My new boat and truck

[anxvariety]

This is a ‘what would you do?’

Last year I bought a new truck, a 2005 Toyota Tacoma.. if you’ve ever owned a Toyota you know how reliable they are and how good their service is should you ever need anything. I paid around $26,000 for it, and I have it about 98% paid off right now.. I haven’t paid it off because I’m hoping that that last couple thousand will help bolster my credit. I bought the truck after having an older car that gave me quite a few problems.. I figured I’d rather pay the truck off than have car issues that give me huge headaches…

Next possesion.. Just a few months ago I paid cash for a boat.. it’s a 20′ 1991 Bayliner… a completely awesome boat that I really am glad I purchased.. it gets me off my computer, and gets me out into the ocean which is one of my favorite places to fish, relax and think… it also gives me a great activity to invite my ‘old’ friends out to do.. it’s easy to invite someone I haven’t talked to in a while out fishing, because even if we can’t think of something to talk about (might not have anything in common anymore) we can talk about fishing, and at least I feel like I did my part to keep my friendships ‘current’ (Hopefully this perspective doesn’t sound too utilitarian, I’m really not that way with my friends). I always want to make sure I put in the time towards good friends.. anyone who’s been my friend and not harmed me.

Ok.. so enough of that.. the question is, both the truck and the boat are awesome, but they represent about $35,000 in liquidible assets… Is this the wrong time to own those things? I don’t want to say what percentage of my savings those 2 luxuries represent, but we know $35,000 will go a long way should their be any sort of ‘crash’.

So my questoin is, at what point do we brush aside the frugal saving voice and listen to the voice of enjoyment and buy the things that help make us happy… The boat and the truck make me happy short term and long term.. but, I’m wondering if I should sell – and try and leverage that $35,000 into my investment strategies and maybe end up with a bigger boat and a better truck.. or maybe the same boat, same truck, and a couple nice down payments on a couple of houses in a couple years.

I am stuck in sort of 2 black and white perspectives and I’m wondering if someone who might have had a similar question in their mind at some point, and made a right or wrong decision can help me through this one…

Right now I’m leaning towards keeping the boat, since it gives me alot of enjoyment, and selling my truck and buying a real old truck(that’s just functional enough to tow my boat down to the beach) and an old Honda Civic or Toyota Corolla(fuel effecient).. I figure I could buy the truck and car for about $7,000 which would give me about $15,000 in cash after selling my truck…

Any ideas? Anyone been stuck in this decision before? It’s probably going to be hard to answser this without knowing what my investment strategies are.. but go ahead and answer it in the context of your own, because I’m not totally set on anything…

It’s not a bad decision to be stuck in… but I still want to make sure I’m poised to strike at low prices, while at hte same time enjoying my life in the meantime when the ‘majority’ might be entering ‘debt-pression’.

Thanks for any tips!

[powayseller]

What is the Kelly Blue Book Wholesale Trade in value (the amount the dealer would give you)? Add 2-3%, and that’s what you could expect in a private sale. I wonder how much you would come out ahead selling the truck. It would have been better to buy a 2-3 year old vehicle. Most of the depreciation of the vehicle is in the first 2 years.

What are your other liabilities? You rent, right? Are your expenses low enough that you can afford the truck and boat, and still save for retirement, save for a rainy day? You have health insurance, a will/trust and term life insurance for any dependents? If everything else is lined up, probably you can afford your toys. I think toys are great for people who don’t have to leverage their futures to obtain them. My husband bought a 5-year-old 911 Porsche Carerra, cash, and neither of us felt guilty about it. It’s okay to spend money now and then.

On the other hand, every dollar you get out of that truck could double over the next few years if invested in some oil and commodity stocks. I’m looking over the Zeal recommendations, and Chris Johnston’s trading service, and realize that I want more money to invest. Cut back on spending for a few years, and leverage my money. I could pay cash for that trip to Europe, off the gains on my investments, so why take the cash for that now?

I once read that Warren Buffett (who is too frugal, it’s kind of an addiction with him to hoard his wealth), refused to buy a TV when he was younger. He kept thinking the $500 “wasted” on a TV, could compound in an investment.

I hope I gave something to think about.

[Bugs]

Apparently you could afford the purchases when you bought them. You had the desire to own them and the means to satisfy those desires without having to overextend yourself. There’s nothing wrong with satisfying your desires and taking your happiness where you can find it, so long as you’re not jeopardizing everything else in your life to do it.

It seems to me that your question has more to do with your priorities than anything else. If the only thing that matters to you is your bottom line then perhaps now would be a good time to sell. If what matters the most are the benefits that you’re currently getting out of these possessions and the money is secondary then there’s no need to give that up.

The only way this would have been a problem for you is if you sacrificed the things you need in the long term in order to satisfy the short term urge. If that was the case then you wouldn’t have been able to afford those purchases in the first place and you would have had to overextend yourself in order to buy the payments. But your rendition of this doesn’t include any indication of that, so I’d say the choice between the two options is best made on the basis of what’s important to you.

[anxvariety]

Reading over my questoin again I realize how subjective it is.. but then again, its those types of questoins that are the hardest! Some things you can plug into a calculator and it will spit out an answer.

You guys say it’s good to have things that make you happy or that you really want that are within your means.. but do you think that’s still true in a time like now? Where there’s almost a silence before the storm? I almost feel like I should be riding a bike and eating ramen.. because you know as they say, when there’s blood on the streets can be one of the best times to buy… Example.. An extra $1000 into Qualcomm 15 years ago, would probably represent $50-100,000 now, and that’s where I’m debating on sacrificing luxuries, and even maybe going on the other side of the coin of sucking it up and maybe even doing some uncomfortable stuff, like riding a bike, staying in my house with no AC on, eating ramen, basket weaving, and collecting cans from neighbors trashcans!

When you guys talk about afforability.. is affordability to you whether you can pay cash for it and still have enough money to live and save with, or is affordability, can you borrow the money to pay it, and still have enough income left over to save and live?

I would be pretty reluctant to borrow much money that I had to pay interest on.. even if I really wanted it, for example the boat I really wanted, but I wouldn’t have borrowed money to get it… I borrowed money to get my truck, but I could have paid cash with it.. I was just hoping that borrowing from Toyota would help remove some of the cob webs off my credit.

Powayseller, I agree with what you say about Zeal.. I follow their investment tips pretty closely, and have done quite well over the 6 months that I’ve been a subscriber. I’m a little concerned about having too much cash in the market, because I’ve lost it all before.. My protection against that now(or at least what makes me sleep at night) is that I’m solely invested in options and gold, with equal amounts in cash.

The economic high that we have had(whatever ‘we’ is, I’ll say southern california) had me pretty bummed out from an investment perspective over the last 10 years.. because I felt like everything was at a peak and finding good investments would require more advanced foresight(that I don’t have at this point) since the only thing most experts were talking about was real estate.. That’s why now I want to make sure I have as much ammo(cash) if the big financial storm hits… because I believe this is one of the only ways to make a class jump(besides inheritance or hard work luck and a good ideas) and help myself get out of the rat race (middle) class!!

Thanks for the resposnes.

[novice1027]

Life is short! You have already paid for them, you enjoy them, and none of us know what tomorrow will bring. You are still young, just start saving from here.
There must be a balance in our lives, and what good will it do to have millions, and not been able to enjoy yourself along the way. It’s not the destination, but the journey!
Good luck

[powayseller]

I think your situation is a personal decision. You sound like you would get more pleasure from using your money in investments than in consumables. Are you asking for verification? Would you feel guilty selling that truck?

I have a few questions about Zeal. First, I made the stupid mistake of buying Ivernia through Vanguard, instead of opening a Canadian brokerage account. Since I purchased it as a pink sheet, I couldn’t put on a stop loss. I hope that will be okay… I’ve never bought anything with a stop loss, so I hope this won’t be my first big mistake.

They list Conoco Phillips in the Speculator list of stocks, yet they say it is one of the best buys around. I am surprised the oil stocks are so cheap! COP is trading at only PE 6.4! Barry Ritholtz recommended it on yesterday’s Forbes interview, and Warren Buffett has a stake also. What would be a good stop loss? The Zeal newsletter doesn’t say. Should I just use 15%? Do you keep adjusting the stop loss upward? How many of the investments on their long-term list do you have? Have you tried the ZS also? I am not going to buy options, calls, puts, stuff like that. I’m only going to buy long.

Have you checked into Chris Johnston’s futures trading? He has a 50% YTD return, and similar for past years. He trades only 40-50 times a year, he’s pretty conservative and quite good at what he does.

[anxvariety]

Thanks, I think I’m going to sell my truck and keep the boat.. Just wanted to make sure no one had any strong opinions either way that could possibly shift me..

PowaySeller, I don’t know much about the specifics of trading on diff exchanges.. but maybe someone else knows the answer to those questions you have about stop loss rules on diffferent exchanges.

As far as stop limit %, I would think 15% is way too low of a stop loss on options as I see 15%+- swings very often in my options..

I bought some Zeal reccomended some CCJ options 2 months ago.. I just sold some of them earlier today for a gain of +80%… this is just one example, and their track record could be erased in a few heartbeats…

Yes, according to Zeal COP is fundamentally very strong.. P/E of 6.xx. For people that don’tknow anything about stocks P/E is price over earnings, it means how much the stock earns realitive to its price.. So if COP is P/E of 6, it could mean their stock price is 60 and EPS(earnings per share)is 10. For the exact numbers just look up the stock quote symbol COP.. I just bought more COP NOV 60 calls today.

I only buy options in the amount that I am willing to lose.. because I realize ultimately I have 0 control of the markets.. Options themselves are my stop loss, because I only buying what I’m willing to lose completely for the shot at the upside.. and with that you get alot more volatility than with stocks..

Remember stop losses wouldn’t do much in a ‘black monday’ type scenario anyways.

[powayseller]

How do you buy COP Nov 60 calls? Why not just buy COP?

[anxvariety]

I typed out a really long response.. but decided to remove it, because it’s too easy to make a mistake in my calculations tha t might mislead..

Here are two good places to find out why you might want to buy options VS the stock:

http://biz.yahoo.com/opt/basics1.html

http://finance.yahoo.com/q/op?s=COP

The jist is, you get way more upside, with a controlled amount of downside.. alot more volatility.

Also, writing your own options is very cool if you’re long on a stock.. Look up ‘writing covered calls’. It’s a great way to make money on stocks you’re holding long on. You sell someone an option to buy your stock at a price that’s higher than what you bought at or around what you would be willing to sell it for at a particular future date.. What it comes down to with covered calls, you are guaranteed to make money on the call you write, your only downside is opportunity cost if the stock were to somehow double or something you’d lose out on whatever the stock price did above the call you wrote.

I hope I’m not consufing anyone reading this.. I’m just trying to give a summary so you can guage interest and then go read the specfics from someone who is a good writer.

[docteur]

Pay off the truck. Keep the boat. Don’t hold onto debt because of a credit rating.

Stay in the moment, enjoy your life. Because nobody knows what’s going to happen next. Nobody.

If we crash and it gets really ugly, well then being on the water will be even more important to you than it is now.

And, you will have two free and clear assets that you can use to generate income or sell/refinance if need be to generate cash. (Many years ago during a real estate crash several of my friends used their cars, boats and even jewelry for down payments on homes and apartment buildings).

What is the point in earning money if you can’t enjoy it? You are enjoying the fruits of your labor now. That’s a great place to be. Stay there.

Start planning from this point forward how to take advantage of a crash (or no crash, or something else you can imagine) and keep that which gives you pleasure.

Because believe me, a happy disposition and wonderful friends are 90% of life’s mastery and if you’ve got those two truly handled, nothing but good will come your way.

[anxvariety]

doctuer, thank you for your amazing reply. You communicate a wise confidence…

It’s cool that there is such a mix of people here.. different professions and specialty areas.. yet at the same time most seem pretty moderate and low key about things.. I guess we’re all interested in housing situation.. I’m surprised that a ‘financial/economic’-ish forum is so friendly and not overly technical or number-crunch-ish.. very cool. Good mix.

[kiki]

I would recommended before selling your truck that you do a calculation of how much you will get for the car minus the price of the old truck you will buy and additional maintenance cost you will incur.
I bought cash a Toyota Camry last year. Before moving to California I swore never to buy a new car because I could buy a one or two year old car and not pay the premium. But when I moved here and had to buy a car, all the old cars were really expensive considering the mileage they had. Cars were selling for $14K with 50K-60K. I manage to negotiate the price to the dealer and paid $18K for a brand new car. I figured I can put the 50K miles to my new car and that will cost me $4K only.
I also look older cars (10years old), but they had 200K-300K miles. Chances I will need to put money on them are very high so that did not work out for me either.

You said you can get $15K but how much do you think you will put into maintaining the car in the next 5 years? $3-$5K maybe? Then is $10K extra money better for you than having a nicer car? This is your call.

You mentioned if this is a good time to spend money. I think the problem is not today or tomorrow or yesterday but if you are spending beyond your means (like using HELOCs to pay for luxury items). This is clearly not the case for you. So the best time for you to spend or not your money really depends on what your long term plans are and your financial situation. If you can afford it and have a plan for your future then I think you are ok. If you used all your money to pay for these 2 items, then you may want to analyze how this affects for future plans.

As novice1027 said, There must be a balance in our lives. I think about the future but I also put a weight on what makes me happy today.

Anyway, my two cents.

[anxvariety]

That’s a good factor to consider.. the maintenance costs and such..

Kiki, you made me think of one of hte main reasons I am asking about selling.. I don’t so much want to sell to get the money ‘now’ per se, as much as I’m concerned that in 5 years there won’t be many people with money to even buy my truck at all.

How does everyone see this playing out? How will this housing bust affect resale values of expensive items like trailers, boats and cars? I would imagine cars would be less affected than boats, since boats probably take a back seat to basic transportation.. but does anyone think the money will dry up so much that people won’t be buying anything other than really cheep cars? That’s probably my main concern with the truck…

[docteur]

When things get really bad, trucks are in high demand because of their utility (they can haul stuff, like to swap meets). Boats in bad times…not in demand, unless you are in the business of transporting contraband…

[kiki]

good question. I never thought about that. I do not know. One position could be as you say that people will only be able to buy very old cars, but on the other side, people that now are buying new cars won’t be able to buy new car anymore so demand of used cars will be high. However, I am not sure how will supply be. Maybe all this people that can not pay their mortages will start selling their cars driving supply up therefore driving prices down.

Tricky question. i do not know. Anyone has opinion/thought on this?

[Author]

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