Financing the Cruise

[CapnK]

Todd - Si, yo comprendo. One of my favorite sayings is (in polite, non-piratical language):

Don't poop in your own back yard. ;D

Good luck with the new job!

[skylark]

My situation is a little different in that my wife will probably not want to go along, so I hope to take some time sailing and traveling, then go back home for a while, then continue sailing for a while.  My cruising financial strategy is pretty much the same as my retirement strategy.  Pay off the house and save up enough money to live off of the interest, factoring in social security and pension revenue when I reach the age of eligibility.

I am putting money in index funds with a balance between Dow Jones and international funds.  I think right now I have 33% Dow Jones index, 33% international fund index, 16% small cap index and 16% medium cap index.  This changes as the market goes up and down.  I think I will shift more towards the international index fund because I don't like the future of the dollar.   I put between 400 and 800 a month away. I am also paying off my house mortgage with bigger payments, timed so that I should pay of the house and reach an adequate investment amount at the same time, when I can announce my retirement.  I intend to keep the money in stock market index funds, and will not move it to bonds, unless for some reason I have payments that must be made on a regular basis.  I don't fool around and move money between funds, I just put it on automatic payment and try to forget about it.

I assume that 4% is a conservative number for the amount of cash I can pull out of the stock market investment fund annually over the long term and never go broke.  For every 100,000 of investment, you should be able to pull 4,000 out annually. So if you need 12,000 annually, you would want to have about 300,000 in investments. My goal is 600,000.  As I get closer I may recalculate this because I also have a pension and could use some of the investments as a bridge to retirement rather than as permanent income.  In other words, take more than 4% per year, depleting some of the investment amount over time.

As for banking, I would use at least two accounts and have at least two credit cards.  One of the banking accounts will probably be Fidelity or some other investment firm money market account. The other would be a bank which has branches in the cruising area, perhaps Citibank. I may also keep a local credit union account.  Set up automatic payments from the banking accounts to the credit cards in the amount of maybe $400 each so you never pay late fees, and make online payments to pay the rest of the credit card bills.  I would use credit cards to get cash and to pay for most things. Stash one credit card and use the other, switch them every month.  Keep a reserve of a couple of months of cash hidden on the boat.

I would probably continue to work somehow, I am lost if I don't have some project to do. I tried the boat broker thing last summer but found it difficult to get listings.  I may do it this year again but I am not sure.

A lot of this early retirement planning includes budgeting and living well on a small income.  If I can continue working at this horrible job (which is questionable) I should be able to retire in between 5 and 10 years, in my mid-50's.

[Lynx]

One would think that paying off ALL debts before investing is a wise move because you are not paying the interest while investing.  Unless you have an IRA and your return rate is better than your investment.

[Shipscarver]

Hey Hey Charlie J !
BRAVO!!

"Ya' got ya head on straight Kid!"

My advise to all: Take all of your credit cards (but one never carried, for medical emergency) to the shore of a large body of water. Shred your credit cards with a boat knife, wrap in newspaper, soak with rum, burn at the shoreline. Then scatter the ashes to the sea, followed by a overly generous splash of rum, and invoke the sprite of Neptune to help you sail into life debt free.
Live on a debit card. It works the same way, including a small transfer of money to your savings account, but forces you to stop spending when the balance in your checking account is gone.
Let's face it, you shouldn't be spending more than you make to start with.
If you "need" a credit card to live, then you are a disaster looking for a point in time,  to happen.
I found it difficult at first (following surgery and divorce) until I realized that if I can not pay for something today and buy it anyway, then I am trying to live someone else's life, not mine. Thereby, I devalue myself and become worth less than I was as a person.

[CharlieJ]

Well- I can't totally agree here. Credit cards in and of themselves aren't bad things.

Hard to rent a car in an emergency without one. Hard to buy a tire out on the road in a strange town with a personal check. The possession of a credit card makes both possible.

Just pay it off when the bill comes.

We were in mid Louisiana coming back from Florida aboard Tehani when the engine crashed. You for sure aren't gonna sail the ICW through western Louisiana or eastern Texas with no engine- ain't happening.


We searched all over southern La for a used one, but finally decided to bite the bullet and get our new Yamaha. We bought it on a credit card. The alternative was to ride a bus home, get the truck, borrow a trailer, drive BACK to south central La, pay to have the boat hauled and loaded on the trailer and drive BACK home. It took a bit to convince ourselves to do it, but we bought the engine. Then worked to pay off the bill. Took longer than that month, but that's done.

THAT sort of thing is a reasonable use I'd think.

Also, going cruising, having the credit card (or two)  makes it simple to obtain cash and you can arrange to pay the bill from your bank account each month. Beats the hassle of trying to cash checks ( or the danger of carrying LARGE sums of cash) in foreign countries- and the Bahamas qualify as foreign.

So don't condemn credit cards out of hand- just use them wisely. Having said that, we do live on the debit cards here at home. I have and carry the two credit cards, but they are virtually NEVER used. They are for real emergencies.

[Shipscarver]

I can't totally agree here. Credit cards in and of themselves aren't bad things.
Hard to rent a car in an emergency without one. Hard to buy a tire out on the road in a strange town with a personal check. The possession of a credit card makes both possible

That's true CharlieJ - I understand the comfort issue.  But, for normal transactions, including those named, (unless you can't cover the amount), your debit card works just like a credit card. In fact, most of them look like a standard Visa or Mstr/Crd, only the charge is deducted from your bank account not added to your credit balance. And, there are no resultant monthly interest charges, late fees, membership fees, etc. to you. You don't even pay for checks when you use the debit card. ;D
For me, credit cards make going in debt too easy. Impulse buying and good salespeople exist. The debit card keeps me aware of what I have on hand to spend, and to more rationally make purchases. The bank is always trying to get me to add "overcharge privilege." That privilege would  automatically transfer $$ from savings to my cking acct so I can overspend the monthly deposit to my checking account. But, I just say no! ;D

[Frank]

There is a valid point to credit cards re: getting funds out of country.While in the Bahamas out islands where the banks are only open for 2 hours twice a week...they do NOT take debit cards...only credit cards for cash advances.It was possible in Marsh harbour but not the smaller islands.I 'assume' this may be the case elsewhere as well.Beyond that...they cause more people more grief than any other convienance.Seems it's just TOOooo easy to 'pull out the card'. Like anything...used wisely they are great.

[CharlieJ]

Shipscarver- you musta missed the next to last line of my post ;D

where I said-

"Having said that, we do live on the debit cards here at home. "

Strangely enough I can't use them in ATM machines east of the Mississippi River. We're with Wells Fargo and they don't do business in the east. So east of the Miss R they become credit cards, only the money comes directly out of your account, exactly as a debit card would. You just have to sign for the item, rather than punching a PIN number.

I totally agree on the debit cards. I think I wrote one check last month and it was from my business account TO a business account. And I think the last time we actually USED a credit card was buying that engine, three years ago. (OOPs- see addition)

But Frank also  has a point.In some places the debit card won't work. And carrying large sums of cash is foolhardy. And travelers checks are also kinda difficult because if there are two of you ( like us) then you have to have half in one name and half in the other- can't have 'em issued to two names.

So for someone cruising, out of the country, the credit card definitely has a place.

Oh- and one other point- you probably WON'T be able to rent a car with a debit card. Most car rental agencies DEMAND two credit cards as ID before they'll rent to you. A debit card is not acceptable. Nor is cash.We found that out two years ago when the truck was broke and we were scheduled for a trip to south Texas for Christmas. We HAD to use a credit card.

[AdriftAtSea]

One major difference is that with a credit card company, you have the credit card company to protect you in case of fraud.  With a debit card, the money is gone and there's little you can do about it in many cases.  With a credit card company, they'd have to prove it was you that used the card, with a debit card, you have to prove it wasn't you...

Also, a credit card will generally issue a credit almost immediately.  A Debit card company can often take weeks to issue a credit to your account—and as soon as a debit card is used, the cash is taken out of your account.  It is a pretty good way to get wiped out.

I generally recommend that you not use or even carry debit cards. Debit cards are basically really geared towards fraud.  When was the last time you needed to use a PIN number to buy gasoline using a debit card?  You don't.  In fact, you aren't required to even sign for most purchases or verify them using the PIN # if they're below $75.  You're much better off and safer with an ATM card, rather than a debit card.  They can be used in many places a Debit card can, but REQUIRE A PIN and have a much lower DAILY WITHDRAWAL LIMIT.

I can't totally agree here. Credit cards in and of themselves aren't bad things.
Hard to rent a car in an emergency without one. Hard to buy a tire out on the road in a strange town with a personal check. The possession of a credit card makes both possible

That's true CharlieJ - I understand the comfort issue.  But, for normal transactions, including those named, (unless you can't cover the amount), your debit card works just like a credit card. In fact, most of them look like a standard Visa or Mstr/Crd, only the charge is deducted from your bank account not added to your credit balance. And, there are no resultant monthly interest charges, late fees, membership fees, etc. to you. You don't even pay for checks when you use the debit card. ;D
For me, credit cards make going in debt too easy. Impulse buying and good salespeople exist. The debit card keeps me aware of what I have on hand to spend, and to more rationally make purchases. The bank is always trying to get me to add "overcharge privilege." That privilege would  automatically transfer $$ from savings to my cking acct so I can overspend the monthly deposit to my checking account. But, I just say no! ;D

[rtbates]

I couldn't agree with you more. All my life I've paid cash for EVERYTHING. It does mean that I have to save and wait. And there in lies the problem, Most folks have no desire to wait. And given that something like 70% of the US economy is comsumer spending the push is toward un-controlled spending. Advertisers know how to get it done...

[s/v Faith]

I merged these last few posts here from the Financial rant thread.

  FWIW, Rose and I used our Visa card for cash advances several times while in the Bahamas.  Just as Frank said, debit cards were not accepted.  By transfering the funds from checking via online banking we paid no interest and avoided wire transfer fees. 

  I personally do not see anything wrong with credit cards, I have used them for years as an interest free loan... as LONG as you pay it off each billing cycle.  You just have to know yourself, and your limits.  Kinda like grog..  ;)

[Tim]

Same here, as long as you use them correctly, we have found credit cards indispensable when traveling. And by using them all the time at home we have accrued quite a bit of free mileage.

[Shipscarver]

OK!  I consider myself properly chastised.  :-[
I guess I am biased. I retired from Chase Manhatten. My debit card looks like a Visa Card and works like one, as well as a debit card. And, yes I do have to enter my code to buy gas. Actually, I was very opposed to Debit Cards when we started them and didn't come around until about 2 years ago. Then when I was traveling, I experienced culture shock. American Express checks were extremely difficult to cash. I carried and used travelers checks for decades. Ye Gads, when I was young and bicycling we lived from Amex Office to Amex Office. Just like I later lived from check to check.  ;)  It seems T CK's are too easily counterfeited (or the clerks are too easily taken in).  So, while traveling: cash, credit cards, and an honest face, are all necessary. But, at home, I'm with you CharlieJ, live on the debit, and hide the credit cards. A friend of mine (practices BK law) once told me she advises everyone to put the credit cards in a sealed freezer bag of water, frozen in the frig. so the urge to spend will pass before they thaw out. ::)

[CharlieJ]

"put the credit cards in a sealed freezer bag of water, frozen in the frig. so the urge to spend will pass before they thaw out"

Now THERE'S a sure fire slow down for ya ;D Fortunately we have enough self control that that's not necessary- But for people like my first wife----------

Of course she would wear out the freezer refreezing the cards ;D ;D ::)

[Frank]

Charlie....same theme....an ex would say..."I can't be overdrawn, I still have checks left ?"

[Lynx]

My bank is starting to use the debit card as part of the ID system when going into the bank teller and the Bahamas would not give cash to debit cards and would not accept checks. Most "Marinas" on the Erie Canal is not accepting credit cards and will take cash or checks.

Sorry, if you are cruising you will need all 3. I just take out what cash I need for the week and not use the cards unless budgeted.

[David_Old_Jersey]

Not done any extended cruising on Boats - but have spent a lot of extended time on vacation well abroad where nipping home is not a practical option.

What works for me is cash for day to day living. I like knowing how much I have to spend and no worries about some dodgy shop ripping my card number or simply making multiple transactions (by design or in error).......when I am not around to check statements. Or from worrying that my card will be rejected.

How do I get the cash? I like Travellers Cheques - cos' I can count them! Have yet to try ATM freindly pre-loaded credit card styles T/c's, but on my list. I also tend to take a chunk of Sterling notes, just in case. And sometimes I used to open a local bank account and wire money from home once a month or so - and then just visit a bank once a week. And having someone at home able to Western Union funds is also useful.

But Debit Cards on home bank account are great to have "Just in case" (as long as they work in "Your" location) - especially if they are on an Account that does not have yer life savings in! But my preferrence is to use only for obtaining cash.

Credit Cards? Not had one for years, BUT their have been a couple of times where having a large chunk of ready money in an easily accepted form would have been really really useful. and where "Paying back" the money was a secondary consideration  ;D. Sometimes in life a large chunk of money solves a few problems.

[dnice]

Ok, (sorry long post!!) I may be a bit naive in this subject, I have never been out of country... but I am basing these thoughts on what others have done and what I have learned on shore.

First off, the Martins maybe had trouble in Norway, but remember they spent 7 years on a 25' boat with a growing family with literally no money. They got money only after (some unknown incident) they got an inheritance, and then bought their new boat and moved on to the north latitudes. Prior to that, on their 25 footer, Dave took odd jobs around the globe, he expressly says that you can get a job anywhere in any country if you are hungry enough.

Now, I don't intend to get that hungry, but It probably will happen nonetheless.

Also to note: 
Alex Dorsey from www.projectbluesphere.com left the US with less than $2000 in his pocket, and managed his way to australia before someone bought his boat and he in-turn bought a new boat. He made his money by charters (only a few) for around $800/month and his DVD sales, which didn't even start selling 'till he was 2 years into his cruise. He took odd jobs also, but he states in his logs that he was living on less than $300 a month while in the San Blas Islands and  in Columbia. He continues to make his living almost exclusively by deliveries. charging  around $4 a mile.

Now to me:
I currently live on a budget of around $1000 a month, I can easily cut that down to around $800 (and intend to do so for savings). Now, if you take away RENT and a few other things that I would be doing without on a boat, (and ad in moorage and fuel/on average) I am averaging around $500/mo conservatively.

Thats $200 a month in food (conservative) and $100/mo in fuel (guess) and $100 for repairs (Hopefully) and $100 for misc.

Working in the US at this  rate, making $10/h, I can save well close to $10000 a year... (subtract quite a bit for whatever and average around $7000) I plan to work for a few years and leave with around $15,000 in the bank.

Thats a 3 year cruise, suppliment that with odd jobs and deliveries, if all goes well, then its indefinate. If all does not go well, then I will just cruise the caribbean and mostly south america until money runs low, then return to US for work.

Even if you look at it by a worst case cenario, its still well over a year of cruising, and maybe a year or two saving back up,  then eventually, off across the pacific, who knows what time will bring.

I have spent my life making similar choices, leave with nothing and go hundreds of miles away with no prospect of work, with the knowledge that something will eventually work itself out, and in the meantime, I am self sufficiant.

Obviously, its all relative. If you can do without marinas, if you can scrape your own bottom, if you can fish, sprout, bake, make your own wine, and so forth, you can live on alot less than what is even considered less than average. From where I am standing, that is what the cruising life is all about.
Self Sufficiency.

So it all boils down to how much you have now, how much you can make in a year, and how much can you NOT spend in a year.

Figuring in Luck is  not such a bad thing when you are talking about crossing oceans in a small boat. I can consistantly plan on obtaining work in any state in the US, I can put my last dollar in my gas tank without worrying if I will eat tomorow, I have been doing it for years... Is it just me? I consistantly plan on 'things just working out'.

Obviously comfort is important. If you can't live without certain comforts, then you have to plan for those costs. I personally have lived without, and any comfort I come across is a blessing.

Now, if you have the money to put aside for emergencies and major repairs, obviously do so, And I would imagine any high yield savings account is better than a long term money market account. Unless you have LOTS of money. If you have enough for long term investing, of course do so, hopefully with the prospect of living off of a few hundred dollars a month in returns.... I can't comment much on those aspects of finance, but I know if I had +$50,000 in savings, I wouldn't have to worry about anything.

[David_Old_Jersey]

Me again  ::)

Ok, (sorry long post!!) I may be a bit naive in this subject, I have never been out of country... but I am basing these thoughts on what others have done and what I have learned on shore.

I have not done extended travels on my boat, but have been to a few places in the world for extended holidays. In the long past I have left a few countries with less than a dollar in my pocket, but always had a means to get home already in place.....and knew that when I got home that a) I would not be homeless and b) could work pretty much straight away and c) that being a Westerner means that anywhere in the world I am never going to starve to death.....I have never worked abroad (always came back when funds low / gone!) but their were always people managing to live / get by on a limited (or non-existent!) budget.......it's a matter of motivation, whether you can and whether you want to.

I plan to work for a few years and leave with around $15,000 in the bank......... Thats a 3 year cruise, suppliment that with odd jobs and deliveries, if all goes well, then its indefinate. If all does not go well, then I will just cruise the caribbean and mostly south america until money runs low, then return to US for work.

I think that is a great plan - if it works on an ongoing basis then great, if not it's not exactly a failure - more one helluva adventure under your belt! But also remember that you may not like that life on a boat (nothing wrong with that!), may hate abroad?! or simply decide that you prefer to travel by land on a bus / car or motorbike. Or simply sit in one place under a palm tree somewhere  8). I like plans, but flexible ones.

But I think you are in a good place for making some plans / getting some ideas..........

[Lynx]

It can be done, one of the cheepest is in the USA for somebody from the USA.

you need a boat paid for and in good shape, the smaller the cheeper.

enough of a cruising kitty to last until you are ready for w***.

This is a different lifestyle. Can be hard and adventureous at the same time.