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Discussion in 'Flight Following' started by MuseChaser, Aug 11, 2020.
Lol...kind of ironic given your screen name. Maybe "EverSeaward?"
I sometimes thing about soaring, but there is no place close. As I mentioned before, flying was my job, and when I left, I never looked back.
they don't. I only have PT6 time, and miss the reverse thrust, and would enjoy it again in a TPE331
For the record, new member & post...
These metrics are what I’ve been tossing around for about a year. Renting doesn’t work & unfortunately my club situation has changed direction for the worse.
I’ve found some very detailed expense spreadsheets to help work through the true cost-to-own. And I appreciate those who have made these up! I find it amazing the people who dole out the advice “If you have to ask...”. 100% not helpful. Some of us can afford and would like to do so responsibly as possible to avoid as many surprises as possible while being a new owner. Trying to have some sort of a ratio flying expenses:income etc.
With my finances it seems doable while still doing all the important life things (saving for retirement, personal savings, maintaining our current quality of life etc). But I still have significant hesitation as it is a great financial & personal responsibility...Safety, maintenance, large surprise expenses etc.
As others above have mentioned these are their reasonS for not taking the plunge.
My approach has been to lay out my financial and investment plan for about 10 years in the future, and do it. Then whatever cash (no debt) is left over after expenses and investments is fair game for airplanes or toys of every kind. I started with this approach in my 20s, limited my monthly expenses for 20 or more years after that, and tended to buy toys that don't depreciate much. Over time this then gives you an inventory of things you could sell to raise cash, as well as new discretionary money that pays for the hangar and maintenance. None of this is taken to a cost level where I feel any financial stress, I don't track my airplane etc expenses, and I never waiver in sticking to the ten year plan that will provide for me some day in the future, retirement etc.
This approach versus buying when a windfall comes your way etc is probably more practical if your income in fairly predictable over a period of years - I've had the same job for 30 years.
I looked at mine as a mode of transportation and not as a toy. I have family all over the map and the few days I have off I don’t want to spend driving so I figured the cost of driving my truck vs flying my bonanza vs buying airline tickets to justify my purchase. It only cost me a few bucks more for 100LL vs diesel for total fuel cost per trip but I get there in a third of the time or less so it is worth it. I can fly both me and my wife anywhere we want to go for less than what I would pay for one airline ticket (most cases) and do it on my schedule. We seem to make trips every other weekend somewhere so it has become an asset. Before the plane we never went anywhere because our closest drive to family was 7 hrs one way, now it’s a 2 hr flight so we go quite often.
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All depends on priorities I suppose, and what percentage of your income you choose to spend on home, transportation, etc.
I've known people that make under $100k/yr that have $500k homes and not much else. I also know people that make more than $100k/yr that live in a $50,000 paid off home that have lots of expendable income for other things.
Thats what always makes it interesting when other people find out you own an AIRPLANE while they drive around in their $75k Suburban from their $500k home. I live in a modest home that costs practically nothing to live in, drive a 12 year old truck, have zero debt, and a sailboat and airplane for fun.
The question isn’t even relevant to me. I’d rather struggle to pay the rent than not fly. Of course, that’s a bit of a cop out or I’d own and fly a helicopter. Obviously I have a limit. I could care less if my limit makes sense to anyone but myself.
Sage advice. I'm grateful to have had a father who lived through the Great Depression and beat it into my head to avoid debt if at all possible. Save up for something, buy it outright, and fully enjoy it without the debt hanging over your head. Instant gratification is overrated! I did assume some debt buying a house, but I doubled up on the payments and paid down the principal as fast as I could.
I tend to sell one toy to pay for the next. I never want more than a couple, as it's easy to become a slave to your possessions!
I wonder if the more salient question is what percent of one's annual income is reasonable to allocate towards operating expenses?
Going to depend wildly. When my friend and his wife had kids, one decided to stay home rather than work, and they had almost $0 disposable income, and they only had a house payment and car payment. They had to float credit card bills through the year (furnace went out, etc) until tax refund to basically break even for the year. So for them, it would be 0% of their income. I could probably go as high as 40% and not have an issue.
I always find it funny how people talk about these things, as if there's a correct % of your income or net worth or whatever to spend on x. I've just never thought about it in those terms. I feel you should know what you can spend by the time you are of an age where you can afford to.
My financial situation is probably different from most and much of what I do and why might not apply well to others. However, the core thing I did was avoid debt. Our house is paid for and when we do very rarely take out a loan it's only to avoid spending invested money that's making more than the interest on the loan. We could have bought a much larger and nicer place, driven much higher end cars, etc. We didn't and with everything paid for and living a lifestyle that is pretty low cost relative to our income level we can afford some really nice things like an airplane and a couple of big trips a year in that airplane. Like I said, my situation is weird. I basically live like a retiree but I'm still in my 30s...
I think there are two extremes when it comes to money. Some live large all the time, taking out loans and planning on working most if not all of their able bodied lives. Others live like they're poor, invest everything, and amass wealth. I don't think either extreme is great, the spenders seem to be swinging from one potential crisis to another, maybe even going bankrupt. Those who live the ultra-frugal way seem to make that such a habit that even when they have the stacks of cash saved up they're afraid to spend it or retire- their heirs will be the ones who get to enjoy it.
Grab a calculator, do some planning, and as in aviation leave yourself a healthy margin for error. That's my best advice.
I think the OP is just trying to gauge what other people do to make sure he's not doing anything crazy. Based on my last 3 years of ownership, annual + other maintenance + operating expenses = 4.7% of my income. I could have put it in the stock market waiting to see some profit in a few years, but no one can take back the wonderful memories flying has given my wife and me.
Yes, unless you’re in a situation where a plane and the expenses are an extremely small portion of your budget, then it is all about what you want to spend your money on. It’s a different equation for most everyone. Personally I believe that for a family person an airplane is something you should be able to write a check for, or by pass ownership until you are able to.
And servicing the loan for the plane.
I can help with a pair of PT6s! I’ll throw in the rest of the airplane!
My friends would always ask me "why don't you get back into flying, you love and miss it so much?" The answer, from 1982 - 2018 was simple; I couldn't afford it. I bought a plane when I can afford to. Like owing a horse or a boat, the biggest hump is the cost of ownership, not necessarily the purchase price..; (... Flying is a passion and the only activity I do when I don't think of anything else.
The plane value is not the kicker. My plane is around 6% of my net worth. The danger is how illiquid my funds are. If I had a surprise overhaul, I’d be hurting for cash. My net value would remain level but I would have to sell something, borrow or cash flow. In other words, a great income would be helpful consideration, not just net value.
Opps, wrong thread
I tried not to over think it too much. My son graduated high school and was too slow to get into college so I took him into the garage to see the new toy. He said, "dad, you bought another airplane?" "Not exactly son, I just spent your college fund!"
My dad taught me that people that have boats can afford them. It's true. If you want a toy you will find a way. When you can't afford it then it goes away.
I did that calculation including hangar and insurance and 50 hrs/per year fuel and came up with 4.9% of income, almost the same. My plane is worth about 1% of our net worth which allows me not to insure the hull, saving some money. I keep enough cash reserves that I could total the plane and buy a replacement if necessary.
Repeating in slightly different terms what I posted earlier, I think the key issue for reasonable affordability and enjoyment is not your net worth or annual income, its making sure you have your monthly nut covered and are not sacrificing any of your long term interests, saving for a house or retirement etc. Also not spending all of your fun money... unless you really, truly only want to fly and nothing else in your spare time.
Or it just falls apart because you can’t afford to maintain it, but can’t accept this and continue holding on to it instead of selling and taking the money.
I'm sure I could "afford" far more than what I'm flying, but my wife likes the cost structure of the club far more than she would like the cost of owning. So I stick with club planes. And, with the amount I fly, she's absolutely correct (as usual).
Primary home < 10% of net worth, fancy toys, much less. The home could possibly be an investment (as in "appreciating asset"; mine is) but it's unlikely a plane would be, or could be. Or perhaps I'd own again.
As several have noted, it’s a highly personalized decision that may vary with stages of life along with a “want vs needs” analysis. For me, I simply have a limit on what I am will to spend on just about anything, irrespective of net worth or annual income. So my currently way over-valued AG5B Tiger does everything I want and need. I could have something way bigger, faster, more complex and therefor expensive, but I just don’t see the need or the want. And since I am on the last third of my life span, I am more and more adopting the philosophy that less is more. That is until I look at some of those new catamarans for around $1.0M - $1.5 M. That is pure porn to me which is why I quit getting Cruising World!!!
I just had this very same conversation today. Somebody mentioned that I have an airplane and said I "must be rich." I drive a 2001 Excursion with 197,000 miles on it. He was driving a 2019 F250. His truck cost more than my plane.
You can make memories or you can make excuses. I don't want to be 70 saying "you remember the time we almost...."
After spending a lot of time on my boat in the Bahamas, I bought a house there. It's a rental so it takes care of itself. Of course then I needed to buy an airplane to get to the house...
Some money goes into savings, some money into retirement. The rest goes into memories.
Got it, thanks for the clarification.
Impressive progression. Mind I ask what your action plan was / is, to go from negative to seven figures in 9 years?
I fell into a club with multiple different aircraft and a solid financial plan. Low monthly fee and less than $100 wet on three of the planes makes flying a hobby I can participate in. I couldn’t afford to fly otherwise. Just the other side of the tracks perspective.
If you’re a family person and have to worry about cost of expenses you shouldn’t be borrowing money for an airplane or a boat, or other expensive luxury item IMHO. Family first.
Yes. Pretty basic personal finance concept. If you can’t afford to make the loan payments, maintain the airplane, AND feed your family, you shouldn’t take out the loan.
I’ll agree with that, but take it a step further. IMHO borrowing is for a home and in some cases a vehicle. These should be short term loans. Everything else should be bought with money that has been earned and saved. If that rainy day ever comes don’t be sitting on unnecessary debt. It’s tough in the beginning that way, but the reward down the road is well worth it, and the peace of mind is priceless.
I am old enough that I have seen several periods of economic hard times and know what they look like. I also know what it looks like leading up to them. Now is a VERY good time for a person to be living within their means.
I would argue if you are unable to save enough money to buy an airplane with cash, you can’t afford to maintain it.
I financed my latest car, only because of the low interest rate, otherwise I would have bought it with cash as well.
Only appreciating assets should be financed.
You’re net worth is meaningless for this type of financial decision.
If you buy it with a loan, you still have the cash to pay for any repairs ;-)
Says the man who bought a car with a loan.
Thats one of those dogmatic statements that falls apart the second one digs deeper. I bought a tractor with a loan, same reason you took out a loan on the car: because it made financial sense to do so. There was no further price concession the Kubota dealer could give me for paying cash, so why not use the finance companies money for the next 5 years rather than my own ? Of course, the tractor depreciates, and omg I was probably 'upside down' for a few years, but at any point along the loan, I could have written them a check for the payoff and get the lien removed. So I can't get too sanctimonious about anyone taking out a loan to buy a plane. As long as you can put food on the table for either yourself or those you are responsible for, taking out a loan for plane/camper/boat/tractor doesn't make anyone a bad person.
I usually paid cash for my cars and keep them 10 years or more. OTOH, when the dealer offered 0% interest on my last one I used their money and left my money invested.
No such deal on the plane so I paid cash for my half.
But even though I financed it, I have the money if I needed.
The problem if financing because you don’t have the cash is what happens if you need a major repair like an engine overhaul. Then you’re left with the airplane that can’t fly and you can’t repair, but it still costs you money.
I stand by my statement, if you can’t saved the cash to buy, you cannot afford the plane. You may choose not to buy with cash, but it’s a choice you make, not a choice you’re forced to make.
Like most I could easily afford more plane, but my bonanza does what I want for my flying.
Before I jumped into owning, I looked at how much I was renting and did some deep reflecting on how much “more” I would fly with owning (not much). That really influenced what plane capabilities I wanted, and has worked well for me.
Exactly. The "cash only" concept is an outmoded idea that fails to take advantage of a large potentially valuable component of a personal finance plan. Managed properly, it allows a person to have things that he/she might not otherwise be able to afford. Like....a house, a car, or an airplane.
We all have to find a way to afford to live the life we want to live to the extent possible. If that personal finance concept works for you in your particular financial situation, then more power to you. Fortunately, there's no shortage of financial plans and tools to help make that happen for people who don't ascribe to the "cash-only" concept.
I have a different set of lifestyle goals and take a different approach. I have no desire to drive a car for 10 years. I either buy, finance, or lease a new car every 2-4 years.
Neither approach is right or wrong.