Financing the Cruise

[Captain Smollett]

I imagine everyone pretty much will have their own gameplan in regard to 'finances,' but I thought I'd post some of my own (very preliminary) thoughts.  I got to thinking about all this after reading the Martins' story during their stay in Norway, where they had to pay a $17,000 fee to remain in-country (it was a mess, and too long to go into here) due to some paperwork snafu with the Norwegian immigration officials.  Anyway, this is never a fun subject to talk about, but I thought I'd throw a few morsels out there and see what kind of feeding frenzy occurs.

For us, I am basing my numbers on roughly $1000 per month on the low side, $2000 on the high side.  This amount precludes staying in a lot of marinas and careful management of "extras."  However, I think it is doable, even with a family of four.

We are exploring putting our cruising funds into some sort of either self-managed or managed investment plan with a shore-based family member as our contact.  A recent conversation with a financial-investment type revealed the following stat: self investors generally see a 3-6% growth over time, whereas managed funds can generate 13% or so (even the fairly conservative ones).  That increase in growth should significantly offset the trade-off in paying loads.

Anyway, it got me to thinking about cruising with simply a cash-kitty vs. a managed investment.  With a trusted family member stateside to be the local point of contact for the fund (and to send us money if we need it), this seems the 'safest' approach to me.  Any growth our investment sees will outpace inflation of the dollar and that growth is our added safety net.  Of course, I'm also in the 'pay as you go' camp, so hopefully this type of "cushion" would not even be needed.

I assume none of us on SailFar are independently wealthy, so I am curious to learn what strategies others have for 'extended' cruising (let's say extended = greater than three months from 'home waters').

[Sonnie]

I'm planning a 10 month cruise this coming fall from Toronto to Florida (Bahamas, Cuba?) and back. I'm planning on about $800 US/mo. with a few thousand for re-entering the "real-world" when I get back(assuming I can't find a long-term sailing position along the way). My goal is to work along the way wherever possible, try to get seatime and masters papers, and preserve as much of the kitty as possible...

I have an ING direct USD account, and for the past few months, have been buying greenbacks with our Canadian money because of the exchange rate. Any other Canadians cruised south with ING debit cards? Do they work in the states, bahamas? Also, I'll keep a positive balance on a pre-paid credit card (THE BEST kind of "credit" card) for emergency use. Also, a well hidden cash stash...

I appreciate any feedback about my budget expectations, etc.

For more info on the boat and a couple of cool small boat voyage links, check out my page at http://seastrutter.googlepages.com

[s/v Faith]

I appreciate any feedback about my budget expectations, etc.

  From the number crunching I have done, and the reading of others accounts I think that an expectation for sub $1k a month is realistic on a small boat, especally if you are ok with avoiding spending much time in marinas.

  If your debit card carries the 'visa' name on it (as many do) I doubt that you will have much trouble using it anywhere.  I have used a visa card all over the (northern) hemisphere with out a bit of problem.  I actually find that I usually get a better exchange rate through the bank then I can get locally (probably not everyones experience, but true of mine).

  I personally do not like the debit card idea, since a compromise of the number allows your account to be zeroed, and you can not get access to your money until it is sorted out.  A credit card, that is paid before the balance comes due is a safer alternative.  They SWEAR your debit card is safe too, but the delay in getting them to honor the problem is going to cost you more time.

 

 

[AdriftAtSea]

I'd second s/v Faith's recommendation about the difference between a debit card and a credit card.  The credit card offers you a lot more protection as a general rule, especially in foreign countries.  You also might want to check with your bank and see if there are any countries that are "blacklisted" for rampant fraud, and will require you to tell them that you will be in them prior to using the card there. 

[David_Old_Jersey]

I have not (yet) done any extended faraway cruising on a boat..........but I have spent quite a bit of time on extended trips in far off places.

However one of my greatest frustrations I have had is running out of money in my hand when I have money "back home" - but just can't access it. Card (s) rejected / lost / stolen / damaged / eaten by ATM / Bank Errors / Cash drunk  / Money transfers getting lost or delayed enroute (rare, but it does happen), even though they have all been sorted eventually.

Basically what I am saying is not to rely on your main source of funds working 100% of the time, especially when you really need it to. Although perhaps "Old fashioned" I do like having Travellers Cheques and Cash as I can see them in my hand. Even if I have been known to spend them all before any replacement funds get sent to me! 

And I suggest thinking what you would do if your passport gets lost / stolen or damaged beyond use.......and you use it to access funds.

And don't assume that just cos' a type of card is accepted "everywhere" back home (wherever that may be) that it will be widely accepted elsewhere. I still recall the "fun"  I have with a Mastercard many years ago. and it happens to others as well. From my past experiance VISA is just about everywhere - but I am sure their are places it is not........

Oh yeah, and replacement cards being sent to your home address are not always much help............

[AdriftAtSea]

One of the advantages of American Express is that they do have offices in many foreign countries, and are fairly widely accepted world wide, even if their acceptance domestically in the USA has dropped quite a bit.  The AmEx offices will even hold mail and packages for customers IIRC.

One advantage of using a credit card is that you can often get a better exchange rate on it than you can with a debit card. 

[Captain Smollett]

Just a quick note in case anyone wants to modfy their vote.  I made two changes to the poll.

(1) You can now vote for more than one item.

(2) Prepaid credit card is included with the Debit Card item.

[Lynx]

Hi, been lurking on the forum for a while. I have a MacGregor 26 and plan to go cruising in about 1 year. When I was looking at the different options to get money to me while cruising. The first thing was the location of where I was cruising to. For me it was the Bahamas and East coast.  The other thing was cost and interest and secure. Almost every investment, after expenses for the last 2 years that had a good deal of security had less than 4% interest after cost. I have decided to go with Government Bonds - http://www.treasurydirect.gov/

Very safe to buy on-line at NO cost and when mature goes back into your checking account without you doing anything. You buy in 1g increments. Matures in 4 weeks, 13 weeks, 26 weeks, 2 - 3 - 5 years etc and draws 4.7%+ interest. It can be sold before due date.

What I am doing is that I put 1g in every month for 2 years and buy the 3 year note as well every 3 months.

[AdriftAtSea]

Lynx-

The only real problem I see with that is if the inflation rate shoots up.  You could end up getting clobbered.  I think you'd be much better off diversifying your investments a bit.  Granted, stocks are more volatile, but the return on them is generally better.  Given the current government's propensity to incur huge amounts of debt with no real idea of how they will pay it off, the rises in the cost of oil, and the increases in the cost of most goods due to the changes in transport costs, I see government bonds as being less than an ideal investment.

[Lynx]

AdriftAtSea-
     I thought about that as well. There is another adjusted for inflation Bond/Note that can be bought. When I was looking into this I did look at the inflation rate for the last 5 years and it was very level. So I chose not to go with the adjusted inflation Bond/Note.

Less than ideal investment - Well, you could be right. So much for the game of making money with money. All have their risk and yields. The interest rate was not as much needed as getting out 1g every month without having to pay or do anything to invest or payout.  If I had more money to invest, I would look at more options. First off, I want my money back, then interest at a profit for the next 3 to 5 years.

Then I have to go back to work, YUCK!!

[Ol' Coot]

I think you'd be much better off diversifying your investments a bit.  Granted, stocks are more volatile, but the return on them is generally better.

Yes, in the long term the market will generally have a better return. 

But every financial planner I've ever heard of will tell you that the nearer your need for the money, the more conservative your investment should be.  If the market takes a sudden down turn, it can take more than a year to recover the lost principal.  Look back to the tech bubble burst and terrorist attacks of '01..

If Lynx wants to be offshore in a year or so, I think the stream of income generated by government securities is a very stable plan.  It's a cruising fund, not retirement.

[sailor]

I got to thinking about all this after reading the Martins' story during their stay in Norway, where they had to pay a $17,000 fee to remain in-country (it was a mess, and too long to go into here) due to some paperwork snafu with the Norwegian immigration officials.

Hmm, IMHO this was not a paperwork snafu, they deliberately broke Norwegian immigration law. Lucky for them, they've finally got their visas. If they were trying to do the same here, US would deport them faster.

We are exploring putting our cruising funds into some sort of either self-managed or managed investment plan with a shore-based family member as our contact.  A recent conversation with a financial-investment type revealed the following stat: self investors generally see a 3-6% growth over time, whereas managed funds can generate 13% or so (even the fairly conservative ones).  That increase in growth should significantly offset the trade-off in paying loads.

Liar, liar, pants on fire (investment type guy that is).  More than 85% of the active managed funds fails to beat their indexes.
Since you seem to know your expenses (you said $1k - $2k per month), how long you need these funds to last?
Is it next 5 years or you & your spouse lifetime? Based on the time horizon I would pick up appropriate (to your age, needed yield, risk profile, etc)  asset allocation and invest the money in some index funds or ETFs.
Nowadays you can do all of it through the internet, even from Timbuktu or South Pacific Islands.

There is a lot of great advice at Early Retirement forum ( http://early-retirement.org/forums/ ) , they are very friendly to "newbies", so don't hesitate to ask.

As far as us - we hope to Sail Far when we don't need a job to survive, living off our investments, maybe in 11 years? 
All the banking handled electronically, for rare paper trails, we will probably use South Dakota as our state of domicile with a mail forwarding address there.

It's a cruising fund, not retirement.

For us is both - cruising fund is also our retirement fund.

[maxingout]

During out circumnavigation we kept the finances extremely simple.

1.  We kept a cash reserve in $100 bills on board for emergencies in out of the way places where cash was essential.
2.  We kept at least one-hundred one dollar bills on board for tips and small expenditures in out of the way places.
3.  We used one Visa Card to get cash advances at a bank, or from ATMs all the way around the world.
4.  We paid one bill a month - our Visa card bill - over the satellite phone.

That kept the cash flowing no matter where we were in the world.  Paying one Visa bill a month was a great way to go.  I have never  been anywhere in the world where a Visa card was not honored.  I would not use a debit card under any circumstances while out cruising because if something goes wrong, it can be very difficult to sort out when offshore or in out of the way places.

We found that a thousand dollars a month covers everything when you are cruising in the islands as long as you are remote.  Remote is cheap.  The moment you set foot on dry land for tours, restaurants, marinas, and assorted unnecessary expenses, the budget expands exponentially.  We cruised from Turkey to Trinidad without staying in a single marina and therefore, it was cheap cruising.  You decide how much cruising is going to cost by the type and size of sailboat you choose, its condition, where you sail. 

My most positive and best crusing memories come from remote locations like the Galapagos, the Tuamotu Archipelago, the Marquesas, Fiji, Tonga, Malaysia,  Thailand, the Southern Bahamas.  For me, the most beautiful places were the most remote and the least expensive.

That's my 2 cents,

Cheers,

[maxiSwede]

As I think I have mentioned on another thread, I will do a 4 month cruise within Scandinavian waters starting in the beginning of June. I am training a young man who will take care of my little company during my cruise, and my woman partner (who will join the cruise during he vacation) will take care of my bills and such.

Assuming the boat is up for it and well maintained, I guess the monthly spending -just for myself and the boat, would be around $380 per month. Consisting of food, diesel, a few spendings when on shore, as internet cafés or an occasional restaurant visit. One night/week at a marina and the rest at anchor....

This is based on what I usually spend in Swedish waters, and I assume thet Finland will be quite similar costwise.

When you talk of $1000 it makes me a bit worried, since I have lived in the assumption that Sweden is at the high end on the expense-scale. I doknow, however that for example marina fees are waaay much more expensive in the UK or France for instance. In Sweden a typical marina fee for a 30-footer would be around $ 18-20, sometimes even lower. Perhaps I would have to recalculate for when I will be heading for an Atlantic crossing....?

If this four-month cruise do not cure my 'sailing bug' I ´ll guess I'll sell my business, cars, and house during the winter and leave those docklines sometime next summer... 

[Lynx]

The $ 1000 US Dollar per month includes repairs, parts, trips back home, insurance car rental and land cruising. This can add up in a hurry. If you stay in a marina and eat out you can spend more

Does anybody have any experience with a Visa card company changing a service charge for foreign currency exchanges in the last year or 2?

[maxiSwede]

The $ 1000 US Dollar per month includes repairs, parts, trips back home, insurance car rental and land cruising. This can add up in a hurry. If you stay in a marina and eat out you can spend more

-That seems likely to be true. An occasional (3-5 years) set of sails and major engine overhaul/change should be in the calculating for the loooong cruise.    those two would be the largest investments on my boat anyway. Don't carry much electronic gizmos...

[AdriftAtSea]

The $ 1000 US Dollar per month includes repairs, parts, trips back home, insurance car rental and land cruising. This can add up in a hurry. If you stay in a marina and eat out you can spend more

Does anybody have any experience with a Visa card company changing a service charge for foreign currency exchanges in the last year or 2?

I think the service charge is by the bank, not Visa itself.  From what I remember reading, the currency changing charges are levied by the banks, and not all banks charge you for the service.

[sailorbum]

I appreciate all the ideas.   I will be working as I move along.   Perhaps hitting Central America or the Islands from the US when I was particularly flush and then heading back.   

I am amazed right now how little I've done and how much I have spent.   Some of you will recall, I cashed out, quit the job, bought a boat. . . .       I am looking for some work here near the boat.   I feel like I have been fairly disciplined but I am scared watching the balance go down.   Things will improve greatly when I have some cash coming in again.    I've been here in Bay City for a week and a half.   I'll not worry until I hit a month.   

I plan to avoid marinas and too many gizmos.   I have only loosely been thinking about the cruising budget.   

[CapnK]

I've figured it out, what makes owning a boat expensive...

It's the docklines!

So long as you don't use those, boating is *much* cheaper!




The above tongue-in-cheek comment comes from reading what MaxingOut wrote, and reflecting on the fact that any/everything I have ever read from LD cruisers reflects that same sentiment - tying up somewhere costs: costs to tie up, costs due to there being more, and easier, opportunities to spend, etc... Keeping that in mind when fitting out, provisioning, and route planning may well wind up giving your cruise a few more months "for free" (or at least without needing to spend). Never thought of it quite like that before...

MaxingOut - Welcome aboard! Good to get information from someone who has 'been there' recently. Will have to check out your site more, made a brief visit this AM. I think I've been there before.

Sonnie - Checked out your site, too. You have a goldmine, and may not know it: You should author a book that tells your secrets as to "How To Attract Beautiful Young Ladies Onto Your Small Cruising Vessel". lol You had quite the bevy of them there, at least for one nights festivities! Let us know when you add content to your pages, too. (BTW, on a more serious note - you oughta put up some more info on that Yanmar you have for sail, er, *sale*. I Googled it quickly, not being familiar with the model #, and that search revealed no info, not even basics like horsepower, cylinders, approx age and parts availability, etc... Capt Smollett here might be interested in it, too.)

Todd - Have you looked for work on OPB's? ('Other People's Boats) Most marinas have people who have jobs they are willing to pay to get done, if you just get your name out there, work starts finding *you*, instead of the other way around. I imagine that things are starting to get busy in the marinas and yards up there, it could put some MeowMix into your kitty... Just a thought.

[sailorbum]

Thanks, Cap!   I agree.   I had a really good example of that when I was on a boat down in Sarasota.   My neighbor, Hobie, had a beautifully bristol boat.   It was his calling card of sorts; and he got business painting and polishing and fixing and such that way.   I have to get my calling card fixed up some for reference. 

Also, where I am is a full service marina.   They don't mind do-it-yourselfers, like me, but I don't think they would want to scab work from their service department.  ) 

Also, I won't get commercial, but today I started brokering boats [sound of me ducking].   It is an independent contractor/commission thing, but they have a real good set up.   Easy to sell/been around 12 years.   I liked it so far.    We'll see . . . .

TrT