Beware of Icebergs

I read a post titled something like “Top Mistakes People Make With Their Money.” One of the Mistakes was what the blogger called Icebergs, and I thought that was clever. When you think about an iceberg, what comes to mind? Perhaps the first thing is The Titanic. Hopefully the second thing is that most of the hazard is underwater, where you can’t see. This is why The Titanic sunk. In the financial planning field, icebergs are investments or purchases you make wherein the initial purchase necessitates substantial future purchases, such that you are on the hook for a lot more money than you forked up for the initial purchase. Icebergs are especially prevalent with hobbies, and I am guilty of iceberg purchases that have cost me. Let’s examine.


Lots of people go boating, but most of those people don’t really need the boat. Boating is an excellent example of an iceberg purchase. Once you buy your boat, you have to store it somewhere, either in the water or on dry dock. That costs money, as does gas and maintenance. Oh, yeah, gotta insure the boat, and also maybe your liability insurance goes up due to the boat. Maybe instead of just a boat slip, why not just buy a place on the water that has a dock? That’s more iceberg spending. Then, what are you going to do with the boat? Go fishing? Then you need special expensive fishing equipment. Water skiing? Same thing. Soon, you can see why people say the 2 best days of a boat owner are the day they buy the boat and the day they sell the boat. Boats are really fun, though.


You love music and you either already play the guitar or you want to learn, or maybe you want to be part of the new interest in vinyl. You buy your first guitar, and then soon you want a second. And then a third. All justified because they all sound a bit different, of course. Or you buy a nice new turntable, but you decide after playing them that those old LPs you saved from 40 years ago don’t sound that great any more, so you need to buy new ones. Pretty soon your high-end sound Jones starts to cost you a pretty penny. Guitar players are famous for their appetite for more and more guitars. Apple Music at $15/month sounds like a good deal by comparison. Music is a great example of an iceberg hobby.

Rental Property

Let’s turn to something that you think (hope) will make you some money in the future. You want to diversify your portfolio and so you decide to buy some rental property. Beware of icebergs here! Unless you are handy, you will have to hire others to do the upkeep and maintenance work. There is a labor shortage, so what does that mean for how much you will need to pay for your maintenance? Then there is the eviction moratorium: landlords cannot evict non-paying tenants due to the Covid-caused economic disruption. Now you have a property that you need to continue to maintain but you have reduced or perhaps no income from your tenants. Because of supply disruptions, the costs of lumber or plumbing that you need for your repairs are likely higher. There are icebergs aplenty with rental properties.


Everyone needs hobbies. Either undertake hobbies wherein the iceberg expenses are limited, or understand and prepare for the iceberg expenses of the hobbies that you do have. Be careful even with purchases wherein you hope to make a return at the end. Once you own something, there is a good chance you will need to have some further outlay in order to use your something or even just to make it run. Make sure your eyes are open to that likelihood.

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