to get on board.

Hi, I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice.

John: Hey, I'm John Scherer. I run a fee-only financial planning practice in Madison, Wisconsin. And before we get going on things, I want to remind everybody to hit that subscribe button. When you subscribe it helps other people find our show and helps us rise in the rankings on things. And before we get started, Bridget, I didn't want to let it go that those puns that you had—“on board”—were outstanding. I didn't want to let that slip by. And I was also thinking, as you were doing the introduction, as you were going to talk about the ideas on financing and decision making, that we should have done that before I bought a boat, not after. Thanks a lot for the help. 😉

Bridget: Yeah, not a bad idea. Okay, so let's talk about financing first. Tell me how you approach it. Well, it seems like you might have just walked into the boat dealership and put your money down. Did you think about this ahead of time?

John: It's interesting you bring that question up. I'm going to go back a few years. The old boat that we had, we owned for 18 years. So it was a long stretch. And it was old when we bought it. Maybe ten years or so ago, I was at the boat dealership getting my boat worked on. You sort of walk around the showroom and you're looking at boats thinking, “Oh, well, that's kind of nice.” And I remember they had the sticker on it and, whatever the price tag was, it was really small. But then the monthly payment was big. I don't even remember the number of the monthly payment. Maybe $300 or whatever the price was. I caught myself in my head saying, “I can afford x-hundred dollars a month. Yeah! But I don't need a new boat.”

That thought process is interesting, and how the salesmanship gets done. Just having that realization of, “Oh, what's my monthly payment?” And for people who would go out and buy a car, “How much can you afford per month?” No, we want to think about the price. You're going to pay this dollar out the door regardless of whether you pay it in one lump sum or you pay more over time.

Bridget: Yeah. That's one of the reasons why I actually like not financing something like a boat, because if you are actually paying out whatever the price of the boat is—and boating prices are very substantial—if you're actually paying out that 5,000, 10,000, 50,000, 100,000, or whatever you're buying the boat for, then you can accurately compare it to the other things in your life. So you can say, “Okay, for $50,000, I could also redo both my kitchen and my bathrooms.” And that's fine if you decide to go buy a boat…

John: Right. But $300 a month or $500 a month compared to redoing my kitchen—those things don't correlate. But when you put it in those numbers, that helps you make a smart decision. That's exactly right. To answer your question directly, no, we didn't finance the boat. Thus, I didn't look at where the interest rates were and those sort of things. Our old boat was 30 years old so it was a matter of time. If we wanted to keep having a boat we were going to have to do something at some point. We were able to find a good deal now so we'd saved up and had cash to be able to buy a boat with.

And it's interesting, as you think about this decision for us, we've got a place on the lake and we live in Madison very close to the lake. So for us, it's a weekly usage. It's not once a year. It's not one week a year. It's a big part of our summer life around here in Wisconsin. For those reasons, as opposed to other things where it's hard to justify, really, like, “Geez, we’re spending a lot of money and buying this thing, and it's not like I'm driving it to work every day.” It's nothing that we need, but there is some value in it for us as some of the memories we can make with our kids and our friends, and those sorts of things.

So from that perspective, I love how you put it into, “Hey, we could redo the kitchen, we could do these other big ticket things.” That is sort of the decision-making process we went through without frankly being articulate or intentional about it, but thinking: is this worth the investment? And I say investment not in the sense of a financial investment. We're not going to get money out of this thing. But are we going to get a return on it? For us, it was a return that is not measured in money, but in lifestyle and happiness and enjoyment. That was a good tradeoff for us.

Bridget: I want to talk more about the happiness factors later, but I do want to mention something if you do finance a boat, which again, we're not recommending. One of the things that you said that I really like is that basically you saved up for it. It wasn't necessarily a bulk bucket, but when you looked at it before in terms of the “How much am I going to spend in a month?” as it caught your eye. Now, instead, it is, “Okay, I have the money. Let me just buy it.”

And then the other thing I like to mention to people is that there's such a thing as deck drag, which is that feeling of “Oh, I have this loan out there…” That actually reduces the happiness of an item. So you're going to enjoy it more if you don't have a loan. But, if you do get a loan, and you do itemize on your taxes, and the boat has a toilet, a stove or some way to cook some food, and a bed, and the loan is secured by the boat, you can actually deduct it like a second home.

That is, if you don't have a second home already. If you have this boat with your second home, then presumably you're deducting your interest already. So it can't be your third or fourth interest deduction. It has to be your second. I just wanted to put that out there because I've had clients deduct boat interests. So that's another factor to consider and it's not nothing.

John: Yeah, absolutely. That to me is one of those great things just to keep in mind. Especially in some of the bigger lakes when you've got the sailboat and some other things, it's not a throwaway to think, “Oh, maybe I should think about if I can deduct this interest if I've taken a loan?” That's awesome.

Bridget: Yeah, you should make sure you do it. I wouldn't say it’s necessary to let this be a big factor in your decision making, but, if you're going to get a loan and you meet the qualifications, you might as well deduct the interest. Okay.

John: That's right.

Bridget: So let's get back into figuring out how to optimize the happiness for this. First of all, research indicates that water makes people happy. Being around water, hearing water and the color blue, all these things make people feel good. I think that for many people, water is a happy space. And I think the boating industry would like to hop on board with that and say, “Oh yeah, this is your access to the water.” But I know for me personally, buying a boat kind of puzzles me. It’s not because I’m against boats, but I'm not particularly into boats. It's not my happy space. And to me, it seems like a lot of work. Talk to me about that.

John: Yeah, it's funny as you bring up the happiness factor. For some of the reasons I'll articulate, we didn't really think about that, but there's a famous saying of people that are on the water that the happiest day is when you buy your boat and the second happiest day is when you sell it, because you get rid of all the headaches. It's work and there's maintenance and there's a lot of hassle—factors that people don't think about it before they own a boat.

For us, it's really interesting. We've got some good friends and they're what I would call boaters. They like to go out and just be on the boat. For us, it's more utilitarian. We like to fish and we like to ski and tube. So it's a tool for us to do these things that are really useful for us. More so, at least as I think about it in terms of some of this research that you've done on things, it's not just about being on the water, it's about other things we can do on the water. And I think that maybe the takeaway from that is simply to be more intentional about thinking about why you want this, what's the benefit for you? Then you can make a really good decision about whether it's worth that allocation of money for things.

Bridget: Yeah, and I think the dark side of this might be worth mentioning too. I think that the social comparison with boats is great. Any time you're in a situation where there's a lot of people with more money, you think that's going to be a happier situation. But the internal social comparisons that go on there can be tough. So you're on your boat and you're not seeing all the people without boats. You're just thinking about the next boat over that is nicer than your boat and you're thinking, “Wow, that person’s got a nicer boat.” And then you go into a lot of social comparison thoughts of “My boat is less than their boat.” Some people avoid this thinking. And you might be one of those, John, but I think I just want to mention that you need to try to avoid thinking that way around boating because there's always going to be somebody with a better boat.

John: Yeah, it reminds me of a client that's moving into a larger home in some fashion. It’s more expensive, when you think about what's the mortgage or the tax taxes. But when you're moving to a different place you forget that now maybe everybody else has the same level or bigger level and they take better vacations and they drive other cars and then you start that “keeping up with the Jones's” mentality. This happens when you're buying a house, I think, exactly on point with a similar thing on the boat. You start to notice all the other fancy things that you want and it can be a cycle of things.

It's interesting as you say, that I sort of fall on the other side of it. I liked our old boat. We didn't worry about if it banged into the dock or if we spilled minnows in it or whatever. Now I have to be careful because we got one that's a lot newer and it's a lot cleaner and a lot nicer. So it's a different level. I am not as much—at least from the boat standpoint—into “keeping up with the Jones’s” thing, but it can be a cycle.

And I think one of the things about that is it's not intentional. I say that to you as we're talking here and then I’ve got to check myself and think, “Is that really where I am on things?” Or, do I start to have that comparison, envy, or whatever the term for it is, kind of creep in? This can start the “it's never enough” type of a mentality. I think the other thing about it is that it's not always right in front of you going “Oh yeah, here it is.” Rather, it sort of sneaks up on you. Being aware of it and being mindful is important so I really appreciate this part of the conversation.

Bridget: Yes, I think that people might not be influenced by it. I am influenced by it and it's something that I would really desperately like to get over. The mentality of “This person's got this better thing and that makes me worse” doesn't make you happy, that's for sure. It does make you grateful. Or even the downside comparison if somebody's boat is worse than mine. Thinking that way doesn't make me happy either. So that's not a happy space. And I hope you don't spill minnows in the new boat. 😊

John: I'll report back. We'll see. We're going up for a week on vacation soon.

Bridget: Two things I'd like to wrap up with: first, optimizing your experiences on the boat. Because that's what you're talking about. The boat is a vehicle for family experiences. That's what you're saying. It's a fun family experience. Then there are other social aspects, too. There are other boating people, which you find it's like a different kind of boating culture. It's kind of fun.

John: Yeah, absolutely. And I just wanted to clarify this. For us, for me, the boat is a tool for other things. There's other people where the boat is the thing, right. They dig that kind of like somebody who's into muscle cars or different sorts of things. It can be that way. But that self-awareness and being intentional about it is a word we use a lot in our practice. And just being intent about “What are you trying to get out of it?” Because, I tell you, once you start thinking, “Oh, geez, maybe we should look for something” you start to lose. It's easy to lose sight of what your goal is. The goal is to get you something that you're looking for. Maybe a little take-off or corollary of that is to be intentional about your thinking about it if you're going to buy a boat.

Bridget: Well, and then you might end up thinking “Okay, it's too much work. I'm just going to buy shares of a boat.” Or, “I'll just make friends with other boat owners.” Or, “I'll just go hang out at the boating place.” There are other options besides you buying a boat. Then again, ownership is nice. Still there are ways around it in sharing the load and, again, engaging socially, too, with people. At least here in Chicago, there's a whole boating culture where people share boats and people rent boats that they take care of and you just show up and use it. So there's other options, too, besides just owning a boat.

John: That's absolutely right. Well, with that, I think it's a great way to wrap things up. Thanks for a great conversation, Bridget. And as a reminder to viewers, Bridget and I are both members of the Alliance of Comprehensive Planners, a nationwide group of wholistic fee-only planners that are tax focused. If you like what you hear on Friends Talk Financial Planning, check out

Bridget: And please subscribe! See you next time.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

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