By Grace Speckman
Let’s face it, horses are expensive! Whether you own, lease, compete, or anything in between, you know equestrians pay a steep price for the animals and sport they love. So why is it so difficult to find practical financial advice tailored to the specific needs of equestrians? Beats me! That’s why I’m here to share five smart money moves equestrians need to consider to set themselves up for financial success.
1. Strategize Funding Large Purchases
Anyone looking to purchase a horse or make a large horse-related expense, listen up. Beyond the generic advice to make a budget, there are many less obvious considerations at play. Will you fund the purchase with cash you already have on hand? A loan? The sale of an existing horse? Or maybe you plan to sell investments, such as stocks, to fund the purchase. I get it: The options can be overwhelming! Equestrians do their homework when horse shopping, so why not do the same when thinking about how best to pay?
A loan could be a smart option when interest rates are low. Most lenders don’t specialize in loans for horses, but personal loans or collateralized loans can be a good choice. In rising interest rate environments, like we’re in now, steering away from loans may be prudent. If you plan to utilize investments, a down market presents an opportunity to sell investments at a loss to lock in the tax benefit (Losses offset realized investment gains or your taxable income). Most importantly, don’t be afraid to loop in an expert! If you work with a financial advisor or accountant, they can help strategize the purchase and provide insight on tax implications, if any. If you work with a trainer, they can navigate the sale agreement, terms, and details with you.
3. Consider Equine Insurance
On top of ongoing fees for care, board, or training, an unexpected injury or illness to your horse can be devastating financially. Are you prepared to handle veterinary bills if your horse is injured or becomes unrideable? One way to protect your horse and your pocketbook is equine insurance. Equine insurance isn’t a one size fits all solution, but it does provide protection, and importantly, peace of mind.
Like many other insurance offerings, horse insurance policies are customizable and can cover anything from loss of use, full mortality, or major medical. Insurance premiums are based on your horse’s age, use, and value (Note that premiums go up for horses age 16+). As an example, you can generally expect premiums between 2.5 to 4 percent of your horse’s value for mortality coverage. However, you may choose to insure your horse for less than their value to fit your budget.
Talk to your trainer or veterinarian first to see if equine insurance may be right for you. They might be able to point you to an already trusted equine agent, but it’s wise to do your own research to find an agent that’s a good fit for you and your horse’s needs. Don’t wait until an accident or injury happens to think about how to cover the expense!
3. Take a Holistic View of Your Finances
Is it just me, or do horse expenses feel like a taboo topic—like we need to justify or downplay the costs? If you have financial goals, horses should be incorporated into your overall plan. Do not ignore them! By failing to take a holistic approach with your finances, you may be missing opportunities to ensure everything is working together to meet your goals.
Take retirement for example. With competing priorities, it’s natural to wonder if you should save for retirement or put money towards your (or maybe your child’s) horse passion. But with proper planning, you can save for retirement and still support your horse habit. The sooner you start strategizing, the better. Time is invaluable when you consider the power of compounded savings and returns over the years. A financial advisor, financial planner, budgeting tools, or savings vehicles (Think 401ks, IRAs, or investment accounts) can you help meet your goals.
4. Have an Emergency Fund.
Don’t neglect your emergency fund! A good rule of thumb is for individuals to have 6 months of living expenses set aside in cash, or 3 months set aside for married individuals with joint income. If you own or lease a horse with essential monthly expenses (like board and medical care), this should be included in your emergency fund accordingly. Again, see No.3 above! Equestrians know horse bills can be shocking at times; however, they should be factored into your emergency fund so your horse doesn’t take the hit from any unexpected expenses.
A high-yield savings account designated specifically for your horse budget can encourage intentional savings and provide compounding interest. The best high-yield savings account rates are now over 2%, versus the traditional savings account average of just 0.17%. The additional interest in a high-yield account can make a big impact over time!
5. Get Back in the Saddle
If there’s anything horse people know, it’s that things rarely go according to plan, but it’s critical to have a plan to begin with. I can think of many occasions where my horse slammed on the brakes unexpectedly mid-round. Barring no injury though, I always jumped right back in the saddle. Your finances should be no different.
This could be a formalized financial plan prepared by a financial advisor, or a simple roadmap you design to keep track of your income and expenses (equine or otherwise). If you go off course with your finances, you have the plan to fall back on to course correct. A good plan will take stock of your current financial picture, help hold you accountable, and project into the future to achieve your goals. But importantly, it should be flexible and adjust with life changes. Have a plan, but if you fall, dust off your boots and get back in the saddle … or back to your financial plan that is.
Just as you wouldn’t expect a green horse to be show-ready overnight, you shouldn’t expect your wealth and finances to be in order without time and effort. Equestrians face unique financial challenges and need solutions tailored to their situation. Will you use any of the five smart money moves above?
About the Author
Grace Speckman is a financial advisor at Evans May Wealth, where she focuses on protecting and maximizing the wealth her clients have worked hard to build. As a lifelong hunter/jumper rider, she specializes in the complex financial, investment, and estate planning needs of equestrians.