Cruising and financial planning
I wanted to start this thread because it seems like this is the one thing that never gets discussed enough. Some people set aside "x" amount of money and plan on returning when the money runs low. Others set up financial plans and continue to cruise until they are to old. Still others stop and work when the cruising "kitty" gets low. Still yet I've heard others talk about remote villages that will pay a cruiser to bring supplies to them on a monthly basis.
It would be nice to hear from as many as possible on how they pay for their cruising. What about those that invest and live on the returns on the investment while not touching the principle? What about banking and transferring money? Sure, it's easy enough to deal with a great number of problems involving finances when you live on dry land and are accessible every day BUT what does the cruising family do and how do you handle it?
We're set up on a plan that gets us out and not ever having to return. At the longest we'll have to wait 5 years, at the earliest about 2 to 3 more years. I hear a lot of people say "just go and don't wait"! How do you accomplish this?
I've noticed there are some on these boards for which money doesn't seem to be much of an issue. I've also noticed some that don't have much in the way of finances but are still managing to cruise. So, how do all these different types manage to get out and "just do it"?
Things I have tried:
Selling my body: great idea but then I found out they wanted to cut it up and use the parts
Dumpster Diving: Worked Great in the US where people throw good stuff away, Have 39 orange life vest that dont float for sale if anyone needs them.
Piracy: After I said this in a barside marina, I now have a 110 foot Coast Guard cutter that follows me everywhere, so made some money selling the liferaft and epirb.
Local tourist guide in foriegn countries: Worked great until people started asking for things that wasnt in the hotel guide books
Pet sitting for cruisers: Great business if you can get the boats ever to come back for thier cute little kittens, by the way have 57 cats that need a home.
The hardest part of discussing cruising and finances is that it is usually different in each situation. There are a number of variables that have to be taken into account. That makes it hard to have a generic plan. And what may work for one, won't work for another.
In my case, I determined that cruising was how I wanted to spend my life. I left, as soon as I possibly could. I was advised to wait, to put away more money, but as soon as I felt I had the minimum I needed, I went. I made a partial withdrawl from my retirement account to pay for the boat, and live on for 5 years until social security kicked in at the minimum age.
Keep in mind though, I had no dependents or debt to factor in. Also, I am only coastal cruising, hence, less money on boat and supplies, as well as customs, etc.. Also, I am living primarily on the hook. And, if for some reason money does become a problem, then I'll find work till I can go back out again.
In one way, it just comes down to how much you want to do it. Yet, there is also the need to feel comfortable with doing it. And that, only each person can decide, based on their situation. In my thinking, the two biggest factors are....what level of lifestyle (ie: on the hook or at marianas, cooking or eating out, things like that) and what type of cruising you will do. Once you determine those two factors, then you have more to base your financial decisions.
One thing I will say, the sooner you go, the more likely you are to go. Every moment you wait, is one more moment for something to come up that would make you wait a bit longer.
Anyway, that's my thinking on it, for what it's worth.
I can see by the number of views this thread has gotten in 3 hours that there are a number of people with the same questions on their mindso I thought I'd lay out a short version of our plan.
1. An investment acount centered around mutual funds concentrating most of those investments on Mid-cap funds that have had good returns in the past. We'll stay away from investing in individual stocks and we're definately staying away from investing in companies such as Wal-Mart which probably won't be seeing large percentage increases in their value as they are considered more 'mature" corporations. Our goal is to try and realize a 10% yearly return on any investment which by the time we "take off" should be enough income to sustain us from year to year.
2. At home we're reviewing all our monthly expenditures in order to be able to put more money into our "cruising" account. Areas to look at include the satellite TV dish, cell phone service, utilities and anything else where we recieve monthly bills.
3. On the banking end.......we believe that a debit card tied to our bank account is probably the best way to obtain cash for purchases. Having very little experience abroad we are still wondering if this is the best approach. Any comments or tips on this one?
Boat wise, we are getting all the time in that we can on our Islander 30 to increase our experience. We'll sell "Fiasco" in favor of a little larger boat before we leave as we have 3 boys and will just need a bit more room.
There are other things we are doing but these are some of the highlights.
What about health insurance while cruising? I've read of several companies that offer major medical policies for cruisers that seem fairly reasonable but am wondering about the treatment of the various cuts, bruises and illnesses that are sure to occur. The Mrs's is an RN so that will help but does anyone know how she'll be treated as a medical professional while abroad?
I know there's lots more but every now and then I have to work.
NCountry...good topic. We started out hoping for a 5% ROI to keep us going and afloat on what we thought was a pretty liberal budget, but over the last 5 years both the % and the budget difficult to achieve. Now, of course you can get 5% due to rising inflation and interest rates but 10% may prove elusive over the long term as there tends to be a lot more volatility as you increase your risk.
2. Cutting down and simplifying your lifestyle now can certainly help extend your cruising life but I wouldn't expect 5 years of luxury denial to get you a whole bunch of time unless you take a lot of plane trips and drive a mercedes! The way we did it mostly was to bank one salary while living off the other and trying to bank as much of that one as possible. Budgets did not even consider the second salary. We also were frugal and bought used cars and took family vacations on the boat. One of the big surprises for me was how much maintenance and repairs will cost you when you are out cruising....and in talking to fellow cruisers that seems to be a common theme. Assuming a boat in the 40' range for a family of 5...you really do need to budget at least 10% of the boat vallue (or at least $10K/year) for repairs and maintenance. Some years you will be lucky...others you won't but over the long term you'll spend it assuming the boat has normal systems and you are not trying to emulate the Pardees!
Lot's of cruising nurses in the US where work is easy to find wherever you drop the hook for a while...very difficult elsewhere to be allowed to get work.
Lastly...you'll find an internet banking connection and an ATM card will get you by just fine anywhere in the States/ Europe or the Caribe. You donn't need to carry a lot of cash or traveller's checks. The South Pacific and less developed areas might require a diferent strategy.
Good luck...I look forward to the continuing discussion.
Another thing to be looking into, now that you mention 3 kids, is home schooling options. Ancedotal evidence is that most children do better home schooled on a boat. I would guess that has a lot to do with the real life experience they gain as part of a cruising family.
I did forget to mention, that what ever you plan for a budget, you should add in a fudge factor. No matter how well planned, you will, most likely, exceed your budget. Particularly in the beginning as you figure things out.
I can't really speak to insurance, as I retired, and so was able to continue my health coverage as part of my annuity. As well as life insurance. At this point in time, I only have libality on the boat of 300K. That seems to be what marinas require. A lot of boat insurance will depend on your cruising area. Going offshore, it can become a big cost, if even available. Another thing to start checking into now.
You won't be able to think of everything, not sure anyone can, but the more thought you put in upfront, the better.
The best way I have found to access funds is to have a credit balance in a Visa or Mastercard. That way you can draw virtually any amount up to the balance you have.
I have sailed all around the Indian Ocean from South Africa to Indonesia and stopped in some really dodgy places (financially speaking) and never ever had a problem drawing local cash.
I'd recommend that you stay away from DEBIT cards if you're going to be travelling internationally. The laws protecting you, with regards to DEBIT cards, are not as strong as those protecting you regarding credit cards.
A Debit card withdraws money directly from your account and does not require any verification of the funds transfer generally. If your DEBIT card is stolen, they can pretty easily clean your account out. If you have an ATM card instead, then the PIN is also required to take money out of the account.
A credit card has similar verification processes to a DEBIT card, but you can review your statement and dispute charges far more easily, as the current laws allow you this protection. You do not have this same level of protection under federal law for debit cards IIRC.
I use the Visa check card through my bank, which has online banking, so I can keep a check on my account. It uses the PIN as a debit card, and also works as a credit card. Since I'm on a budget, I can't overspend, since I can only access my balance, and no monthly bill for charges. For me, it seems to combine the best of both.
You'd be better off getting a no-fee credit card and then using on-line banking to pay the card off immediately. Credit cards give you a good deal more protection than DEBIT cards—especially if you're on a limited budget.
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