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Go Back   SailNet Community > Out There > Cruising & Liveaboard Forum > Financing a Family Circumnavigation
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Thread: Financing a Family Circumnavigation Reply to Thread
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Topic Review (Newest First)
04-03-2014 09:47 AM
kwaltersmi
Re: Financing a Family Circumnavigation

Quote:
Originally Posted by chall03 View Post
There is always going to be some sacrifice.
This is the heart of the matter for us. We don't have a goose that will be laying a golden egg anytime soon, so making lifestyle trade-offs before cruising and realizing that the journey itself is where the real value exists are what we're banking on. Maybe that's a lie we're telling ourselves to stay motivated, but I can't prove otherwise yet.
04-03-2014 08:23 AM
outbound
Re: Financing a Family Circumnavigation

+1 on Need to do the spread sheets and run them through your advisors. Do this with"what if" in mind. For us with interest rates what they were, and tax structure what it is it was cheaper to partly finance the boat,keep that lump in assets with liquidity. That way could pay off the boat if either tax structure, inheritance law,or markets shifted. The lump is invested in conservative returns but liquid. If doing now would have bought the boat cash as interest rates have since gone up. Also establish plans for management of your assets when you are gone. Has taken some effort to delegate these responsibilities but now feel my manager is watching when I'm not. In example above designated assets will be sold and boat loan retired if triggering shift occurs in my absence. Secure email and other advances make it possible for you to be engaged or disengaged as life demands. Note B.J. Is on a great boat. A 53'H R . We have the benefit of being just 2 so can go smaller. As stated size does matter. Think about future plans. For us we want to do the South Pacific and also not be crew dependent. The canal and our physical capabilities kept us under 50'.
04-02-2014 08:30 PM
B.J. Porter
Re: Financing a Family Circumnavigation

Quote:
Originally Posted by engineer_sailor View Post
I started this thread just to begin to understand the mechanics and even vague numbers. Lots of good info to start assessing if such a trip could ever be possible. The key is to formulate a plan instead of relying on serendipity and/or luck.

Pretty fascinating that people manage these trips. Seems like it's a great experience for all involved including the kids. I am sure it's the right choice for some and not for others
Starting some time around 2006 or so I made a spreadsheet.

They idea of the spreadsheet was to see if the lifestyle cost was theoretically possible. My figuring was that if I can't make it work in theory than my odds of making work in practice were pretty slim.

I've taken one of the more recent versions of the spreadsheet, swapped out our real numbers with some basic assumptions to make it look "real", but you can play with it.

It lets you enter things like...
- When you plan to buy your boat (or if you have already)
- Pay cash or finance the boat
- Broad assumptions you can set for expense categories.
- Children in college, how many and when (current set up for two, which I have)
- Retirement funds vs. non retirement and when you can touch them w/o penalty
- Baseline assumptions about post tax returns on invested money.
- Cross reference of your planned expenditure level, versus different monthly levels of spending and your cash on hand (assumed invested) over time.
- Change baseline assumptions about things like college costs etc.

There may be bugs in it, I still found some after years of using it.

The cash flow numbers, if you finance your boat, include your monthly payment in it. You need to fill out the boat purchase information.

I even had one version where we sold today's boat when the kids went to college and bought a smaller one...too complicated for this exercise, but it helped me.

I've uploaded it to my web site. Feel free to download it and play with it. If nothing else the way the numbers change between say, buying a $100K boat with cash and financing a $300K boat make you think.

Here is the file...

Happy to answer questions and discuss.
04-02-2014 07:49 PM
chall03
Re: Financing a Family Circumnavigation

Quote:
Originally Posted by engineer_sailor View Post
Thanks for the details chall03, those are the kind of details I am trying to understand. I picked those parameters as rough guesses. I also didn't intend to over constrain to circumnavigating, perhaps sabbatical is a better term.

Boat: $100k
Yearly costs: $35k

Is still a solid $250k one had to come up with.

I could see that being in reach for retiring boomers with pensions or houses that appreciated during the housing boom. Might be tough for someone in their 30's today to get to

Josh
We are in our 30's. It is tough but possible, the tough bit makes it worth it!!

The bigger issue for us was and still is leaving and then re entering careers.

Where do you want to cruise??
Do you want the 300k boat or could you do it in a 80k boat?

All these things can change the sums widely.

We seriously thought about selling the house, BJ Porter makes a good case for this. For a myriad of reasons we are not, but it does make a lot of things easier.

Either way yes for a family to go cruising will you have to do something different and makes some changes, very few are doing it with their spare change.
04-02-2014 06:08 PM
B.J. Porter
Re: Financing a Family Circumnavigation

There are probably almost as many answers to the question as there are people that want to do it. More probably, because more people obviously try to make it work and can't...those might not be the right answers.

In our case it was a long term plan, combined with good earning power and saving some money and having some OK investments.

But we started planning to do what we are doing now almost ten years before we finally left.

Some people just GO, and worry about the nickels when they do it. In our case my wife was not up for that financial risk as she wants to make sure our kids can go to college.

The permutations and combinations are endless...we ended up leaving before we'd achieved every financial goal (#1 being sell the stupid house for a lot of money) because we wanted to go with our kids. We were already a couple of years behind leaving (see house not sold...) and just said "lets so it" so we could be with the kids.

What I've learned so far...

- Get the house sold. It is worth more to you gone than bleeding money while you are out there. If you want to keep it an rent, do it...but get a rental manager. You do NOT want to be trying to deal with a flooded basement from 5,000 miles away.

- Smaller and simpler really is cheaper. We love our boat, it is fast, comfortable and we can carry frozen meat, make water, etc. But we've spent a lot of money and time fixing stuff. Simpler boat = fewer things to break = less $$ spent on repairing things. When you anchor things like your boat length don't affect your costs, but when you have to paint the bottom, haul out, or get a slip it adds up fast.

- That being said...people on simpler boats spend a lot of time fixing things too; you have to include that in your plans.

- Start trying to live cheaply NOW. The last year before we left we almost made a game of it. The year before that we took some steps...but weren't really on it. If we'd been doing that for five years we'd have had a lot more in the bank.

- Many of your costs that you are used to now will be lower of go away. Clothes, cars, etc. all drop off a lot. Communications ends up being more than you expect, but not awful. People in this day and age are used to being in touch!
04-02-2014 02:33 PM
Alex W
Re: Financing a Family Circumnavigation

I think it's all about a plan.

Given your alias including the word engineer you are probably near the top of the income scale in the US. I'm an engineer (about 5 years older than you?) and work with a lot of engineers and it's certainly easy and comfortable to match lifestyle to income. Many of my friends and coworkers have done this. It can be a happy way to live if you don't have big travel desires.

I made a choice about 10 years ago to try and limit spending and pay off all debts (so not moving into nicer and nicer houses or needlessly upgrading cars or sailing bigger and newer boats) and concentrate on being able to "retire" earlier (I put "retire" in quotes because it will probably mean switching to a lower stress/lower income job after some extended travel). I don't know that retirement will ever include sailing around the world, but it will certainly include some extended cruising.

I don't know how to do this without a plan.
04-02-2014 01:00 PM
killarney_sailor
Re: Financing a Family Circumnavigation

Quote:
Originally Posted by engineer_sailor View Post
Thanks for the details chall03, those are the kind of details I am trying to understand. I picked those parameters as rough guesses. I also didn't intend to over constrain to circumnavigating, perhaps sabbatical is a better term.

Boat: $100k
Yearly costs: $35k

Is still a solid $250k one had to come up with.

I could see that being in reach for retiring boomers with pensions or houses that appreciated during the housing boom. Might be tough for someone in their 30's today to get to

Josh
What we noticed in our travels is that probably 90% of cruisers living on whatever pensions/savings they have. Some live quite frugally some not. We did see quite a few cruisers in the late 20s to 35 year old group.
general observations:
- 35% singlehanders; 55% couples; 10% with young children (met a French couple in Panama who had two young ones and she was nine months pregnant. They were going to have the baby and carry on. The other kids had been born in Tahiti and New Zealand. They were on their way to Thailand

- 95%+ were cruising for a finite time before heading back to work. It was funny in South Africa because they had all sailed 20,000+ miles and were running out of money and going back (mainly Europe) to get a job. Some were going to just save money for a few years and then take off again, some were going to 'settle down' and have kids

- boat prices were $3000 to $25000 range with size from 27' to 34'

- monthly budgets were very low; highest might have been ~$1200; lowest $200ish? The $1200 people were able to rent cars and go off touring to Kruger park that sort of thing so they were not suffering.

- overwhelmingly they were European and especially from Scandinavia. Most of the Swedish and Norwegian boats we saw were young people.
04-02-2014 12:52 PM
engineer_sailor
Re: Financing a Family Circumnavigation

I started this thread just to begin to understand the mechanics and even vague numbers. Lots of good info to start assessing if such a trip could ever be possible. The key is to formulate a plan instead of relying on serendipity and/or luck.

Pretty fascinating that people manage these trips. Seems like it's a great experience for all involved including the kids. I am sure it's the right choice for some and not for others
04-02-2014 11:01 AM
outbound
Re: Financing a Family Circumnavigation

Every one's circumstances are different. Have repetitively done spread sheets with financial advisor and to do it again in a week as we finally are getting close to spitting up the anchor. After researching this don't expect to do the clock but rather N.Atlantic then canal to S. Pacific.
Multiple unexpected variables:
flights home
medical care
professional services at home to keep land side concerns/family stable, safe and happy.
Land side costs while cruising- purposeless to go to all these lovely places and not be able to enjoy the cultures/sights/cuisines.
Big issue is what in my profession is called QOL ( quality of life). It's this that will determine what boat you get, what you put in it, and what you will spend travelling.
If contemplating this sure read the books and blogs but talk with your S.O. and professional advisors so you can truly be realistic as it concerns your life.
04-02-2014 10:05 AM
blowinstink
Re: Financing a Family Circumnavigation

Quote:
Originally Posted by engineer_sailor View Post
Thanks for the details chall03, those are the kind of details I am trying to understand. I picked those parameters as rough guesses. I also didn't intend to over constrain to circumnavigating, perhaps sabbatical is a better term.

Boat: $100k
Yearly costs: $35k

Is still a solid $250k one had to come up with.

I could see that being in reach for retiring boomers with pensions or houses that appreciated during the housing boom. Might be tough for someone in their 30's today to get to

Josh
I like a combination of the scenarios above (assuming you are a typical engineer with a house and a little savings): Buy the boat while you're working. If you already own a home, what extra can you pull from it by renting it while you're gone? Even if the rental of you house only nets you 1K / month, you then only need 80K for a 4 year trip (on that 35K budget). Can you burn your IRA? Tell the kids that a year cruising is gonna pretty much it for the idea of college savings (who is gonna be able to afford college when they get there anyway, right?)? Maybe just take a 2nd on the house for that extra cash. It all depends on how much it means to you and what you're willing to give up (you realize you'll have to do something illogical . . . right? :-)).

A 3 year tour of the Caribbean might only require 50K to buy and outfit a boat . . ..

If you are hand to mouth on land, and you really want / need to cruise, you'll probably have to re-conceptualize what cruising means to you . . . as you say maybe something other than a circumnavigation. Kids who grow up on a boat probably take away an awful lot regardless of the cruising grounds.
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