Developing a Boat Budget

There’s an old saying in the boat world: A boat is a hole in the water to throw money into. That’s fine if you’re a smart planner and determine in advance how much money you’ll need to support your boat’s lifestyle—and if you can afford the sum.

Do it wrong and your boat will probably gather cobwebs from lack of use (it happens to tens of thousands of boats each year), or, worse, you’ll be forced to sell it at a hefty loss. There’s a piece of good news here, too: At times, the best boat buy is a slightly used boat owned by a person who didn’t budget in advance. Your objective is to be the buyer of that boat, not the seller!

Here’s how to develop a realistic budget:

1. Determine how much money you can afford to spend in total each month on a boat.This amount will cover both your boat payment and all other boat-related expenses.
   
   
   1. A tip: You’ll be needing this much money monthly for a number of years. The term for most boat loans, for instance is ten years. Plus, you must pay all the expenses related to the boat during the loan-term and after it’s paid off. Make sure your long-range budget incorporates these expenses.
   2. Write down the actual amount you’re willing to commit to a boat each month.
   3. Let’s say, as an example, that you decide you can afford to spend $600 per month in total for all your boat expenses.
2. Determine how much money you will pay each month on the boat payment itself. Your boat payment should be lower than the total amount you budgeted for overall boat expenses.
   
   
   1. A tip: A conservative boat payment would be 60% of your total monthly boat budget.
   2. Determine the portion of your total monthly expense you want to dedicate to a boat payment. Write that down.
   3. In our example, the actual boat payment you could afford is 60% of $600, or $360 per month.
3. Determine the amount of cash you have available to buy a boat. We call that “Available Cash.” Available cash is made up of two things:
   
   
   1. The cash your boat payment will buy you. A tip: Your credit union may finance 100% of your boat purchase price, and may not require a down payment, either. But because boats depreciate so quickly, we hope you’ll consider making a down payment to protect you from future liability when you decide to sell the boat.
   2. Any money you contribute as a down payment. “Available Cash” also includes any cash from savings or the sale of an old boat you plan to use as a down payment.
   3. Use the calculator on the right to help you determine your Available Cash figure. Just fill in the blanks and click “compute.”
   4. Write down your Available Cash amount. This is all the money you have to spend on a boat, including options and accessories. Let this amount determine how much boat you buy, new or used.
      
      A tip: If you don’t spend more than your “Available Cash” limit, you’ll be on budget, and be a happier boater!

Prepared for Corning Credit Union by Remar Sutton & Associates, April 2003. Reviewed and updated March 2007. All rights reserved.