Preparing Your Finances To Go Cruising: Part 2

pile of cashPart 2

Reduce and Eliminate Debt

The first thing you need to do to begin building your cruising kitty is to reduce and eliminate your debt.  Debt is the money you owe.  Let’s go over the different types of debt.  Real Estate loans constitute the largest form of debt for most people.  Real Estate loans are money making investments and you need to take into consideration your future cruising needs when deciding the best course of action in regards to these.  For example, if you are only planning to try cruising for a year, you may not want to sell your home, but instead choose to rent it out while you are gone.  Many people cruise for years on the rental income they receive from more than one property.  Still others simply sell their home, pay off their debts, and sail into the sunset with fewer responsibilities.  If you are unsure of which option is best for you, you should consult your accountant or a financial advisor to help you decide how best to use your real estate equity to help you achieve your cruising dream.
Another kind of debt is student loans.  Student loans are often a hefty percentage of many people’s debt load and it might be unrealistic to try to pay the whole amount off before you go cruising.  Paying back student loans is important, and you can continue to do this while you cruise by leaving a set amount in your bank account and arranging for automatic payment through a bank draft.  Make sure you leave enough in the account to make payments for the entire length of your planned cruising sabbatical.  Make sure if you are trying to arrange a minimum payment amount that you are paying a significant amount, enough that your principal is steadily reducing and you are not paying mostly interest, as this will get you nowhere except longer in debt.
If you have an automobile loan, pay it off as soon as possible, even if you have to sell your vehicle to do it.  If you want to be a cruiser, you can’t be the typical American that uses their vehicle as a form of self expression or an extension of their personality.  As a cruiser, you need to forget all the material facades and understand that the purpose of a vehicle is a practical one.  Your car transports you from place to place, in reality, it has no other purpose.  You can find a reliable, used vehicle for next to nothing, we usually pay no more than $1000.00 for a car, and maybe $2500.00 for a truck.  Then we sell them when we go long-term cruising again.  Credit card debt,  personal loans, back taxes, and all other debt needs to be reduced as much as possible before you take off because your financial responsibilities will be the one of the main factors in determining how long you can cruise.
Any debt that you still have within a year will have to be paid by cash reserves that you will leave in your bank account for that purpose and for the purpose of paying any monthly bills like insurance, a cellular phone, or storage units.  The less debt you have, the longer your cruising kitty will sustain your new cruising lifestyle.   Don’t forget as you focus on paying off your debt to pay yourself first by setting aside ten to thirty percent of your income and investing it in your savings.  A lot of the financial advice here is very basic, simple stuff.  Feel free to consult with your financial advisor to help you decide the best way to organize your finances while you prepare to go cruising.  In any case, simplification is an essential part of going cruising.  Paying off your debt and building your savings and money making investments will contribute heavily to your cruising success.

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One response to “Preparing Your Finances To Go Cruising: Part 2

  1. What a wonderful site! My wife and I are planning on departure in two months to very slowly work our way ‘south’. Interestingly, we are also on a Bayfield 32c, which is what led me to your site.

    Finances -v- freedom. If ever there was a set of chains to bind a human life stronger than finances, I never heard of it. Fortunatelty, we’ve paid off virtually everything other than one car and one boat payment. It’s small change, compared to a house , prestige cars and credit card payments that most of our friends live under, but the boat is still on payments, but that can be solved upon our return – we believe.

    For us we had the choice to either remain in our jobs to pay-off the boat, then go, or to go now, return to the USA after the Caribbean and work to pay-off and re-fit the boat for more adventurous cruising, should we decide that we love it that much. With a few moments thought and one health scare, it was clear that we do NOT know that we’ll have a tomorrow to do these things. Best to be prudent financially – yes, ensuring that we have a ‘golden parachute’ for our eventual return to hold us over until jobs come through, but go NOW! Having never to have sailed for an extended cruise in our lifetimes would be a crime.

    The other factor in saving money has been in living aboard & doing our own work on the boat. Whenever possible, which is has been for almost everything. locally, we don’t have the tide range to dry out ashore, so haul-outs cost us dearly, but other than that, how-to- books, materials and small, exploratory stretches into the world of rig tuning, engine work and basic carpentry is money in your pocket for cruising later. Electrical is a snap for me, since I worked that industry most of my life.

    If ever there was a ‘sleeper’ of a boat , it’s the Bayfield 32 series. Many people have no idea what they are. Yet, most people love them on sight! We purchased ours during a major slump in boat prices and live aboard to cut expenses – besides, it’s a great way to live, though somewhat bumpy on summer weekends with the power boat wakes. ;^)

    We’ll be reading more from your website. Thanks for making the time to do this.

    R&K
    s/v Providence
    Virginia – USA

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