Should I Pay Off My Boat Before Cruising?

[Tony B]

Originally Posted by bobconnie

....... I like being self insured on my boats and only carry Liabilty Ins............

Bob
I am in the process of purchasing another boat. I looked at your post and thought of several ways this can be done and not sure exactly how it would work out.
I had to Google Montegut, La. I have been working offshore Louisiana for over 22 years and never heard of Montegut. You are way in the bayou.
Anyway, could I possibly talk you into starting a new thread about 'self insurance'. Frankly, I am really sick and tired of insurance companies. After Hurrican Katrina, I might just as well walk into an insurance office with a tattoo on my forehead with either "Just say 'NO" or "Where can I buy some KY"
I'm sure others on here might enjoy that thread also. It is just something that never occurred to me.
Thanks in advance

Tony B

[zeehag]

set up a payment schedule and run-- there are folks out here who pay while cruising.

[JimmyP]

Debt free is a small financial freedom... But a huge psychological & emotional freedom!
I've paid off both house and boat---there is nothing else like it. Once debt-free, you can't go back.

As cruisers, we generally are seeking an alternative approach towards life.
Debt free supports opens new approaches!

[Doodles]

From a strictly numbers point of view it just depends on what you would do with the funds if you didn't pay down the debt. Lets assume you have a 6% loan and the effective rate after the tax savings 4-5% depending on your tax situation. If you can invest the funds at a rate higher than the 4-5% after taxes then you are better off keeping the loan and investing the money; otherwise, paying down the debt is the better deal.

Obviously this approach ignores the psychological aspects of being debt free which may be a greater motivation as many have suggested.

[Mike OReilly]

I won't pretend to know your personal financial circumstances, but I've come to view our economic system much like a casino. Simply put, the system is rigged to benefit the owners, and we ain't the owners.

Western capitalist countries (most particularly those of the english tradition) are now fully owned by those at the top -- the 1%, to put it in current parlance. The system is rigged to benefit the few, at the cost to the many. Debt is one of the major tools of this system. Debt keeps you locked into the system, and the price you pay is extracted in both life and liberty.

For me, the choice is clear: go debt free.

[Cheechako]

Many ways to look at it for sure. Tax considerations, risk considerations etc. You can also look at it that if you continue to make payments, and end up selling the boat in say... 3-5 years, the out of pocket money was lower than if you paid it off. Unfortunately boats dont appreciate in value like houses do.. (used to?), but it rarely makes sense to pay off a house. Let's say you bought a house for $100k, you put $10k down and live in it for 10 years and the value of the house is now worth $150k. in Gross terms you leveraged $50k of profit with $10k + payments. Anyway, probably doesnt apply totally here but a concept worth thinking about. Being debt free when cruising definitely allows your mental state to stay on "island time" longer!

[Ex-Calif]

Credit just allows one to trade cash flow for lifestyle at the horrific cost of interest. It is the drug of choice for most Americans. Since 2009 most of us have been in credit withdrawl nightmare. Unable to access the "value" in our properties has resulted in us not getting what we want "now"

In almost all cases it is better to save your money and pay cash. I don't know too many guys reliably getting better than 3% on investments over the long run so the idea of borrowing bank money at 6% and investing mine is ludicrous. Bank of America is the one with 100 story building, not me. I think they got this finance stuff sussed out a little better than I do...

OTOH - If you worked 35 years for a big company and have a nice retirement check coming yet few assets. I can definitely make a case to convert that fixed cash flow into a different lifestyle. Get the loan locked in before you retire...

In other words in high cash flow situations you can easily make a case to borrow.

[carstenb]

If you possibly can - pay off everything. Then you are your own master, beholden to none.

Believe me - that is a feeling few have these days, and when you are sitting off some white beach with a G&T in your hand, you'll damn sure appreciate your freedom. Seriously, I only owe a small amount of money on my house which I can choose to pay at any time (don't cause right now it is better for me tax wise). The day I go cruising I sell the place and will owe nothing nada.

A no-brainer

[Mr B]

I am Totally debt free, I own my own house, 2 trucks, 2 cars, two motor bikes and My Gemini, Which I paid cash for,

The money I save in interest payments, or what ever the spin doctors would like to call it.

Allows me to do what ever I like, I have the cash in my pocket, not Theirs.

Interest, Is putting a pile of cash in a heap on the floor, setting it alight and watching it burn,
Its your money, Do you really want to just throw it away. Thats what interest is,

[ArtM]

Not paying off the boat will extend your cruising kitty. Paying off the boat means that you will be sailing with a large chunk of equity and a small chunk of cash. The only way to get to that equity is to refinance the boat, or sell it.

If you want to extend your cruising kitty, keep the cash. When you are done cruising, you can sell the boat to pay off your loan (this assumes that will not be "under water" - you need to do some depreciation projection to make this determination)

Pay Off: Short cruise with a cash bonus at the end (when you sell your boat)

Don't Pay off: Longer cruise with no cash bonus at the end, and possibly risk selling at a deficit

[LiveLife76]

Just curious...if you don't mind, what did it cost you to ship to CA?

[Azul]

Originally Posted by ArtM

Not paying off the boat will extend your cruising kitty. Paying off the boat means that you will be sailing with a large chunk of equity and a small chunk of cash. The only way to get to that equity is to refinance the boat, or sell it.

If you want to extend your cruising kitty, keep the cash. When you are done cruising, you can sell the boat to pay off your loan (this assumes that will not be "under water" - you need to do some depreciation projection to make this determination)

Pay Off: Short cruise with a cash bonus at the end (when you sell your boat)

Don't Pay off: Longer cruise with no cash bonus at the end, and possibly risk selling at a deficit

Sometimes your plans don't work out the way you think they will (say, wife gets sick of cruising, leaves with kids, now you have an unpaid for boat to sell at 75% discount to pay alimony/child support....) Also, when you have "disposable income" from not paying off the boat you will be tempted to make frivolous choices like SSB, marinas, shipping boats coast to coast instead of things that might be more important to the family... Accountants will almost never tell you to simplify your lifestyle, I don't know why. I have run into one of those "gee I never would have guessed that could happen situations" personally and wish I had back some of the money I spent in my conspicuous consumer days on boats, women and airplanes. But then I probably would just spend it again on boats, women and airplanes ha.

[carstenb]

I forget who said it, but one go my favorite quotes is:

I've spent most of my money on booze, women and song - the rest I've just wasted

[impi]

Originally Posted by n8kraft

Hi cruisers,
I want your opinion on whether I should have my boat completely paid off before I go cruising.

Here's my backstory. My wife and I just bought a Cheoy Lee Offshore 41 for $40,000 in Annapolis, MD and paid to ship it to San Diego, CA. My monthly payments are $387 a month for 120 months. I can have the boat paid off by my departure date of July 2014 if I pay $1240 a month.

I'm not overly concerned about the interest because since the boat is my primary residence the interest can be taken off my taxes.

Are there any benefits to having the boat paid off before I go cruising, or is it better to just put the money in an account and have the bill paid automatically each month?

If I may add my 2 cents worth ... I would pay the boat off as well as any other payments before you go sailing. Try and get rid of as much administration issues as possible, simplify your life and put plans in place for the things you will need to have sorted on land before you leave.

If you have any 'land issues' and are sailing to remote areas, you will need to allocate capital for communication systems such as a satellite phone etc.

I streamlined my life as much as possible and still find it an irritation to have to interrupt my sailing pleasure with the mundane requirements such as annual tax returns etc.

[skipmac]

Originally Posted by carstenb

I forget who said it, but one go my favorite quotes is:

I've spent most of my money on booze, women and song - the rest I've just wasted

“I spent most of my dough on booze, broads and boats and the rest I wasted.” ― Elmore Leonard, LaBrava. A perennial favorite.