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Old 10-29-2006
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The Cruising Life, by Jim Trefethen, and Cruising Financials

I've been slowly reading through The Cruising Life by Jim Trefethen, and I have to admit that it's making me think twice about some things. (Sorry this is a long post.)

Even if you don't read this book, it's worth skimming the reader reviews at Amazon.com. I have to like a book that is both praised and hated by other readers. Some dislike his preference for wood boats. Some think his wiring diagrams will burn your boat to the waterline. Other's think he's an unreformed ad man who started with a lot more money than other cruisers.

The funny thing is, the criticisms might be right, but at the same time the arguments he makes about "the cruising kitty being the most important part of the cruise" are pretty thought-provoking. He has an opinionated, argumentative tone about how to plan finances for cruising, which I appreciate as one man's opinion to consider.

If I'm reading this right, he and his family started cruising in the early 1990s. His two kids were still school-age, but he was in his early fifties. They bought a $25,000 wood sailboat and took off from the east coast with minimal refurb, and made it to New Zealand before deciding the "big rebuild" was needed.

They started by renting their house back at home, but found it a bad experience and sold it. Their cruising "kitty" was around $150,000, which was put in diverse investments that generated around a 14 percent return in the late nineties (1997 ish-- sound familiar?). They were cruising mostly on the return and small work along the way. The had a separate retirement fund that had grown to around $250k in 1997, which was invested and would remain untouched until they were 65.

As I think about the differences between

1) Doing a sabbatical cruise or career break cruise.
2) Doing an open-ended cruise when in our 40s.
3) Doing an open-ended cruise in our 50s, and maybe not working again.
4) Doing a retirement cruise closer to age 60.

I think that Trefethen's model is a pretty good example of option 3. What's interesting, and thought-provoking, is that they started with pretty good financials (retirement fund, solid equity in house, 50k in savings), but the equation of selecting the boat really had to hit a low cost point ($25k) in order to protect the kitty so that it could generate returns. As he noted, the advice of boat brokers was that a $250k boat would be needed to safely cruise with children across oceans for a multi-year trip, and Trefethen noted that in that case they could have bought the boat and then had nothing left.

He notes that a lot a cruisers don't plan for final retirement well (those who start cruising in their 40s and 50s), and others mistakenly think that they'll sell their boat at the end of the cruising for a nice retirement nest egg. I'm not sure these claims are true, but I could see them happening.

Anyway, his arguments about living a minimalist life on land for several years before cruising, and buying a boat at the last possible minute, make sense in several ways. In today's economy, I don't think I could generate 14% in annual returns on a $150k kitty, which hints at the idea that it would have to be quite larger in order to finance most cruising expenses via returns on investment.

An interesting goal would be $500k in the final retirement fund, and $500k in the cruising kitty (before the boat is bought). Even with the $500k to start, it seems like selecting the boat would still be a tough issue, since it would be best to have around $400k returning around 7 percent a year to offset a majority of cruising expenses for a family of four.

Interesting issues-- ones that can make sabbatical cruising look better than before as well. Despite the criticisms, the book is worth reading for its ideas.

Jim H

Last edited by Jim H; 10-29-2006 at 11:53 AM.
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