Financial boat questions...

[GoneSkiing]

I'm in the pay it off boat. Bought my NXT new, paid it off after a year. I don't like debt and making payments. Paid cash for my last few vehicles too, saved up until I could afford to do so.

I don't disagree that investing the money instead if it is at a higher rate than your loan, the math works out. For me, its a mental thing.

[JMann]

Pay it off and use the money you were paying on the double payments to build that cash reserve back up

[uplandbird]

Dude- What a great problem to have. Congrats!

[Wakejunkie]

I did a 20 year loan even though I make double payments. The interest between 10 and 20 years was 0.1% so it was easy for me to decide. I wish I could pay it off now but that’s not the case for me. Maybe in 5 years I can have it paid off. I’m making more money in investments than my interest so I consider it good and a cost to enjoy what I love.

[waterskier360]

I’d rather have cash reserve in an emergency than finance major repairs , life emergencies etc. if you lose your job and have little cash on hand your forced into decisions you ordinarily wouldn’t make .

2 or 3 months minimum of expenses in the bank or what ever your comfortable with and the rest on the boat .



















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[moosehead]

A good nights sleep is heavily under rated.

I would also suggest borrowing money collateralized by a boat to invest it elsewhere is mixing metaphors, regardless of any arbitrage.

Lastly, a boat is never a good financial decision, but a hugely enjoyable one if you can afford it.

I’m in the pay off toys camp. YMMV.




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[LostDriver669]

Financially, you can make almost any justification you want. That being said, figure out which side makes you most happy and do that. If having no payments feels better than having a wad of cash then that’s your answer. Regardless, you will make it work so don’t worry about having cash on hand for an incase thing; assuming you have the correct reserves already.

Personally, I would love to pay off our boat, but we will likely only have it two years and I would rather be tied to a mortgage than have a ton of cash tied up when the time comes to sell.

[coloradox45]

I typically go back to the idea as well that you are right in the boat, meaning you having equity, which means if needed you can sell the boat and be out from under it at minimum, or make some money at best. Dumping money/cash into that makes sense if it's your singular payment perhaps? It's also how you plan on using the boat, do you trade often? Do you plan on keeping it for the next 5-7 years? Longer? That would make me think about how I would spend that money as well.

I agree that having that cash working in other ways is more important. Money is cheap to borrow right now and 401k/retirement accounts are making money 2-3 times faster than you can borrow it right now. Invest it into a rental property? Rainy day fund? Pay down your mortgage?

This is a good problem to have no matter what.

[ATLX30]

The answer to this all depends on your interest rate and any other debts. If you have a 3% interest rate on the boat but 4% on your house, it's silly to pay off the boat first. If you don't have other debts and have a low interest rate, it still doesn't make sense to pay off the loan. Better to invest the cash or use it for other purposes, like buying a house. If your interest rate is high, then it's a no brainer to pay it off. Having debt is not a bad thing as long as you keep it relatively limited and are smart about it. Don't pay if off just because you hate debt. Pay it off only if it makes financial sense to do so.

[seth25]

if you want to look at this from a pure financial perspective then it comes down to asking what you would do with the money if you did not pay off the boat. Financially, you want to compare the interest of the loan that you're paying against any investment that you might make with the money if you kept it for yourself. This is generally referred to as an opportunity cost.

If you are simply keeping the money in your checking account, then I would go ahead and pay the boat off because you are wasting money on interest that you don't need to pay. If however, you would otherwise have that money in an investment that is producing a return higher than the interest rate of the loan, then I would continue to make payments so that you can earn interest on your money through other investments.

Psychologically this is a much different question though, because I also agree that it's nice to have things paid off instead of having payments. So the question in my mind comes down to whether or not you would rather have it paid off, or whether or not you're really looking to do the best thing with the money.

Dead on

[dmbeck]

I feel like everyone has presented points that make sense on paper, but how many of them are actually something that will be followed through with? Just because the OP has 50k on hand right now doesn't mean he can just easily go out and invest in a rental property that's going to yield a greater return. There's a lot more effort in buying property, also 50k is just a start in most cases, then you have the maintenance and other head aches. Not saying it's a bad investment, and there's a bunch of people on here that are better with money than myself, but paying off your boat loan is quick and easy, other forms of investment aren't. Not saying it can't be done but if the OP is like myself then he might not be very knowledgeable about investing. Just like doing your own taxes and other things in life that school doesn't prepare you for, investing is something that takes some guidance I feel like, I know I'm looking for some.

I've seen a lot more people who string their money out get into issues than people who pay off their debts as quickly as possible. Not saying one is right and the other is wrong but investing in something with above a 6-7% return isn't as easy as going to the bank and opening a cd. Easy answer is pay off your boat and enjoy it, that way you don't risk blowing the 50k that's just sitting around.

[[email protected]]

I feel like everyone has presented points that make sense on paper, but how many of them are actually something that will be followed through with? Just because the OP has 50k on hand right now doesn't mean he can just easily go out and invest in a rental property that's going to yield a greater return. There's a lot more effort in buying property, also 50k is just a start in most cases, then you have the maintenance and other head aches. Not saying it's a bad investment, and there's a bunch of people on here that are better with money than myself, but paying off your boat loan is quick and easy, other forms of investment aren't. Not saying it can't be done but if the OP is like myself then he might not be very knowledgeable about investing. Just like doing your own taxes and other things in life that school doesn't prepare you for, investing is something that takes some guidance I feel like, I know I'm looking for some.



I've seen a lot more people who string their money out get into issues than people who pay off their debts as quickly as possible. Not saying one is right and the other is wrong but investing in something with above a 6-7% return isn't as easy as going to the bank and opening a cd. Easy answer is pay off your boat and enjoy it, that way you don't risk blowing the 50k that's just sitting around.

I agree that there is certainly a behavioral/human component that must be taken into account.

It is absolutely true as alluded to above that with more cash “lying around” it is much more tempting to get that new tool or new piece of furniture or customize the truck or whatever is next on that subconscious list of wants.

What the mature person who can actually delay pleasure can pay off that debt, they will have funds to pay cash for those next want-list items.

The Millionaire Next Door is a must-read to know the behavior that leads to financial success, and this is just one of them.

[sppeders]

I'm in the get it paid off "boat".

Average Joe here. Currently working on getting that Mortgage down to "0". I know it probably makes more sense investing that elsewhere, but i'm currently at 30% of my income already goes to investments. My extra cash now pays down the mortgage. I'd like to retire from coorporate america in 5 years (around 45ys of age) and then strike out on my own for the duration of my working days.

Nothing better than looking out in the garage and seeing everything in there is yours and not the bank. something emotionally pleasing about that. Now i just need to get the garage mine and not the banks... ha ha.

I've got a year or two's worth of an emergency funds laying around. No debt just makes life way more rewarding/enjoyable. This is coming from a guy who financed everything in my early 20's, but saw the light at 25.

[FoggyNogginz]

I feel like everyone has presented points that make sense on paper, but how many of them are actually something that will be followed through with? Just because the OP has 50k on hand right now doesn't mean he can just easily go out and invest in a rental property that's going to yield a greater return. There's a lot more effort in buying property, also 50k is just a start in most cases, then you have the maintenance and other head aches. Not saying it's a bad investment, and there's a bunch of people on here that are better with money than myself, but paying off your boat loan is quick and easy, other forms of investment aren't. Not saying it can't be done but if the OP is like myself then he might not be very knowledgeable about investing. Just like doing your own taxes and other things in life that school doesn't prepare you for, investing is something that takes some guidance I feel like, I know I'm looking for some.



I've seen a lot more people who string their money out get into issues than people who pay off their debts as quickly as possible. Not saying one is right and the other is wrong but investing in something with above a 6-7% return isn't as easy as going to the bank and opening a cd. Easy answer is pay off your boat and enjoy it, that way you don't risk blowing the 50k that's just sitting around.

I agree with your points, and I'm an average Joe myself. However, the S&P price index returned over 30% in 2019, so it would have been pretty easy to make substantial money with a single index fund last year. Of course I realize that past performance is no indication of future return, but there are certainly ways to take $50,000 and invest it wisely in literally a matter of minutes while leveraging a balanced portfolio to reduce losses in the event of a downturn. In fact you could go pretty darn conservative and still make 10 to 15% at the moment.

My response to the original question was based on pure financial advice as to what is optimal to do with the money in terms of returns versus paying interest. You're absolutely correct that this guidance does not take into consideration the other financial obligations or investment opportunities being considered by the OP though. That's what's great about getting advice from strangers on the internet. LOL

[FoggyNogginz]

Congratulations on the early retirement plan. There really is nothing better in my opinion. Lots of people wait until their body gives out before they take time to do the things they enjoy. Congratulations to you for getting a plan early on!