T-Bills or a Boat - Which Will You Regret More?

T-Bills or a Boat - Which Will You Regret More?

Today we explore the age old question: is it better to buy T-bills or a boat? What pays more? What will we regret more? In the following lines I'll go into the details of these seemingly opposite choices in life.

What are T-bills and how do they work?

Treasury bills (T-bills) are short-term financial instruments. They are issued by the US Treasury Department and their maturity period ranges from a few days to a year. They are considered among the safest investments because they are backed by the full faith and credit of the US government.

When you buy a Treasury bill, you are lending money to the government. The US government uses that money to finance its debt and pay for current expenses, such as salaries and military equipment. Treasury bills are sold in denominations ranging from $1,000 to a maximum of $5 million.

For example, if you want to buy a 1 year $10,000 T-bill at 5%, you will pay $9,523 up front. One year later when it matures you will get the full $10,000. If you need to sell the T-Bill early its value will depend on changes to prevailing interest rates since you bought it. If rates went down the T-Bill has more value, but if rates went up its market value will drop.

You can easily purchase T-bills using your online broker (Vanguard, Fidelity, Schwab, etc). You can also purchase them straight from the government at Treasury Direct, but be aware their website is just horrible.

Why should you invest in T-bills?

  1. Because the invested money is safe and will be returned to you.
  2. Because you can choose the maturity date.
  3. Because with a longer maturity period, you can earn a higher interest rate.
  4. The wonderful thing about T-bills is they are generally exempt from state income taxes! So if you live in a state with high income taxes, the “after tax rate” is a bit higher than the quoted rate.
  5. T-Bills have a place in your emergency fund, which can lead to better sleep at night
  6. T-Bills compound in your favor.

Is it a good idea to buy a boat?

Are you seriously thinking about buying a boat, aka a hole in the water where you throw money?  Sure why not? They are super fun, great way see wildlife, catch some fish, and get a sunburn. You can't take your T-Bills water skiing can you?  And to be honest a boat is much more impressive to your friends.  If you are standing at the water cooler talking about T-Bills, you probably won't attract a crowd, but bring up a boat and everybody is instantly your friend!

However, if you are thinking of buying a boat, you should consider the entire cost which includes insurance, repairs, maintenance, mooring, storage, and gas. As you can see there are many costs. Are you ready to shell out the money for all the listed expenses? 

Buying a boat can be compared to buying a car. They have many of the same costs. It's just that you use the car every day, and with the boat it depends on what season it is and how the weather fares. Sure if you live in Florida right on the water and your house has an attached dock you could use it almost every day. But if you live 50 miles from the lake, you may not use it as much as you think. This makes the “cost per use” extremely high and it might be better just to rent a boat or make friends with people who own one.

So you still want a boat and can pay $25,000 to $300,000 for the purchase. Awesome. Time to add some items to your budget.

  • The annual insurance price will vary depending on the type of boat you have, but it will be like adding another car to your policy at least.
  • The mooring of the boat depends on the size of the lake / area where the boat is located. It can cost up to $300 or more per month, which is $3600 for the year just to park it.
  • Storage in winter also depends on the size of the lake where the boat is located. Most marinas will charge you anywhere from $1000 to $3000 per year depending on the size of the boat, and the size of the lake where the boat is stored.
  • Maintenance will cost 10% to 15% per year.
  • How much gas you use will depend on the size of your motor and how often you use it, but figure anywhere from $200-$500 as a starting point. This applies not only to the boat but also extra gas you need to buy when towing it.

In the first year you are looking at $5,000 - 10,000 and UP to own a boat. These expenses don’t go away until you sell the boat (or it sinks). Can you imagine how much you will pay over 10 years for all these expenses? That is enough for a sweet sports car.

What alternatives can you use instead of buying a boat?

If you don't have money for your boat, always accept invitations from your friends or relatives who own a boat. But there are other alternatives such as renting a boat or buying a used boat. If you buy a used boat and if you are handy with your hands you can make it look like a new boat. You might even be able to fix it up and sell it for more than you bought it for.

What would you regret more?

When it comes to T-bills - there isn’t really any risk, but no fun either. So T-Bills are kind of boring. Buying them and watching the rates is kind of fun for me, but I’m a finance nerd. Strengths aside, nobody ever said on their deathbed they wish they would have spent more time on T-bills while they were young.  So overdoing it on T-Bills, even for finance nerds, might be a sad of waste of life.

As for a boat, you will likely get a lot of fun out of it, provided you understand the ongoing cost, and can afford it. Keep in mind BOAT stands for "break out another thousand"... With a well thought out plan boats can be owned "regret free".  The stress with a boat comes from unexpected repairs, wrecks, scary situations on the water, etc.  Great times can be had on boats so why not go for it? I once dreamt of sailing on the open ocean in my own 30’ sailboat. People do it all the time. With the new GPS and weather tracking systems it is much safer. Makes for a great adventure. 

Honestly, it is up to you to make the decision that you feel is right for you.

Conclusion: I hope this article helped you get interested in T-Bill AND Boats so you can have financial security and fun in life at the same time.

The post T-Bills or a Boat - Which Will You Regret More? is part of a series on personal finances and financial literacy published at Wealth Meta. This entry was posted in Personal Finance, Budgeting
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