The Threshold Question: Part 2

The first step was estimating a budget.  Next, we took that budget to our financial planner, and told him to make it happen.  I was fairly certain he’d spend the hour pointing and laughing, then tell us to go back to work and forget the whole thing.

To the contrary, we emerged from this meeting feeling – dare I say – hopeful.

First, we’re already putting away $500 each month to build up an “emergency fund;” in case one of us loses our job, is injured, or some other calamity arises.  That makes $6,000 each year in savings.  Assuming we leave in five years like we’re planning, we’ll have saved $30,000 just by doing what we’re doing already.  Assuming our broker invests that well, we’ll have another few thousand on top of that.  Then, we’ll sell our cars just before we leave, putting another several thousand in the coffers.  Suddenly, we’re almost up to the $50K or so budget outlined by Bumfuzzle.  Nice.

This was great news.  But, I need a buffer.  A BIG buffer.

I’m extraordinarily conservative when it comes to money, so when I do our family budgeting, I only include my and Dad’s base salaries.  Dad’s in technology sales (kind of), and so a large portion of his salary is variable based on his area’s sales each quarter.  That’s not in our day-to-day budget.  As for me, I’m a partner at my law firm, and anything I get from the firm also isn’t in our day-to-day budget.

Previously, we’d use the “commission” money for things like vacations and major purchases.  Well, this cruising for a year will definitely qualify as both a vacation and a major purchase, so we’ll be putting most of the commissions toward prepping and saving for that.  Honestly, I expect most of it will be spent on things like training courses, charter vacations to practice our skills, and of course purchasing and outfitting the boat.  So, I’m still a bit worried about savings.

But, our meeting had these highlights:

1. Use Credit Wisely. First, we have a line of credit on our house that will have some room on it by the time we set sail; so, that’s one source we can use in an emergency.  Next, we somehow got a great credit card from our bank several years ago, with reasonable interest and a fairly high limit.  That will also be a huge help in an emergency.  I’m not a fan of relying on credit, but to have it available just in case we need it?  That helps me sleep much better at night.
2. The Cost of the Boat Isn’t Actually the Cost of the Boat.  The cruisers we’re looking at are anywhere from $150 – $500K.  (Okay, the $500K boats aren’t being given serious consideration.)  My first thought was that those prices would be a road block – it’s like purchasing a second house!  But, this is a house we’ll only be on for a year, and after the year is done, we can sell it.  So, we’re not really purchasing a whole house; we’re only paying for a year or two of a whole house, which is much more manageable.
3. Our Student Loans Are Expiring.  Student loan debt payments make up a significant portion of our budget (>$1,000/month).  My student loans – which are the bulk of our student loan debt – will be paid off in 2015.  That will allow us to increase our monthly savings by hundreds of dollars each month.

So, to ensure we have the funds we need, we’re tightening our budget like we never have before.  Our Christmas gift-giving this year will be almost free, thanks to our local Buy Nothing Group.  Another budget-killer for us that’s going away?  Impulse buys.  Not gonna happen.  Also, any purchases that put us over budget in a given month?  Also not gonna happen.  I don’t care if it’s groceries and we have to forage for clovers and dandelions.  (I’m loving the book in that link, by the way.)  To make this trip happen, it’s “In budget or bust!”