Let’s actually dig-in and figure out what it takes to Sail Away and see the world.
First, here is a link to a Google Sheet that I put together to model your own escapism plans. (Note: this would also work to model taking off in an RV, backpacking/cycling/motorcycling/trekking or even couch surfing with slight modifications.)
Sailing Away Financial Model:
Overview What does it take to financially sail away?, DUPLICATE THIS SPREADSHEET and Modify for yourself Copyright( C…docs.google.com
Please do copy this Google Spreadsheet and start plugging in your numbers.
How much have you saved? This is the BIG ONE. You will be buying a boat and living off of the passive income from this store of acorns. This number alone is the 80/20 of the model. Obviously if you have $20k in savings and $100k of debts and no boat you will not be able to Sail Away unless you partner with someone else with more financial resources.
I am assuming that you sell your primary residence and this frees up a lot of cash, that you then use to buy a boat with a 30% down payment, with a 4.5% interest rate over 15 years. Down in the boat financing and one-time costs section you can modify your loan.
Alternatively, a lot of people do NOT sell their home, but instead rent out their home. In this case, increase your Rental and Earned Income by the net take-home (be conservative) of what your house will actually produce for you. But you will still need some cash to buy your boat, and outfit her for the blue waters of the world.
Most people do not have enough money to buy a boat, quit their job, and never work again. Many buy a boat with a loan, put her into charter, sail a few weeks a year, then after 5–8 years take the boat out 6 months of the year and work 6 months of the year.
Some people have extremely world marketable skills like being a doctor, diesel repair, or software engineers that can work remotely. In these cases, perhaps move the Earned Income up to 50% of what you would normally make to account for working less hours and less business networking.
With those high-level options in mind, now let’s go into each of these inputs one by one:
#1 — Total liquid savings — $450k
These are the funds to buy the boat or at least the downpayment as well as outfit her for blue water and then invest passively to generate an income. For base case I picked $450k as a possible amount of savings assuming a sale of a home. Where to invest your money? That is a question beyond this post and I am not qualified to answer. But I this is what I am doing: testing both betterment and wealthfront. I also speculate with some stock picks (tech companies that I feel that I understand well) and just plain cash. I have given long thought to angel investment, but so far I still have energy and thoughts to finance some of my own projects, and I am currently investigating real-estate debt notes.
A lot of people asked me why am I selling my house in Austin, why not rent it out? It is a wonderful house — so many great memories and experiences here — countless parties, the epic treehouse, 30 chickens, bees, gardens, fruit trees, grapes, 100 gallons of beer brewed on an open fire, and all a mile from downtown and an easy walk to South Congress. Why not simply put our stuff in storage, rent it out and come back to Austin after we are done sailing? We have so many friends here — knitting, Elite Martial Arts, homeschooling and of course game & tech friends.
First, I believe we will have a market correction if we are not already starting one. My house has gained tremendous value since moving here 4 years ago and it seems wise to harvest this value now.
Second, Texas does not have income taxes yes, but they sure make up for it with property taxes. The property taxes on my house are now $19k per year! And they are rising by about $1–2k per year and will continue to do so for the foreseeable future and ultimately reach about $30–40k a year. That combined with the mortgage makes renting the house still a net money loser. Let alone unoccupied months, repairs, and management fees. Perhaps with super aggressive Air BnB marketing and executive short-term rentals one could theoretically break-even and then what — wait until after the correction, values come back to where they are now, and then go higher because ultimately they will. Austin has a 2.9% unemployment rate and is expected to 2x the population in the next 10 years. I bought the house for $735k and I expect to sell it above $1.1m perhaps if I held onto it for 10 more years I could see — $1.7? I think there would be spreadsheet math that would make it seem logical, but that is a lot of exposure to a net money losing asset over those 10 years with not a lot of diversification (for me).
Finally, I am not sure we will come back to Austin to live. I am sure we will visit often due to the friendships, but the world is so big! After just 3 months of France I was smitten and think I could be very happy there, or perhaps New Zealand! Or Costa Rica, or Portugal, or Spain, or? Well that is what we are going to find out.
#3 — Number of Crew -4
How many people are sailing with you? I assumed 4 people, and modeled it as 4 people flat for all time. Obviously, kids will go off to college at some point, but I wanted a simpler model. This number will affect your medical insurance, provisioning and misc expense #s
#4 — Consumption Level — 100%
This is my made-up fudge factor for how relatively spendy is your family against a typical American family that makes $80k a year as a household. Simply change this number up or down as per your habits. e.g. 150% would be a $120k a year family.
#5 — Rate of Return on Investments — 5%
This model does NOT model inflation. I prefer using more conservative investment return numbers e.g. 5% vs 8 or 10% and assume inflation is 0% for clarity. Also inflation is very weird these days, some parts of consumption are deflationary (tech) and some are inflationary (medical and college) and most stuff is pretty stable.
#6— Income Tax Rate — 0%
Zero taxes!? Yes. Even as an American who must pay taxes anywhere on the globe, you are exempt from taxes on the first $85k if you live overseas. And you can choose the state you reside in to eliminate state taxes as well.
#7 — Boat Base Cost — $218k
I talked about how we arrived at a new Lagoon 450 for $675k, but you can get a 40+ foot catamaran that is ~10 years old for $250k. Then you would have a boat about as big as mine (Lagoon 450s are particularly roomy for their length) but might simply have cosmetic blemishes and need some expected work.
#8 -11— Boat Loan — 30% down, 4.44% interest and 15 years term
As boats are luxury items 30% is a common number for a down payment. The interest rate of 4.44% = 4.19% 15 year term+0.25% for being an older boat from the Essex website. I was fortunate from my Zynga stock sales to be in a position to pay all cash for Ad Astra. The mortgage calculator tab takes care of the details:
#12 — Boat Outfitting — 10% of the boat — $25k
I set it at 10% of the base price of the boat. Kinda like getting your house ready to sell, I choose the 10% rule of thumb. Obviously if the engines are shot, and you have to re-power the boat then I hope that was reflected in an unusually low selling price? It is super easy to get carried away. I did. I bought all kinds of crap in France that I didn’t need, or use that has been stored in the owner’s locker at TMM, or was stolen by the previous management company, or simply lost.
#13 — Debt to be cleared — $0
You don’t have any debt do you? 😉 Pay off whatever you can. Whatever you don’t pay off shows up as line item #17
Between buying the boat, outfitting and clearing your debts — these are your one-time costs.
#15 — Rental and Earned Income — $1500 per month
Now we get into the monthly finances. Will you be earning any money while you sail? Are you a trust fund baby? Do you have rental properties making you cash? Perhaps a military or public employee pension? Perhaps teach English or write software, or you can play music or write at an incredibly gifted level? There is not just an epic post, or a forum, but instead a collection of forums dedicated to the topic of how do you make money while Sailing Away at the Cruiser’s Forum.
#16 — Boat Payment — $1464
This was derived from the down, term and interest rate from the Essex site and fed into the mortgage calculator tab.
#17 — Legacy Debts — $500
Your old debts in monthly format that you didn’t get rid of. Toss in some life insurance here?
#18 — Boat Insurance — 1% of boat value
This is pretty reasonable and many marinas will require you to have it. However if your boat’s value is < $100k it may make more sense to skip it.
#19 — Medical Insurance — $600 per person per year — overseas
You are leaving the USA right? Well then, medical insurance will be sane.
#20 — Provisioning — $250 per person per week, or $36 per day. Even if you ate out every meal that would be $12 per meal. Quite doable.
#21 — Boat Repair — 5% of the boat’s value per year
This is just a rule of thumb and breaks down for cheaper boats. The more you take care of your boat the lower this number. Preventative care. This is a huge topic beyond the scope of this book. But you should be able to do basic diesel tasks like change the oil and bleed the engine, repair a torn sail and be decently handy. Be able to use Google.
#22 — Mooring fees and other consumption — $1000
This is the catch-all. Anchoring is usually free, mooring balls are $15 to $30, and marinas are really expensive at $60 to $200 a night. This assumes that you anchor at least 50% of the time and minimize your use of marinas. Also where you save up for air tickets back to visit friends?
#23 — Fuel and Water — $200
This varies A LOT — we are just completing the installation of a $19k water maker system that will free us from needing to take on water. (Usually about $15 to $20 for the parched Caribbean Islands). This greatly frees up our range and independence, probably will not recover the costs of the water maker though. Diesel consumption is entirely how much do you motor against the wind, vs chill and wait for the weather window. Even super hard charging across the island chain stopping at new places 2–4x a day with 10+ people, the most I have spent is about $900 for a month — and that was a lot of driving. One couple sailed around the world on just 40 gallons of gasoline. Gasoline for your dinghy will probably be more than the diesel for the main engines if you are doing it right.
Whew! That is all of the inputs… your reward is to get the number of years that you can sail away… see if you can unlock the “forever” achievement!
Here is a link to my copy of the Sailing Away Financial Model: note, I capped my savings at $1m for public consumption, but the rest of the numbers are transparent.