Cruising on $500 per Month . . .

[goprisko]

Originally Posted by wolfenzee

The philosophy nessesary to be able to cruise on $500/month can apply to the entire boat. I have seen people look at the boat they could comfortably afford and then go for the bigger (all be it stripped down model) that they could barely afford. There are two ways in which your budget can make you loose sight of your dream. 1: spending more money than you can comfortably afford 2: cutting back so far it takes the pleasure out of everything. Basically find a comfort zone/center point. This is different for everyone, what you get out of your boat is yours....so try and figure out how to enjoy it the best you can.

We covered this matter extensively on pp 28-36. On those pages we developed a methodology for estimating the annual cost of a yacht.

We also developed a proforma budget and discussed the tradeoffs one must make in such a budget to make it conform to his needs.

A key issue in the budget is the cost of maintaining the boat. Since this cost is directly related to the displacement / LOA of the boat, one must first determine the monthly boat expense allowable, and then estimate the monthly cost of maintaining any boat of interest. If the boat of interest costs less than the bugetary limit, the boat fits. Otherwise, it's too expensive.

To help orient the newbie, it is best to look at the boats used by successful micro-budget cruisers, and choose similarly.

You can reduce the expense of a given boat by keeping it simple.

Tiller vs Wheel
Hankon sails vs roller furling
Pawl vs windlass
Handybillies vs winches
ice box vs refrigeration
paper charts vs chart plotter
oar vs engine
bucket head vs water closet
windex vs electronic wind direction instrument
hand lead vs depth sounder
conch shell vs electric horn

and so on.....

INDY

[Doodles]

Originally Posted by goprisko

The last time I organized a company.... In RSA... we organized it "For any legal purpose"

Regardless, should an individual choose to organize a company and name it
"The Cruising Yacht Works" for example, and he then organizes the supply
of material and equipment with which he builds himself a cruising yacht, is he not operating his "company" for the purpose expoused in it's name?

Not necessarily true at all in the US. Every year taxpayers are audit under what are called the "hobby loss rules", i.e. they failed to show they were really engaged in a business for profit but were instead operating a hobby or personal activity via a business shell for the tax benefits.

Originally Posted by goprisko

Should you doubt this, please keep in mind the many times you were not asked to pay sales tax to vendors operating out of your state's jurisdiction. Those vendors did not pay the tax out of their own pockets, because they showed the sale as to another jurisdiction, hence not taxable.

Once the company has fulfilled it's purpose, given the vendors have been paid, and any taxes due have been paid, it can be allowed to lapse. There is no need to spend further funds winding it up formally.

Even though the vendor did not "ask" you to pay the sales taxes or was not required by his state to collect it from you does not necessarily remove you from the obligation of paying the sales tax to your state. I know from personal experience that the state of Virginia is notorious for conducting what are called "sales and use tax audits" on Virginia business where they are looking for items purchased out of state with no sales tax was paid. The Virginia business is required to monthly report these items and pay the tax to Virginia otherwise you are subject to interest and penalties. If you are an individual and you do the same you are required to report and pay the sales/use tax on you income return for the year in question. Not saying I like this, but its the law.

As for letting a company charter lapse versus a formal closing, I know its done all the time but it can come back to haunt you. There are many, many cases of this happening. In my opinion it is just not worth the little extra it cost to close it down properly.

[svrodeorm]

Originally Posted by wolfenzee

. 1: spending more money than you can comfortably afford 2: cutting back so far it takes the pleasure out of everything. Basically find a comfort zone/center point. This is different for everyone, what you get out of your boat is yours....so try and figure out how to enjoy it the best you can.

pretty much sums it all up.... for each and every one who are crusing- or considering to untie the docking lines.

[goprisko]

Doodles said the following, and more....
Not necessarily true at all in the US. Every year taxpayers are audit under what are called the "hobby loss rules", i.e. they failed to show they were really engaged in a business for profit but were instead operating a hobby or personal activity via a business shell for the tax benefits.

He is missing the point of my posts regarding forming a company to build your yacht. He is lost in the minutiae of tax law. The statute mentioned above has no relevance here. It covers an individual attempting to deduct the costs of operating the "business" from his personal gross income for tax purposes.

I advocate forming a separate entity "My Home Built Yachts", specifically a Delaware LLC, for the purpose of building and owning the yacht. This permits you to domicile the vessel in Delaware, where tax is minimal, and all transactions are performed under the umbrella of the LLC.

The point of forming a company in whatever form you choose, and registering same with the tax authorities, is to obtain parts, material, and services at wholesale or 40% off.

As part of this you will obtain a DUNS number and establish a separate credit history for the company. The company will file its own tax reports. Once the purpose for which you formed it is complete, you dissolve it, or render it inactive. You will have to show monies going into the company, and you can show them as loans or capital contributions. It will be easy to show expenses, because the boat project will create them. At the end of the project you can sell the boat to yourself and liquidate the loan(s) with the proceeds. You can conduct the sale in Florida or another jurisdiction which does not impose sales tax. This ties up loose ends with the tax authorities.

If your project needs such in the amount of $ 60,000 (retail) buying wholesale saves you $24,000 and brings the cost down to $36,000.

Again, the point of forming a company to cover construction of your boat, or refurbishing your boat is to buy wholesale and save 40%.


INDY

[avb3]

Originally Posted by goprisko

[B]The point of forming a company in whatever form you choose, and registering same with the tax authorities, is to obtain parts, material, and services at wholesale or 40% off.

I'm not sure where you come up with the 40% off situation.

I agree there is a wholesale versus retail difference, but it is my experience that often a high volume retailer can provide better pricing then I can get at wholesale.

Much has to do with volume and repeat purchase.

If you set up an account with a wholesale supplier, one of the first questions included is what your expected annual volume of purchases will be. If it is below their threshold of a wholesale supplier, you gain nothing from that gambit.

If your project needs such in the amount of $ 60,000 (retail) buying wholesale saves you $24,000 and brings the cost down to $36,000.

Again, the point of forming a company to cover construction of your boat, or refurbishing your boat is to buy wholesale and save 40%.

INDY

I like your plan, I just don't think the execution of it in the manner you describe will be possible.

[avb3]

Originally Posted by goprisko

hand lead vs depth sounder
conch shell vs electric horn

and so on.....

INDY

OK, those last two are SERIOUSLY funny!!!!

[w1651]

You can conduct the sale in Florida or another jurisdiction which does not impose sales tax. This ties up loose ends with the tax authorities.

Just so you know when you do register it in Florida you will have to pay the sales tax. I'm having to do that myself with the boat I just bought.

It might be a better option to just have it documented by the Coast Guard though I don't know the hoops you have to jump through to do that either.

[Doodles]

Originally Posted by goprisko

Again, the point of forming a company to cover construction of your boat, or refurbishing your boat is to buy wholesale and save 40%.


INDY

If all you are trying to do is get a trademan's discount you don't need to incorporate or form a LLC. Just register as a sole proprietor, e.g. Indy Sailorman t/a "Building My Dream Boat". Most small contractors and tradesmen operate this way. You don't need to form the fancy company in Delaware.

[w1651]

anyone have any experience with Marelon sea cocks? They are supposed to be completely corrosion resistant and plastic so the body won't decay either.

[wolfenzee]

Originally Posted by Doodles

If all you are trying to do is get a trademan's discount you don't need to incorporate or form a LLC. Just register as a sole proprietor, e.g. Indy Sailorman t/a "Building My Dream Boat". Most small contractors and tradesmen operate this way. You don't need to form the fancy company in Delaware.

The local ship's supply and variou8s other people around the yard gave me a "contractors discount" (about 35%) with out me even asking.

[Blue Crab]

Originally Posted by wolfenzee

The local ship's supply and variou8s other people around the yard gave me a "contractors discount" (about 35%) with out me even asking.

Ditto here in Beaufort, NC. The commercial ship supply, Barbour's, is far cheaper than We$t but without the foofoo clothing and yottie doodads. Gotta do your homework.

[Mark Johnson]

Originally Posted by w1651

anyone have any experience with Marelon sea cocks? They are supposed to be completely corrosion resistant and plastic so the body won't decay either.

I've used them for over 25 years and find that they are way more reliable than bronze, over the long haul. (Bronze can corrode away).

Like all ball valves you need to work the handles about 10 times every 6 months to remove scale. The smaller valves have handles that could be broken off if you force it. If it seems tight, it has scaled up... hold both ends of the handle and work it little bits at the time to free it up, then it should work fine.

If you treat them right, they should last the life of the boat!

M.

[w1651]

Originally Posted by Mark Johnson

I've used them for over 25 years and find that they are way more reliable than bronze, over the long haul. (Bronze can corrode away).

Like all ball valves you need to work the handles about 10 times every 6 months to remove scale. The smaller valves have handles that could be broken off if you force it. If it seems tight, it has scaled up... hold both ends of the handle and work it little bits at the time to free it up, then it should work fine.

If you treat them right, they should last the life of the boat!

M.

Thanks M
I gotta replace every seacock (valve) on the old girl. After that I will feel a lot better about her.

[Mark Johnson]

If you set up your "business account" with wholesalers to stipulate "DO take out taxes", then there should be no problem later, because the issue the government cares about is NOT "did you get 40% off on your home project", But "did you pay taxes on your purchases".

What many wholesale businesses care about is not so much the legitimacy of your business, but if they send a rep to your boat building sight, (like they did mine), does it look like a HUGE volume of business that they stand to get with you. (> $20,000) Their agreement not to sell to "individuals" is with their other clients, not the government... IF you have a "DO pay taxes" account.

If you have a COD account on the hundreds if not thousands of deliveries, this eliminates all credit/background checks as well. They make a bunch of money on you, you save about 40%, the Gov gets its cut, and everybody is happy!


BTW, On a different note... Almost all cruisers are couples. So to compare your "cost of cruising" to them, you have to double your living expenses first...

You would need absolutely NO income for 20 years, except what goes into a bank account that you can see clearly how much goes out of, and spend NO money except out of that account.

You would need to average these expenses, plus the "doubled" living expenses, over 20 years minimum. This includes ALL money for the boat... including a standing rigging and sail replacement, several replacements of all running rigging, ground tackle etc. ALSO... every electronic or mechanical device on the boat will probably be replaced at least once, including the dink & its accessories. (Not to mention ALL fuels, the regular breakdown expenses, damage to the boat, and haulouts).

You also have to add up ALL expenses on communication, land trips, clearing in/out expenses, taxes, ALL insurance, home or storage building, vehicles & their expenses, contributions, gifts for others, eating out, all food & supplies, and ALL health related expenses... (Added up over 20 years and averaged out).

ONLY by doing this does one know the REAL cost of their lifestyle. No one adds up everything! We estimated our "cost of cruising per year", but averaged out over 20 years, that number was about half of what we REALLY spent. It is easy to deceive oneself!

This point of view is the result of "building a boat and sailing away" to see as much as I could, three times over 40 years. The first boat was run down and totaled, so I have to add in the total expenses to build that one as a loss. The other boats' "building expenses", as well as our living expenses while building them, (21 years), have to be averaged in too. This is NOT an easy or inexpensive pursuit, unless one lives like a bum on a bum boat, and does very little... which isn't fun!

We have cruised as the least "funded" 1% of all cruisers, and there are many tips on cruising & living inexpensively that are very useful. I'm not seeing many of them here though.

It makes sense to size the boat, its equipment, and comfort level, to live within your means, but beyond that, there is nothing "noble" in talking about how cheaply one cruises whatsoever! That totally misses the point. "The idea" when you go from country to country on your boat, is to experience the food, the people, take inland trips, REALLY see the sights. If I have any regrets, it is that I had so little to spend in these wonderful places, and my fondest memories are of the few inland trips that we took, which dug deep into the "cruising kitty". (places like Tikal, Antigua, or Lake Atitlan in inland Guatemala, or the worlds largest radio telescope at Arrecibo, in central PR)...

Over many years, the need for "basic comfort" becomes greater, or you will give it up in a few years. (I.E. We eventually added memory foam to our bunks, and made the settees wider.) Also over time, you will need more "stimulation", or your brain will ROT. (There are a disproportionate number of "down N out alcoholics", living on boats.)
Go to fewer countries if necessary, but don't skimp on money SO much that you don't really get to know the places that you go to.

The POINT is to enjoy ones life, and sitting in a nice tropical place while experiencing nothing more than a mile from your boat, may SOUND romantic, but over years you realize that there is more to life than that!

If in the process of "seeing the sights", you spend all of the "cruising kitty", (like we did), sail back, get a job, and save up for the next cruise. Don't short change yourself by traveling TOO cheap. Life is short!

Balance Grasshopper, balance...

M.

[ImaginaryNumber]

Originally Posted by Mark Johnson

We have cruised as the least "funded" 1% of all cruisers, and there are many tips on cruising & living inexpensively that are very useful. I'm not seeing many of them here though.

Mark, please don't be bashful. Share your cruising and living tips with us!