What percentage of nest egg should be used on boat?

[Dearmondfamily]

Hello all, family of four about to start our adventure! Liveaboard, cruising. No set plan other than travel whenever and wherever.

Was just wanting to hear some thoughts on how much of your savings should be spent on the boat and how much should be held back for, upgrades/repairs.

I will be somewhere in the ballpark of 200,000 saved, along with a monthly retirement income.

I know there are a lot of variables to this but, what have most of you experienced as far as necessary repairs on a freshly purchased boat?

Any input would be greatly appreciated.

[Captn_Black]

I generally hear figures of around 2% of the purchase value per year. Though I would put aside an additional 5%-10% for emergencies. We work online, and are renovating while cruising, so our figures wouldn't apply to you I imagine.

[ohdrinkboy]

Originally Posted by Dearmondfamily

Was just wanting to hear some thoughts on how much of your savings should be spent on the boat and how much should be held back for, upgrades/repairs.

Everyone's tolerances are different. Personally, less than 10% of my liquid net worth will be tied up in a boat. I just can't tie up my money in a depreciating asset. I'd rather go smaller/simpler.

How much you hold back depends greatly on the current condition of the vessel and how long you intend to own it. Well found, and you are planning on selling in 5 years I would hold less back. Living on it 20 years and it is in so so shape. Hold much more room in your budget.

[Captn_Black]

Yea, ohdrinkboy touched on a good point here. If you want to be liveaboard cruisers and your funds are limited, you're either going to have to set most of your funds aside and buy a smaller but newish boat, or learn to do the work yourself and get something larger but with issues that you can handle now and in the future.

[JPA Cate]

A few things to think about?

Exit strategy? Cruising isn't for everyone. If teens, the kids normally would be starting out on life on their own in a few years. What fiduciary responsibility for them do you anticipate? Are you certain your retirement income will continue? does it have a cost of living clause in it? One way of looking at this is don't spend more than you can lose (hit a partially submerged container, at night in a sea way - they're nearly invisible, usually- and boat sinks).

Ann

[a64pilot]

Even with the cost of living adjustments it doesn’t keep up. I have been receiving Retirement pay for almost 20 years now, and is almost exactly what it was to start with, because according to the Government, there is no inflation.

But if your buying a boat to go cruising, expect to spend at least 25% of the purchase price making it the way you like it to cruise, especially if it’s older than 10 years old which yours will be, and in my opinion it’s foolish to buy new or even real close to new. I think I spent closer to 50%, but I did go a little overboard and my boat wasn’t fitted out to begin with so I was buying a lot of “stuff”

Then not trying to be ugly, but unless you have a Retirement that will comfortably cover 100% of your Retirement financial needs until you die, then you don’t have enough. It’s one thing to Retire at 65 or older but every year you Retire before then significantly raises your requirement for savings. You don’t sound old.
I see younger couples cruising, but I strongly suspect they have trust funds to support it, or they are going back to work, they just don’t know that yet.

Family of four, the boat and refit for that and your 200K is gone, cause all of you aren’t fitting in the average 40 footer, and big boats cost more money to own and repair.

Most seem to consider $3,000 a month as a requirement to cruise, and I’ve seen many budgets and none seem to have xxx amount of money that goes into the maintenance fund every month and you need that. We cruise about half the year so far, and I spend I’d guess about $5,000 a year keeping her up and slowly improving her. I don’t really know but think that’s a good number.
That is your common 40 foot boat that pretty much everything was new when we left, electronics, sails, rigging etc.
So I figure all in it’s closer to North of $4,000 a month.
But there is great truth to the comment that it costs what you have, cause most if they can afford it, will spend it, and so long as you have the min requirements covered, if you don’t have it, you can’t spend it. You just do without.

But have spent years of my life being broke, and it sucks, I don’t want to live like that again if can help it.

But a huge deciding factor is how old are you now and is this a cruise until we run out of money and then go back to work, or are we done with work for life?

[sailjumanji]

Originally Posted by Captn_Black

I generally hear figures of around 2% of the purchase value per year. Though I would put aside an additional 5%-10% for emergencies. We work online, and are renovating while cruising, so our figures wouldn't apply to you I imagine.

2% of the purchase price covers the insurance for comprehensive coverage. Then you get to budget for fixing and replacing things!

[SVHarmonie]

Originally Posted by Dearmondfamily

Hello all, family of four about to start our adventure! Liveaboard, cruising. No set plan other than travel whenever and wherever.

Was just wanting to hear some thoughts on how much of your savings should be spent on the boat and how much should be held back for, upgrades/repairs.

I will be somewhere in the ballpark of 200,000 saved, along with a monthly retirement income.

I know there are a lot of variables to this but, what have most of you experienced as far as necessary repairs on a freshly purchased boat?

Any input would be greatly appreciated.

It will cost more than you think. A LOT more than you think.

Forget thinking about upkeep as a percentage of what YOU pay for the boat, that's an obviously silly way of calculating it. An old crappy boat that you get for cheap costs less to maintain than a nice new boat in great condition? Does that make sense to ANYONE???

Think of the cost to maintain a boat like this: It is a percentage of what the boat would cost AS IF IT WAS NEW. Typically, 3 to 5% of that value.

Read this: Cost of boat ownership. You don't have to agree with it, or even like it, but it is a good explaination of the way things are...

[arsenelupiga]

Originally Posted by SVHarmonie

It will cost more than you think. A LOT more than you think.

Forget thinking about upkeep as a percentage of what YOU pay for the boat, that's an obviously silly way of calculating it. An old crappy boat that you get for cheap costs less to maintain than a nice new boat in great condition? Does that make sense to ANYONE???

Think of the cost to maintain a boat like this: It is a percentage of what the boat would cost AS IF IT WAS NEW. Typically, 3 to 5% of that value.

Read this: Cost of boat ownership. You don't have to agree with it, or even like it, but it is a good explaination of the way things are...

agree 100%, read that link above. We are 6 years into it, now live boards and pretty much follow that. Our commitment is <20% in the boat, rest in DIVERSIFIED investments, not just property. I am also experienced investor that adds 1 or 2 % p/a on top of buy and hold returns . Boat maintenance so far 5% p/a including upgrades and insurances.

[Dearmondfamily]

Thank you all for your replies, I've got some reading to do!...

[Captn_Black]

Originally Posted by sailjumanji

2% of the purchase price covers the insurance for comprehensive coverage. Then you get to budget for fixing and replacing things!

I don't know many/any international cruisers with fully comp insurance, and was working on the assumption that they at least do some of the work themselves on an essentially new boat.

But yea, as arsenelupiga said, working it out as a % of the value is probably not realistic, especially for used boats. I gave a more realistic view in my opinion after that.

[ol1970]

My philosophy with my land based life has been no more than 5% of my net worth is tied up in depreciating assets. If you know for sure you’ll love crusiing and be out for 6-7 years I could see spending 15% if it’s your full time home (for others it might be higher yet), but that assumes the other 85% is income producing (not a house that’s sitting empty). We plan on keeping a home base someplace nice that we can escape to if another pandemic or storm situation pops up again like we’ve seen the last few years.

The other big variable though is how much is your annual pension after taxes. Some people have $250k/year pensions others have $30k/year. This changes the equation quite a bit. Living on a shoestring budget is exciting and fun in your twenties, not so much in retirement.

[sailjumanji]

Originally Posted by Captn_Black

I don't know many/any international cruisers with fully comp insurance. .

Yep, but he didnt specify what country he was planning to cruise in, or even where he is currently based. He also didnt specify what currency his 200,000 savings was. I agree with others though that expenses based on percentage of boat cost is not a reliable metric.

[a64pilot]

They have a total cash amount of about $200K. That’s not going to buy close to a new boat in a size that a family off four will be comfortable in.
Then and this is what bothers me, they call it the nest egg, which to me means funds set aside for Retirement and a boat is a horrible investment, I think it best from a financial planning perspective to consider the money spent on a boat as money no longer available, don’t consider the boat as something you will sell one day and get money back.
That’s a harsh reality, I mean in say 5 or 6 years when we buy a house, I expect my boat will be if anything in better shape than she is now, but she will also be almost 40 urs old, and face it a 40 ur old boat isn’t going to bring much, most people with decent money to spend won’t waste their time looking at 40 yr old boats.
Boats do not hold value well.

[ilenart]

Originally Posted by Dearmondfamily

Hello all, family of four about to start our adventure! Liveaboard, cruising. No set plan other than travel whenever and wherever.

Was just wanting to hear some thoughts on how much of your savings should be spent on the boat and how much should be held back for, upgrades/repairs.

I will be somewhere in the ballpark of 200,000 saved, along with a monthly retirement income.

I know there are a lot of variables to this but, what have most of you experienced as far as necessary repairs on a freshly purchased boat?

Any input would be greatly appreciated.

Your heading is actually asking a different question to what your notes is asking.

What percentage of nest egg should be used on boat? - depends on your circumstances. Do you own a house? Are you in good health? How old are you? Are your kids education paid for? If you are in your 20s or 30s you could spend 70-80% of you net worth and go sailing for several years and still work afterwards. If you are close to retirement would suggest the percentage would be way lower, say 15-20%.

how much of your savings should be spent on the boat and how much should be held back for, upgrades/repairs. - for me a lot depends on the age and condition of the boat. For a 40 year old boat I would think 40 / 60 (40% boat 60% upgrades / repairs). For a 20 year old boat would suggest 60 / 40. For a 10 year old boat probably 70 / 30. Note this excludes living and running costs ie food, fuel, mooring, entertainment etc.

Ilenart