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Old 10-06-2016, 21:51   #16
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Re: Retire debt free or get a boat loan

We went with a loan for our catamaran. It just didn't make sense to tie up that much cash in the boat when the loan was so low on interest costs. It means we keep more of our money and the investments are earning more than the interest on the boat. We don't plan to keep the boat forever and will pay off he loan when we sell it. We may have done it differently if we had been buying a monohull that we could get for less than $100k, but our cat was quite a bit more and we didn't want to lose money by paying cash.


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Old 10-06-2016, 23:39   #17
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Re: Retire debt free or get a boat loan

Here is another unusual aspect of the cash for a boat issue. We never anticipated this problem.

We are quite well off. Our fixed income from Social Security and Pensions more than pays all our expenses. We paid off our boat before we left to cruise. We've had no loans or debt of any kind for years. We pay our credit card bills in full each month. We don't need to withdraw any money from our substantial IRAs and other investments.

And, we are having trouble with getting a home loan because we've been cash consumers for the last 16-years. We have no credit history as far as current lending goes.

We've had the same two credit cards for over 35-years with never a late or missed payment. We've had the same checking account for more than 40-years. We've bought and sold six homes, two boats, and a dozen cars and motorcycles in the last 50-years. But none of that counts because WE DECIDED TO BE CASH CONSUMERS when we decided to go cruising in 2000.

The fact that our investments exceed our anticipated expenses by an order of magnitude means nothing because we haven't borrowed any money from anyone since 2000.

Take out a loan for the boat, keep your credit history (loan payments) current so that when you do want to borrow money you will have the history to support your request for credit.

Our mortgage broker has suggested we buy a car and take out a loan for it. We need to borrow money, go into debt, and decrease our net worth to prove to the the banks/lenders we know how to be credit consumers.

No Debt with a high net worth is only good if you plan to pay cash for everything in the future.

Seems ODD to me!
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Old 11-06-2016, 00:33   #18
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Re: Retire debt free or get a boat loan

Money is very cheap right now, keep a very low interest loan on the house and pay cash for the boat.
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Old 11-06-2016, 01:34   #19
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Re: Retire debt free or get a boat loan

this 'debt is good' will not be around forever.

In AUS, interest rate shot up from 4% to 18 % in less than a year in last recession.

Sure will happen again, when suits to elite.
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Old 11-06-2016, 05:18   #20
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Re: Retire debt free or get a boat loan

I'm not into borrowing money for a depreciating asset. I also struggle with the lose some money to save some tax. Ok, if by leaving money in other investments makes you more money, then sure. I don't know your situation but I have concerns about debt that doesn't produce income, particularly at the present time, I'm not convinced there is a economic recovery happening. I make these sorts of decisions based on the numbers in the worst case scenario, and there has to be a exit strategy.

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Old 11-06-2016, 09:04   #21
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Re: Retire debt free or get a boat loan

Good point. Better to get professional advisŤ.
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Old 11-06-2016, 09:17   #22
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Re: Retire debt free or get a boat loan

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Originally Posted by belizesailor View Post
Get a new financial advisor. Financing a non-income producing depreciating asset is a bad fianancial decision. Staying debt free is a good one.
What belizesailor said, IN SPADES!

There is no possible legal way the interest deduction obtained by financing anything will offset the cost of renting the money. This is true regardless of what your marginal tax rate is.

Change advisors! Be sure the new one is a "Certified Financial Planner" and has excellent references as well. A CFP is held to a higher standard (talking USA here) than other financial advisors. They hold a "fiduciary" responsibility, whereas others are only held to a "reasonable man" standard of serving your needs. The "reasonable man" might choose to invest your money in things which enrich him but which aren't the best for you, and that's okay under the law. Not so the other. A "fiduciary" is held responsible to serve your best interest even at the cost of his own.

Another excellent test is to ask yourself and him/her, "How is your personal wealth-building doing?" If the answer to that question is anything less than stellar, move on.

JK
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Old 11-06-2016, 09:27   #23
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Re: Retire debt free or get a boat loan

My guess is your financial planner is banking on the interest as a second home write-off.
If you are paying a professional I would heed his advice rather than ours. I doubt you want to post your financials?
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Old 11-06-2016, 09:34   #24
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Re: Retire debt free or get a boat loan

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Originally Posted by belizesailor View Post
Get a new financial advisor. Financing a non-income producing depreciating asset is a bad fianancial decision. Staying debt free is a good one.
I agree. In almost every case the words "boat" and "loan" should not be used together. I try to keep them at least a sentence apart when possible. Financial advisers like to put together "cute" schemes like that to justify their fees. Keep it simple.
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Old 11-06-2016, 09:40   #25
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Re: Retire debt free or get a boat loan

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A boat isn't a great investment. Not sure of your sailing experience, but have you considered leaving your money safe and doing some charters in the Bahamas and Caribbean instead? Don't forget repairs, maintenance, insurance, depreciation, and dockage when you are away from the boat. The initial purchase is just the beginning of pouring money into a hole in the water.


We've been retired and cruising for four years. Retiring debt - free is the only way to go.

Ralph
Can one get a 3-month charter, and might it cost about as much as a small yacht?
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Old 11-06-2016, 09:50   #26
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Wink Re: Retire debt free or get a boat loan

Without a doubt pay cash! Most all of us work most of our lives to escape debt and unless you have experienced being debt free for a long time you may have forgotten what it feels like.Let me refresh your memory , it SUCKS! I'm sure your advisor is a fine individual, but tell him to shove the idea of financing anything if you have the cash for it.True freedom is not owing anything to anyone.Being Debt free is Powerful
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Old 11-06-2016, 10:16   #27
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Re: Retire debt free or get a boat loan

I do not know your financial advisor. Mine handles a couple of IRAs and that is it. He has given me advise on a couple of stocks I bought one (bad move) and pasted on the other. I have since open a Scottrade account and make my own decisions on what I invest in and don't have to pay him. I made 11% last year and currently at 16% year to date. The choice is yours and like many other previous replies debt free is a WONDERFUL feeling.

I wish you luck and I hope you find the boat of your dreams.

Brian
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Old 11-06-2016, 10:18   #28
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Re: Retire debt free or get a boat loan

Quote:
Originally Posted by TacomaSailor View Post
Here is another unusual aspect of the cash for a boat issue. We never anticipated this problem.

We are quite well off. Our fixed income from Social Security and Pensions more than pays all our expenses. We paid off our boat before we left to cruise. We've had no loans or debt of any kind for years. We pay our credit card bills in full each month. We don't need to withdraw any money from our substantial IRAs and other investments.

And, we are having trouble with getting a home loan because we've been cash consumers for the last 16-years. We have no credit history as far as current lending goes.

We've had the same two credit cards for over 35-years with never a late or missed payment. We've had the same checking account for more than 40-years. We've bought and sold six homes, two boats, and a dozen cars and motorcycles in the last 50-years. But none of that counts because WE DECIDED TO BE CASH CONSUMERS when we decided to go cruising in 2000.

The fact that our investments exceed our anticipated expenses by an order of magnitude means nothing because we haven't borrowed any money from anyone since 2000.

Take out a loan for the boat, keep your credit history (loan payments) current so that when you do want to borrow money you will have the history to support your request for credit.

Our mortgage broker has suggested we buy a car and take out a loan for it. We need to borrow money, go into debt, and decrease our net worth to prove to the the banks/lenders we know how to be credit consumers.

No Debt with a high net worth is only good if you plan to pay cash for everything in the future.

Seems ODD to me!
Hi NOT odd if you understand the nature of the system of financial enslavement that you have helped create in the USA led by a certain group of individuals in so called high places.Look no further than Freddie Mac and Fanny Mae and the legions of loan sharks working out of their backstreet holes feeding off the poor and poorly educated.Not to mention the criminal banking system such as Goldman Sachs and others that have brought sooo much suffering to so many.Suicide stands out as one of the sad effects of borrowing money and not being able to pay it back.
My father and grandfather were both bank managers here in South Africa and in the UK and they taught me to never borrow money but to save it and never to spend what wasn't mine.
So some people have been wise enough not to be enslaved by the system and that is really the best way to live .Remain the master of your finances and you can avoid being the footstool of others.There are many out there who want you to be their slaves as you may have noticed.They want to control you and dominate you in any way they can .So no it is not ODD but merely a plan .
As the Bible says .Neither a borrower nor a lender be!!Congratulations on having conducted your finances so well .You are however seen as an enemy of the SYSTEM!!!Because you are FREE and not a slave.
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Old 11-06-2016, 10:23   #29
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Re: Retire debt free or get a boat loan

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Originally Posted by Cajun Sailor View Post
Without a doubt pay cash! Most all of us work most of our lives to escape debt and unless you have experienced being debt free for a long time you may have forgotten what it feels like.Let me refresh your memory , it SUCKS! I'm sure your advisor is a fine individual, but tell him to shove the idea of financing anything if you have the cash for it.True freedom is not owing anything to anyone.Being Debt free is Powerful
I would agree for me. No way in hell would I do anything but write a check.

He, you and I may have entirely difference tax liabilities. His advisor may see an advantage in dropping him into a lower tax bracket. I like being debt free but that is just where I am in life. I would not presume to second guess a financial professional. I am assuming we are not talking about H&R Block.
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Old 11-06-2016, 10:26   #30
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Re: Retire debt free or get a boat loan

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Originally Posted by blackcatscooter View Post
We went with a loan for our catamaran. It just didn't make sense to tie up that much cash in the boat when the loan was so low on interest costs. It means we keep more of our money and the investments are earning more than the interest on the boat. We don't plan to keep the boat forever and will pay off he loan when we sell it. We may have done it differently if we had been buying a monohull that we could get for less than $100k, but our cat was quite a bit more and we didn't want to lose money by paying cash.


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HI if you have cash in the bank can you receive interest on it ?If so what is the rate ?Here in South Africa thank goodness we can still realize an interest rate of 6.4% in a money market call account where immediate access is granted instead of what seems a new norm of negative rates in other countries .I was wondering if it is possible to place funds in our banks instead of in the USA .
Any financial guru's out there?
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