Should I buy a boat or save for retirement?
A financial planners perspective.
The short answer is often yes!
Ok before my “conservative” financial planning colleagues shake their head in despair, I have a confession to make. I understand the difference between a lifestyle asset (…aka a boat) and an investment asset like shares. I just think the ‘investing’ client conversation is often over-rated. And I don’t think we talk to clients enough about other relevant stuff like:
- Working less, not more
- Having fun while you physically can
- Learning to live on less
- Partial or ‘mini’ retirements
Don’t get me wrong, a good financial adviser (whether they have a clue about boats or not), should advise their clients about both lifestyle assets and investment assets. And the time spent with the client should cover both areas in equal measure.
A boat today, retire later
To illustrate the point, let me detail a real client scenario I experienced as a financial advisor back in 2002. My client called Phillip (… not his real name) came to see me about whether he should buy a boat. He was concerned about whether he could afford it. We had sat down 3 years prior and established a solid financial plan for him and his family. We agreed on set annual reviews, but this meeting was out-of-cycle and Phillip basically wanted to know whether the boat purchase would adversely impact his long-term financial plan.
No surprises, I said to Phillip “….yes the boat purchase will mean it will take longer for you to reach your lump sum retirement goal”. Phillip was 47 at the time, and he wanted to retire at 60. He was married to Lara with 3 kids aged 5, 7 and 10. The boat was $70,000. We did some back of the napkin rough sums using my financial calculator. It would mean retirement would be pushed out around 2.5 years using some conservative assumptions.
As we talked, I asked Phillip “…so why the boat anyway?” He responded, “I’ve always loved fishing…, the family love fishing, plus I’m always relaxed on the water”. So I asked, “…is it the boat, the stress relief, or the family time that is most important to you”? Phillip immediately explained, “Oh family time 100%, the boat will give us that”. Playing the role of devil’s advocate I asked if he could simply go to the beach with the family, hang out in a park, or go bike riding together. Phillip smiled and said of course he could. However, he just really loved boats, and the entire family really loved fishing. I had to listen. He was telling me something important.
When pushed to consider the consequences, Phillip didn’t mind the idea of deferring retirement for 2.5 years. Then he said something quite interesting. He confessed he was worried his kids wouldn’t want to hang out with the family forever. Shock horror, isn’t that the truth! Phillip wanted to make the most of the time together with his kids when the kids wanted to be there. Apparently, parents become officially “uncool” at a certain point. And that is of course if they were ever cool to begin with.
He who dies with the most toys, still dies.
So it was agreed. Phillip was going to buy the boat. He was going to embrace life right now. Heck, I wanted an invite onto the boat. Unfortunately I never received an invite from Phillip. Something about my fees being too high 🙂
The main game
While it is totally ok to get caught up in the complex (but nonetheless very important) investment strategies that underpin financial plans, don’t forget about the main game in town. Wealth creation and preservation is but one part of the puzzle of life that needs serious consideration. I personally love this quote. “He who dies with the most toys, still dies”. For me, I always think what is the point in accumulating so much wealth that when you are ready to start enjoying the fruits of your labour, that it is either too late, or you have so much that inevitably your family will start fighting over it.
My “boat moment”
For me, turning 40 two months ago was a catalyst to consider my life goals. I’m 10 kilos heavier than I’d like to be. I don’t want a boat (not because I think it will sink), but I want to hang out with my kids more than I currently do, I want to garden more, and want to lose weight. And, I want to work less. I’m trialling working 4 days a week at the moment. Have I got it right yet? No. But at least it is in my consciousness and I’m working on bringing that prospect into my life.
Am I willing to retire later to enjoy the benefits today of picking my 6 and 4 year old up from school a few afternoons each week, or leisurely going to the gym in ‘work time’ as part of my 4 day week? You bet.
Financial planning is more than creating an optimal portfolio structure to maximise returns for a given level of risk. Sure, you will learn all about that in module 2 of our Diploma of Financial Planning. But you will also learn about asking clients questions and actually listening to their individual story. Because our current story is all we have…. it is all we ever will have. Money is not our story and it never will be, not entirely anyway.