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Posted on Aug 7, 2013 | 0 comments

Look It Up

Don't know what kind of moth this is? We didn't either so we looked it up!

Don’t know what kind of moth this is? We didn’t either until we looked it up!

Dan and I like to be thoroughly well prepared for big changes and new possibilities in life. When we have a problem, we search Google and figure out how to fix it. When I was pregnant with Carter, I spent hours researching online exactly what to expect and prepare for multiple different outcomes to the point that my doctors were always surprised that I knew exactly what they were talking about and had almost no questions at any of my appointments. Dan visited countless websites and forums along with talking to other landlords before we were confident that we could make well informed decisions about buying rental properties. What can I say? We like to be educated.

Recently, we realized that we had been somewhat slacking in the cruising education division. Sure, we read a lot of other people’s blogs and had spent a lot of time reading cruisersforum and other boating sites when we were first making up our plans, but we hadn’t done a lot of in depth training because we were so focused on the financials of making sure we could get going. That mindset has been able to shift over the last few weeks… We have now reached the point where our rental reserves (six months of expenses per house) and the initial cruising kitty (10k to start, but it will be replenished each month from our various income sources while cruising… think of it as working cash) are established. Now we move into the boat savings stage. It is exhilarating to know that every dollar saved will be building towards a new home. That might not seem like a big deal, but for us it has been a major eye opener. Now we need to make sure that we are ready when the money is!

To start things out right we purchased the full pack of NauticEd* Captain’s courses and have both been working through them together. These courses cover a huge range of topics from diesel engine maintenance and proper sail trim to safety at sea and storm tactics. We have been very impressed with the quality of instruction and depth of information provided from these courses and both of us feel a lot more confident that we will be able to sail our boat safely when the time comes. They even have nice PDF graphs and quick reference guides to laminate and keep on your boat with you as well as practical exercises that we’ll be able to work on together once we get our real boat.

Another course that we are planning to take is the Mahina Expedition seminar that is given at Strictly Sail every year. This seminar is highly rated and addresses a lot of the logistical issues of living on a sailboat. Provisioning, safety, clearing in and out of countries, and having pets on-board are just a few of the topics covered in the all day seminar. The Blue Water Boats list that we’ve been referencing in many of our posts is also created by the Mahina team. These people have a lot of experience under their belts and we’re hoping to take some of that and put it to use on our own journey.

Two other big areas of focus for our studies will be first aid skills and Dan’s SCUBA instructor course. We feel that Dan getting his instructor certification could be a major benefit to us in the future and could potentially give us some additional income throughout the year. The first aid classes we are a little less sure about where to start. Dan is currently EFR/CPR certified as part of his rescue diver certification last year and plans to get his EFR instructor certification at the same time he finishes the PADI instructor certification, which would make it easy for me to get EFR certified as well (which we plan to do.) However as anyone who has taken EFR or the Red Cross first aid class will know, these classes are designed to stabilize a patient until an ambulance or other trained medical staff can reach the patient which usually only takes a short time in comparison to the days it could take if someone was seriously injured at sea. We are currently trying to find other options that would give us a more thorough training, but are having a hard time finding something reasonably priced that we could both be trained in. The most promising so far has been the Wilderness First Response program but that is about $800/person and requires a week of hands-on training so we aren’t sure if we want to jump into that without more … research.

Do you know of any other classes we should consider taking in the next year of preparation? We’d love to hear from you! Leave a comment or shoot us an email from the Contact Us page.

*Use our coupon code followthehorizon at NauticEd to get $15 off any classes! (Full disclosure: we get a very small credit to our NauticEd account when you use this code)

We’ve also done some major updates to our To-Do List page! Click on over to check it out.

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Posted on Apr 24, 2013 | 0 comments

Margin of Error

A financial safety net is just as important as a physical one.

A financial safety net is just as important as a physical one.

Whenever we are dealing with finances Dan and I like to plan for a pretty decent margin of error. (Dan would appreciate it if I would practice this a little more in dealing with scheduling as well; I am consistently 5 minutes late.) If you could listen in to some of our mini-planning sessions we frequently have, you would hear the phrase “worst case scenario” at the beginning of most of them. We figure that if we plan for the worst case – within reason of course, we aren’t going doomsday here- then we will be left with a much higher comfort level and safety net in times when we’re living on the other end of the spectrum.

The margin of error is especially important when we are talking about making a budget for a lifestyle that we have never lived before. Sure we think that we will be fine living on $1000-$1500 per month based on our research, but that’s all it is right now, research. It’s crucial for us to know that if that doesn’t end up being true we aren’t left high and dry (pun intended). The whole basis of this adventure is our desire for freedom but you can’t have freedom if you are constantly worried about how you are going to pay for the next time your engine needs a tune-up.

There are a couple of big ways that we are dealing with the margin. The first is in how we are planning out our rental income. Dan has created a spreadsheet that we use to evaluate any potential rental properties that we look at which takes into account all expenses (including property management costs at the highest rate we’ve seen in our area) and also vacancy rates of our tenants. We have separate columns for vacancy rates at 0%, 4%, 7%, and 11%. The current accepted vacancy rate in our area is a very low 2-3% but we use the 7% rate as the amount that we use for budgeting purposes. We hope this will give us a very safe expectation of income from our rentals even if the market worsens a bit before we leave. Hopefully we’ll continue filling vacancies within a week or two as we have done with our first 2 houses and also find a manager we like at a lower price, but if we don’t we are still fairly comfortable.

The second part of the plan is maximizing our income earning potential while cruising. Dan is currently a certified PADI Dive Master and plans to become a PADI Open Water and Specialty Instructor as soon as possible. Because PADI is recognized worldwide we are hoping that this will give us a nice back-up option if our income falls short of expenses. We also intend to log our sailing time once we start cruising to begin the process of getting Coast Guard Captain’s licenses (6-pack at least) which would allow us to complete deliveries and also increase Dan’s marketability as a SCUBA instructor who is licensed to carry divers himself. Finally, investment income on other savings and maybe some future swing trading as described in Live on the Margin in addition to some small income from this blog (yes we have recently added ads to the site) eventually could all add to a few hundred a month for extra flexibility.

Best Case Scenario: our costs will not overextend our rental income, we will have renters who stay for years at a time and financial stress will be a thing of the past in our new life. Worst Case Scenario: we have crappy renters who tear up our houses, our boat breaks down too often and Dan has to take up part-time work doing his favorite hobby. Sounds like a pretty nice life either way.

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Posted on Feb 7, 2013 | 0 comments

Passive Income: The New American Dream

Live on the Margin websiteWhen people, including ourselves, first start looking into cruising there is one big question that everyone wants an answer to and is for some reason difficult to find. How much is this going to cost? aka How much longer do I have to scrounge and save in this boring life before I can gtfo? Most people cruising today count on some form of savings to finance their cruising plans and once that “kitty” (as the community likes to call it) runs out, they have to stop and work either permanently or in temporary jobs until they can keep going. Pat Schulte (of Bumfuzzle fame) and Nick O’Kelly have found another solution: Live on the Margin.

Disclaimer: The book is really good, but remember trading stocks and options isn’t like gambling, it is gambling. If you read the book, follow the advice, and lose your butt, don’t blame us. We just found the book entertaining.

Pat and Nick have been traveling throughout the world for many years while making money in essentially one way: trading stocks and options in short term trades. And lucky us, they’ve written a book about it so we can all do the same thing. Now I know what you’re thinking, “Really? You want me to read a book about trading stocks? I think I’ll just go count the blades of grass in my front yard instead.” Normally, I would agree with you, but this book is easy to understand and actually funny. That’s right, I said funny. I actually laughed out loud a few times while reading it clandestinely in my cubicle. If you’ve ever wanted to learn the basics of trading without wanting to blow your brains out afterwards, this is the book for you.

Here are a couple of my personal favorite quotes from the book:

The stock market is brutally sincere when it tells you that it wants to suck every dollar out of you. The guy on the other side of the trade wants your money. He will lead you by the hand and mug you and take your money.

When describing what happens when a “celebrity” stock crashes and takes a long time to go back up:

Nobody wants to dance with the popular kid who just crapped his pants on the dance floor in front of the entire school, and that’s the problem you run into with celebrity stocks.

After reading the book I took their advice and opened an account with an online brokerage that allows you to trade fake money as if you were making real trades to help get accustomed to the ins and outs of trading before you start risking real cash. So far, I’ve learned three things from trying it out myself:

  1. I actually know nothing about stocks. I’ve had to reread parts of the book a couple of times while looking at a trading platform to figure out how to make it work.
  2. If ice in the veins is what is required for making good trades, I think I might have hot chocolate. So far, I’m waaay too reactive to little things that happen and get hyped up waiting for the market to move. This causes me to make stupid decisions and act like a member of the “anxious herd of sheep” that I’m trying to avoid being.
  3. I’m pretty sure that Dan will be the one doing all the trading in this family.

I’ll admit it, I totally suck at trading. I have yet to make any fake money in my lousy trades, but at least I’m learning and not using real cash yet. I just hope I don’t run our fake account into the ground before Dan can finish the book!

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Posted on Jan 23, 2013 | 0 comments

Welcome to the World of Rent

How would you like to live here? Too bad, it’s already rented!

As of January 16, Dan and I are the proud owners of our first rental home and even in just a week we are starting to get a picture of the ups and downs involved. On the upside, we already have most of the repairs finished that we wanted done before having a tenant moved in. We were also pleasantly surprised by the great response we had to our Craigslist ad. Within 2 hours of first posting the ad, we already had people calling and filling out rental applications online. In fact, we had 10 showings in the first 3 days which was enough to find multiple candidates that we were fairly confident in renting to.

One of the candidates seemed like a great fit for us. She was an elderly retired woman (let’s call her Mary, not her real name of course) with two handicapped grandchildren that she cared for and received monthly payments from the government on their behalf, in addition to a decent pension. Mary also had lived in her last two locations for almost 10 years each, which sounded pretty darn good to us. Older woman with guaranteed income and longevity? Perfect! We let her know that pending a reference and credit check we would be interested in moving forward with her application.

During the course of our research into becoming landlords, multiple individuals recommended to us that previous landlord references were one of the crucial screening calls to make. With this in mind, we prepared to make a few phone calls. We noticed that Mary hadn’t written down her past landlord’s number, so we gave her a quick call to which she responded that she didn’t have it on her but she would call us right back with it. After waiting a couple of hours and not hearing back, Dan decided to try to find the number himself using her listed address. Luckily, he found a full listing provide by the city housing authority of all of the owner/property managers for each rental unit including name and phone number. However, we needed to call Mary back anyway to get a few more pieces of information and this time she gave us her landlord’s number herself.

We called the landlord with the number she provided and he gave her a raving review. Never late on payments, grandkids don’t cause any problems, just everything perfect. However, there were a couple of discrepancies that didn’t quite pass the stink test. First, Mary had written on her application that she paid $525/mth at her current address and the landlord said $1200. Second, she claimed that her reason for leaving was that the landlord was selling the property but the landlord was very emphatic that they didn’t know she was moving and how disappointed they were in losing her. Finally, the name and number of the landlord didn’t match what was on the city spreadsheet as the legal contact, and the number was only 1 digit different from her personal number (which also happened to be from a different area code then the local one). We had Dan’s brother double check the owner of the cell phone number – he works for a local cell distributor – and found that Mary was the owner of the account.

Now I’m usually a pretty relaxed person and don’t get angry too easily, but this situation really rubbed me the wrong way. I mean, seriously? You’re going to give me a fake phone number and have your family lie to a prospective landlord? We don’t know why she lied to us, whether she didn’t have the other landlord’s number or was intentionally hiding problems she was having, but to us it doesn’t matter. She will not be living in our house under any circumstances. Luckily, we had a second choice tenant whose credit check showed exactly what she told us it should and her landlord’s name and number matched the spreadsheet and also happened to be a former mayor. Somewhat more legit.

It is easy to see how people who own businesses can become cynical very quickly. Most people just want to do the right thing, but some really are trying to take advantage of you. The important thing is having a healthy balance of faith and skepticism about other people, so hopefully you can determine which is which. And remember, if it stinks…it’s probably fishy.

 

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Posted on Nov 7, 2012 | 0 comments

The Election is Over, Now What?

Well Election Night has come and gone, and once again we all chose a president. The real question now is so what? While it’s nice to hear what a candidate is “planning” to do, what we really need to know is how their policies are going to affect our everyday lives. Unfortunately, it is almost impossible to find good concrete information about how US policies affect our future plans. We have been trying to find better information about what our status will actually be once we move out of the country essentially as nomads.

Here are a few of our most pressing questions:

  • Where is our legal “residence” once we no longer live anywhere specific?
  • Would we have to pay state income taxes in addition to federal if we aren’t a state resident?
  • Through which state/city do we do our absentee voting, and where do we have our ballots sent?
  • How is the federal health insurance mandate going to affect us? Does it apply if we aren’t living in the country?
  • How do we maximize our tax status to use the system to our advantage while we are living on interest only?
  • Do we have to pay capital gains tax on the sale of our house if we don’t “reinvest” it in another house? (This one we have answered now: only if we sell our house for more than $250,000 more than we bought it for. In our dreams.)
  • How do the new overseas banking regulations affect us?

The difficult thing in finding the real answers to these questions is the fact that every cruiser is different and most policies aren’t exactly written with roaming nomads in mind. And while both of us are fairly confident in our abilities to read and understand legal contracts and other important documents, we aren’t very comfortable with basing very serious decisions on our own knowledge of tax, immigration/emigration, and healthcare law. I mean have you ever tried reading raw tax code? Not recommended for the living.

 

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