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, all very interesting, I agree. But if you do a search on this site, you will see that opinions vary alot regarding what's needed for a cruising budget--from minimalist at 10K per year to more than 5 times that, and it will vary with number of children as well.
Most people would have a hard time coming up with your suggested figures of 500K cruising kitty and another 500K retirement fund. Obviously the more the better, but one can end up saving forever and not getting off the dock.
The hard part is finding the right balance between having enough money to be reasonably secure and not postponing so long that health problems or other life events overtake the plans.
This book was one that was part of my reading also over the past 3 years. I think what works best, with any book, or opinion, is to take what works best for your situation, and not try to do everything.Regards,
I would think that one of the toughest things to do would be to start cruising in your 50's and then have to go back to workafter a few years of the cruising life.
We are thinking that we need to save enough to keep us cruising as long as we want to, then have a paid for retirement house in which to live in once we are unable to cruise any more.
Probably 3 years off but we will not have $1M.
The health thing is to some extent an uncontrollable when we start aging though.
Living on 7% return was mentioned. Great when you can get it but what do you do the year the market drops 10%?
Most financial planners will tell you to plan on only using 3 to 4% of your returns to live on. The rest of your returns of 6 or 7% go to offset inflation and market losses when they occur.
So if you have $100,000; you should only count on $3,000 to $4,000 per year if you want that money to keep up with inflation and market fluctutions.
So the $500,000 should only be counted on to generate $15,000 to $20,000 per year.
For someone over 50, health insurance alone could eat most of that!
We cruised for 6yrs,1994-2000,on a very seawothy boat costing under $75,000. Taking early retirement at age 52 and having no medical issues we were very fortunate. House was paid off and leased out. We were fully invested with our retirement funds and of course the 90's were great for the stock market. We lived on less then $10000 per yr. so we saved alot of $$$$. No utility bills,no commuting costs,no vichicle expenses, no big shopping sprees at the mall. We loved it...one of our best life experiences..we miss the lifestyle...but we are back to a trailerable sailboat and enjoying life in the mnts. Good luck...Dave&Karen
Burn Rate Kitty
Thanks for all the replies-- you all make good points.
David and Karen-- it's good to hear that your experience was so positive, and I'm impressed that your budget was so manageable.
Beth Leonard's article in this month's Cruising World is worth reading on these issues, but I am noting that she and others are revising the numbers upward for general cost-conscious cruising. Not many people post their actual monthly costs, but some note that the fees for entering countries, the cost of food and supplies, and most types of health insurance are going to be significant cost factors.
As for health insurance, there are several recent discussions about it at the SSCA board that are encouraging and offer good leads. Still, anyone enjoying themselves on $10k a year for two deserves praise and questions.
As for Trefethen, I think it's fair to critically assess a lot of his points. For example, few of us are going to be able to have a 1.5 million dollar kitty with even a five percent return to live on. As noted above, most investments are not risk free and fluctuate, and the fact that he talks about relying on a 14 percent annual return reveals both the uniqueness of his time (1997) and a lack of understanding of how things will fluctuate.
So, on paper it makes sense to live off the interest of your kitty, but in reality I doubt that it would work. If it did, we wouldn't need a retirement fund because our kitty would always be there. Instead, I believe most of us would have a "Burn Rate" kitty, in that I might accumulate $200k of disposable capital or funds that I would project to cruise for five years on. Even with no interest, that would work out to around $40k a year. If we can do it on $25k a year, then all the better, but with possible cost over runs (boat repairs, flights to see family, health insurance, etc.) will add up.
(Note: someone with different circumstances could take off with a $50k kitty or less, and have a great time for two or more years based on burn rate and additional income, so in no way is 200k or even 50k a minimum.)
How one manages to accumulates $200k of disposable capital in addition to a safe cruising boat is another issue. Trefethen argues that it best to save it up before you begin (2-5 years of minimalist lifestyle), even if that means selling the sailboat you own at the moment to save money. I do believe he has a point that buying your cruising boat too soon is an expensive proposition (boat loan, insurance, moorage, hours to clean and maintain, parts and supplies). He also notes the "trap" of becoming a liveaboard but not a cruiser.
So, at the moment I think it's fun to consider his minimalist approach. We've done it in the past (before our first home purchase), and I like the idea of actually selling everything down (including the house) before buying "the boat." A major benefit of this would be to be able to buy the boat with cash, and to buy the boat anywhere in the world we chose, since right after purchase we would move to it (and do several months of work before serious voyaging).
I also think he has a point about buying "the least expensive boat you need" and the "smallest boat you need." I actually like the thought of the boat as a disposable quantity-- only liability insurance, and only worth about 10% of our net worth. As long as it is safe, it doesn't have to be pretty, and boats in the price range that might fit are older Tartan 37s or Allied Princesses.
Anyway, lots of options, but I like to think them all through and try to avoid loans, cost overruns, and major depreciation hits if possible. The more I use and work on my current boat (1974), I also think my family could be happy in a solid older boat, even with the performance and space disadvantages.
Quote from Sterling Hayden
Everytime time I see the same old discussion about what it costs I refer to the potential voyager to the following:
A Quote From Sterling Hayden's Book, Wanderer
To be truly challenging, a voyage, like a life, must rest on a firm foundation of financial unrest. Otherwise, you are doomed to a routine traverse, the kind known to yachtsmen who play with their boats at sea... cruising it is called. Voyaging belongs to seamen, and to the wanderers of the world who cannot, or will not, fit in. If you are contemplating a voyage and you have the means, abandon the venture until your fortunes change. Only then will you know what the sea is all about.
I've always wanted to sail to the south seas, but I can't afford it." What these men can't afford is not to go. They are enmeshed in the cancerous discipline of security. And in the worship of security we fling our lives beneath the wheels of routine - and before we know it our lives are gone.
What does a man need - really need? A few pounds of food each day, heat and shelter, six feet to lie down in - and some form of working activity that will yield a sense of accomplishment. That's all - in the material sense, and we know it. But we are brainwashed by our economic system until we end up in a tomb beneath a pyramid of time payments, mortgages, preposterous gadgetry, playthings that divert our attention for the sheer idiocy of the charade.
The years thunder by, The dreams of youth grow dim where they lie caked in dust on the shelves of patience. Before we know it, the tomb is sealed.
Where, then, lies the answer? In choice. Which shall it be: bankruptcy of purse or bankruptcy of life?
Waterline, I have to smile when I read that quote from Hayden. First, I loved Hayden's book, especially it's honesty. However, if you're read the book, then you should realize that very few of us would ever dream of wanting to live his life. The quote above is about not needing vast sums of money or materials to be happy, but at the same time we should realize that Hayden earned and wasted more money (in 1940s dollars, no less) than any three of us will ever earn in our lifetimes.
His book is really a revealing of a long lifetime of insecurities about his personal abilities, relationships, money, sailing skills, booze, sex, parenthood, politics, and career. It's a beautiful and candid striptease of a man's life, and you have to admit his courage when he notes that even sailing to paradise with this two children (against the divorced wife's wishes) didn't calm his inner demons and doubts. They simply went with him.
So, I like the quote, but if you know that source then you understand it's just a riff. I'd like to pretend to have more control and confidence in life, although his book is a catalog of how we all can feel at times.
Hayden marches to the beat of a different drumer and I agree most of us could not or would not live that way.
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