Financial Cruising Plan as a South African

[Pretoria2C]

Hi All,

My wife and I are considering moving to Australia because of our current political, economic and safety problems in SA and will probably make a final decision at the end of the year when we go check it out.

Anyways we thought that it would be a good time before actually moving to take a cruising sabbatical (for who knows how long, but around 18months+) even if we do end up staying in SA.

We are currently very early 30s and if we do go cruising we will leave our jobs around June 2021 and cross the Atlantic at the end of that year (if all goes according to plan).

All of our money is in Rands but I will convert to USD to make it easier for everyone to follow. When we quit our jobs we should have approximately $750 000 completely liquid as we don't own any assets, I plan to find a liveaboard and get it sorted for max $200 000 (and I want a small cat so that's another story).

Basically im asking for opinions and advise on what you think would be the best way to live off the remaining $550 000 without losing too much net wealth. I don't really want to buy rental properties as it would be difficult to manage from the other side of the world and we might be moving. I have always managed my own savings (not amazingly) but over the last few years our stock market has been doing very poorly. Currently most of my capital is in money market funds which get a max return of about 7.8%. If I had to put all of our remaining money into the highest performing funds after income tax at about 16% between the two of us the monthly income is roughly $3000. From all my research that seems do-able as I am quite frugal and hands on when it comes to maintenance.

A fixed deposit only looks better after 36 months. Another option is to give the funds to a financial investment company such as ARC (South African Company) or similar who promise high returns but I really don't know anything about this and would have to research it. Another option is to send my funds overseas and either get them into Aus Dollars if we decide to move there or US Dollars as it is used most widely in the areas we want to cruise in. Both im sure will probably be doing better in relative terms than our rand in 5 years time

I do plan on seeing 1 or 2 financial advisors for opinions but hoping there are some knowledgeable ladies/gents who have done similar on here

[daletournier]

Hi I'm no financial expert in anyway. I have a little insight into your SA issues as I was there on my boat for 5 mths last year and I'm also Australian so have a reasonable understanding of my own country.

Now this is nothing but a unqualified opinion. Australia is having it's own economic issues, obviously nothing like SA but after 28 years of economic expansion the economy is slowing. Interest rates are dropping and will drop more,this results in our dollar depreciating. Since I left in 2011 the aud has depreciated nearly 40% relative to the usd, in fairness to our dollar the usd took a big hit after the GFC but our dollar is going down. Australia has the honor of alot of household debt due to our over inflated housing market (bubble) that has been trying to burst but is kept alive by more and more stimulus, eventually the housing market will crash and a housing crisis in Australia is a banking crisis. Only the Swiss have greater household debt than us.

Personally I'd keep the money in Usd or gold ,I believe both will out perform the aud in coming years. The world economy is slowing and people will be looking for safe havens to park their money in, both the above are considered safe havens. Gold in aud is up 22% in the last 12mths.

Obviously theres alot more to be said about the Australian economy, our debt levels and our dollar, more than can be spoken about here. With all its faults and economic storm clouds building Australia is still an incredibly lucky country.

[Pretoria2C]

I guess all the financial guys were smart enough not to buy a sailboat which is just a huge liability lol

Thanks for the response Dale. After doing a ton of research on various potential countries and cities iv realized that there's now perfect country and they all have their pros and cons. Interestingly our Rand has depreciated by about 110% over the same which is really scary. Currently I think il be looking at putting the money in US unit trusts or similar

[daletournier]

Originally Posted by Pretoria2C

I guess all the financial guys were smart enough not to buy a sailboat which is just a huge liability lol

Thanks for the response Dale. After doing a ton of research on various potential countries and cities iv realized that there's now perfect country and they all have their pros and cons. Interestingly our Rand has depreciated by about 110% over the same which is really scary. Currently I think il be looking at putting the money in US unit trusts or similar

Btw ,since typing my response gold has hit record highs against many currencies and the USD has got stronger. With the negative interest rates around the world growing daily both the USD and gold will keep strengthening imho. Countries all over are doing their best to destroy their currencies, it's a race to the bottom.

[redneckrob]

Originally Posted by Pretoria2C

Hi All,

My wife and I are considering moving to Australia because of our current political, economic and safety problems in SA and will probably make a final decision at the end of the year when we go check it out.

Anyways we thought that it would be a good time before actually moving to take a cruising sabbatical (for who knows how long, but around 18months+) even if we do end up staying in SA.

We are currently very early 30s and if we do go cruising we will leave our jobs around June 2021 and cross the Atlantic at the end of that year (if all goes according to plan).

All of our money is in Rands but I will convert to USD to make it easier for everyone to follow. When we quit our jobs we should have approximately $750 000 completely liquid as we don't own any assets, I plan to find a liveaboard and get it sorted for max $200 000 (and I want a small cat so that's another story).

Basically im asking for opinions and advise on what you think would be the best way to live off the remaining $550 000 without losing too much net wealth. I don't really want to buy rental properties as it would be difficult to manage from the other side of the world and we might be moving. I have always managed my own savings (not amazingly) but over the last few years our stock market has been doing very poorly. Currently most of my capital is in money market funds which get a max return of about 7.8%. If I had to put all of our remaining money into the highest performing funds after income tax at about 16% between the two of us the monthly income is roughly $3000. From all my research that seems do-able as I am quite frugal and hands on when it comes to maintenance.

A fixed deposit only looks better after 36 months. Another option is to give the funds to a financial investment company such as ARC (South African Company) or similar who promise high returns but I really don't know anything about this and would have to research it. Another option is to send my funds overseas and either get them into Aus Dollars if we decide to move there or US Dollars as it is used most widely in the areas we want to cruise in. Both im sure will probably be doing better in relative terms than our rand in 5 years time

I do plan on seeing 1 or 2 financial advisors for opinions but hoping there are some knowledgeable ladies/gents who have done similar on here

Early in your post you said you were converting everything to dollars for this discussion for simplicity sake. Then later you cited money market funds returning 7-16%. It's important to note that no-where will you get 7-16% returns on USD money market deposits. I have do doubt that's the going rate for Rand denominated deposits, but be careful when you confuse the rates in ZAR while talking amounts in USD, which you appear to be doing here. USD treasuries are in the 2% range at the moment, that's the most you're going to get in USD on USD deposits. If you leave your money in Rand, you can expect your currency to depreciate at 5-14%, exactly the spread between the ZAR deposit rates and the USD deposit rates. In fact, if you did a futures transaction for 1 year from now, you'd find that you'd get less ZAR in a year at precisely the ratio determined by the relative interest rate differential between the two countries.
So, while thinking in terms of ZAR returns if you're in SA may make sense, it doesn't make sense to think that way when you're talking about sailing outside SA where your effective interest rate will be far lower, closer to 2% and if you take inflation into effect closer to .5%, in USD terms.
At the point you leave SA leaving your money in ZAR and your expenses start becoming denominated in another currency you're becoming a currency speculator in exactly the same way I would be if I (living in the U.S.) would if I decided to convert all my USD to ZAR tomorrow while staying here in the U.S. Nothing wrong with that if you have insights that you think would make you a good currency speculator, just don't fool yourself into thinking you're doing anything else, like magically getting a higher interest rate.

[Shammi]

My two cents:

1. Convert all liquid funds to USD. With all the trouble brewing in the world (Brexit, China trade war, Eurozone weakness), US dollar is one of your best bets to hedge against currency risk.

2. After paying for boat, keep two to three years’ expenses in cash so you are not forced into selling stocks in a recession. (Recessions last typically two to three years). Use this cash for expenses.

3. Invest the rest in a low-cost S&P500 index fund from Vanguard or Fidelity. This is your long term investment. You are young and can take the risk to be in an all equity fund. Withdraw no more than 3% of first year’s balance annually (adjusting only for inflation but not for portfolio growth) to replenish cash withdrawals in 2) above.

Once you start working again, you can go 100% in S&P500 index fund

[sailorboy1]

Originally Posted by Pretoria2C

Basically im asking for opinions and advise on what you think would be the best way to live off the remaining $550 000 without losing too much net wealth.

Well I and other here are mostly doing that. But really I would never spend a lot of time taking economic and financial advice from a boating forum. Same for any old guy financial advisor (he must not know).