| Maybe UP isn't the preferred direction? |
Bootstrap's bootstraps. Hehe.
- From Pirates of the Caribbean
Bootstrap Economics: Reaching for Escape Velocity
I've been mulling over a reader's recent comment regarding the building of our new boat, WAYWARD:
We don't think of WAYWARD as a shoestring build, despite many shoestring aspects of our operation.
The actual number is closer to $20K for materials (now in retrospect... reduced by discounts and adjusted to eliminate costs of building remote). Our labor is 'free' to us. Almost half of that is copper plating costs, which we feel pays for itself over time AND - as a commodity metal - has intrinsic value. By making other choices we could possibly have cut the remainder in half (we made some expensive choices based on our build situation... it could have been much simpler and cheaper to build elsewhere).
So before copper but including infrastructure, our materials came to about $11K.
But the point is well-taken. THIS boat swallowed up a chunk-o-change. The question is a good one...
How do low-income folks sweep together this kind of cash money?
Disposable income is money free to be directed where one will. Toward ease, entertainment, travel... or the fulfillment of dreams.
It is the left-overs from income after overheads - those costs necessary to one's lifestyle.
Low income folks seldom have reasonable opportunity to substantially increase our income. In fact, the general trend is downward. But lifestyle can be changed to reduce overheads.
Life on the water is potentially very low overhead. This fact underlies bootstrap economics that make it possible to attain the dream, even on low income.
Let's start with the simple life on land...
Overhead
"...Folks around here live close to the land, owning our own little places..."
A whole economy is implied in this phrase.
Nowadays, property for habitable land must be inherited, gifted, rented or purchased. Before and after land is paid for, it is subject to property taxes based on assessed value (which may be far above actual market value). Access and rights-of-way must be reserved and maintained.
Structures either came with the property or must be constructed. If not let run to ruin, they must be maintained, often in accordance with zoning laws and regulations. Generally, their scale produces proportionally large expenses. Their value is taxed, and improvements of one's own or one's neighbor generally increase assessments.
Whether you rent or own, these costs find their way to the Occupant.
Generally, one or more vehicles are involved. Purchase, maintenance, repair, fuel, insurance. Secondary costs creep up, too... that trip to see Auntie, a wedding just a few hours away, that rendez-vous just a state over... each side-trip is festooned with small, extra-vehicular expenses.
From the full comment from which I quoted above, the folk in question seem to be keeping up. Foreclosure is not mentioned, and some savings are possible. But it is implied they are not getting ahead.
NOTE: Children are sometimes thought of as generating overheads, but I'm not so sure. In our case, we're a couple of LINKs (Low Income, No Kids). This frees a certain amount of cash, though not as much as our culture generally assumes. Kids don't require cash... they mostly thrive on love, food, water and fresh air. I won't go into it further, here, but there are plenty of quality families persuasive on this point.
Crunching Some Numbers over a 5-year Span
Let's look at rent. Since 1985, $500/month has been near what's considered to be low end for a functional space in places I've lived (Pacific NW). That's $6K/year. Over 5 years, that's $30K!
How 'bout a car? Let's say $1K purchase price. You put 5K miles on it per year - half the national average - at 25mpg and $2/g for gas. Legally required liability insurance costs, say, $100/month. Over five years, you replace the tires with retreads for say, $500, and do your own oil change/tune-ups every 2K miles averaging $25 a pop (oil, filters, plugs, etc). In five years, these conservative numbers generate costs close to $10K!
Okay... that's a $40K lump swept together from $8K/year given over to quite modest rent + vehicle.
If we could eliminate just these two overheads, the same, low income that had been narrowly paying the bills would generate relative heaps of disposable income.
Fortunately, there is a way...
Bootstrap onto the Water and Deep-Six Overheads
Once on the water overheads can be low to niggling - especially for engine-free sailboats, with solar or wind electrical generation and biomass heat/cooking.
If you anchor out, no rent. No utilities (though on-board electrical is in effect a utility cost). No fuel. No taxes. Reasonable costs to meet Coast Guard regulations. Low maintenance. Replacement costs are low and spread out.
How to get there?
Bob Wise, at Volkscruiser, has a lot of good advice on the how-tos of getting a boat under you for reasonable outlay. When I say 'reasonable' I mean obtaining a home for the cost a used car. It's a buyer's market, out there, with a lot of lonely, serviceable boats at fire-sale rates.
With both feet still on land, one can save toward a small cash-down purchase or build. The bar can be lowered by arranging 'owner-financed' terms.
Consider avoiding credit with attendant interest payments (which can easily double the cost of purchase).
Income
We Water Rats have in our favor the ability to take on remote work while providing our own infrastructure, plus the generally handy skills we WILL develop aboard. Having to make-do naturally suits us to a range of jobs that drive Professionals nuts on the urban frontier.
We can get a job done without an employer having to worry about our transportation, care and feeding. Out-of-the-way work affords a substantial and uncrowded market niche for our services.
Odd jobs suit our kind; commuting to regular work does not... leave that to the Lubbers! We strike a bargain, fulfill our commitments, collect our pay and sail off.
Micro-streams of income, thanks to low overheads, can play a large role in our micro-budgets.
Special situations may call for something like a 5-year plan. In effect, we financed WAYWARD by working two extra seasons (seasonal caretaking), between recent every-other-year gigs. That extra push provided the 'extravagant' wherewithal without raising our prospects to anywhere near the official poverty level.
We're now looking forward to recovering from chronic employment. 8)
Location
Much of this presupposes that we live aboard in areas which are not yet rigged to milk us, nor yet move us along. There are generally two types of suitable waters:
Waters remote from population centers - Concerned Citizens - and conformity regulations they tend promote - are few and far between. They're more likely than not to be friend, client and employer material. Much of Cascadia is an example of this type, especially its mid- to northern reaches.
Cracks - In these, regs might well be in place, but enforcement is low to lackadaisical. If Concerned Citizens inhabit the neighborhood, it has enough blind spots to keep out of their view. A bit more shuffling around might be in order to diffuse the profile. The Sacramento Delta is such an area.
Sometimes, a funky marina can be found for a reasonable trade-off between increased income (earned nearby) and low rent. But careful... a lot of us who enter, never return. Escape was hard enough the first time round!
If you wish to attain escape velocity but don't currently live in an area where on-board life is inexpensive, consider relocation as part of your plan.
Savings
Disposable income is very often disposed of. Money burns holes in pockets. A splurge here; a luxury there. Just doesn't seem to accumulate.
Your Money or Your Life recommends we spend consciously. Put that money toward realizing dreams, not impulses.
You might be surprised how quickly it accumulates. How powerful money, well spent, can be!
Our Escape Trajectory
In 1990, Anke and I bought our first boat, used, for $5K - $1500 down and $500/month for 7 months (could see it as short horizon rent-to-own). To pay it off, I flipped pizza at a notch above minimum wage, while Anke worked at a winery and childcare for a notch below. We both quit steady work the day we put paid. From then on, we were able to live on odd jobs (easier to manage from the water), yet sock half our piddly earnings away.
We lived on BRAMBLE for five years, learning to sail and boat carpentry. When we sold her, we recovered our purchase price.
The financial story is a bit more complex than this, but the gist is, the low overheads enabled by that first boat freed up 'capital' for use toward building our own. A sizable portion of our investment in each vessel has passed from one to the next (equity). Our moderate income over the years has been divided between low overheads, family related travel and a short run of DIY, liveaboard vessels.
An important point... BRAMBLE was not our dream boat, but rather our 'kindergarten boat'.
All inadvertently (and thanks to Anke's pragmatism), we lucked into a viable, bootstrap approach which broke the financial burdens of life on land. If we'd followed my lead, we'd have dithered away years - if not our lives - vainly scraping for that 'perfect' boat, anchored by overheads.
From our first days on the water, it has been different.
NOTE: There are many reasons to council that one NOT build one's first boat, but rather buy used. There is so much that first boat will teach you; lacking that experience to inform your choices, it's difficult to justify the time, effort and expense invested in building, unless you simply enjoy the process. Triloboats attempt to lower that cost, while this blog attempts to fill some experiential blanks. But the main goal of both is to help those of you who wish it toward the water!
Bootstrap Economics: Reaching for Escape Velocity
I've been mulling over a reader's recent comment regarding the building of our new boat, WAYWARD:
To tell the truth, it is a little hard to see how 30 grand in materials for a boat is exactly shoestring living. Maybe it's different on the water, but where folks around here live close to the land, owning our own little places, people are very hard pressed to gather into one place a little pile of money one-sixth of that. HARD pressed.
We don't think of WAYWARD as a shoestring build, despite many shoestring aspects of our operation.
The actual number is closer to $20K for materials (now in retrospect... reduced by discounts and adjusted to eliminate costs of building remote). Our labor is 'free' to us. Almost half of that is copper plating costs, which we feel pays for itself over time AND - as a commodity metal - has intrinsic value. By making other choices we could possibly have cut the remainder in half (we made some expensive choices based on our build situation... it could have been much simpler and cheaper to build elsewhere).
So before copper but including infrastructure, our materials came to about $11K.
But the point is well-taken. THIS boat swallowed up a chunk-o-change. The question is a good one...
How do low-income folks sweep together this kind of cash money?
Income - Overheads = Disposable Income or Debt
It is the left-overs from income after overheads - those costs necessary to one's lifestyle.
Low income folks seldom have reasonable opportunity to substantially increase our income. In fact, the general trend is downward. But lifestyle can be changed to reduce overheads.
Life on the water is potentially very low overhead. This fact underlies bootstrap economics that make it possible to attain the dream, even on low income.
Let's start with the simple life on land...
Overhead
"...Folks around here live close to the land, owning our own little places..."
A whole economy is implied in this phrase.
Nowadays, property for habitable land must be inherited, gifted, rented or purchased. Before and after land is paid for, it is subject to property taxes based on assessed value (which may be far above actual market value). Access and rights-of-way must be reserved and maintained.
Structures either came with the property or must be constructed. If not let run to ruin, they must be maintained, often in accordance with zoning laws and regulations. Generally, their scale produces proportionally large expenses. Their value is taxed, and improvements of one's own or one's neighbor generally increase assessments.
Whether you rent or own, these costs find their way to the Occupant.
Generally, one or more vehicles are involved. Purchase, maintenance, repair, fuel, insurance. Secondary costs creep up, too... that trip to see Auntie, a wedding just a few hours away, that rendez-vous just a state over... each side-trip is festooned with small, extra-vehicular expenses.
From the full comment from which I quoted above, the folk in question seem to be keeping up. Foreclosure is not mentioned, and some savings are possible. But it is implied they are not getting ahead.
NOTE: Children are sometimes thought of as generating overheads, but I'm not so sure. In our case, we're a couple of LINKs (Low Income, No Kids). This frees a certain amount of cash, though not as much as our culture generally assumes. Kids don't require cash... they mostly thrive on love, food, water and fresh air. I won't go into it further, here, but there are plenty of quality families persuasive on this point.
Crunching Some Numbers over a 5-year Span
Let's look at rent. Since 1985, $500/month has been near what's considered to be low end for a functional space in places I've lived (Pacific NW). That's $6K/year. Over 5 years, that's $30K!
NOTE: That rental price used to be for a modest apartment - nothing fancy - in okay condition... now it's getting to be dive price. In some parts of the country, rents may be somewhat lower, but will nevertheless generate large figures over time. My contacts assure me that ALL these numbers are wildly conservative.
How 'bout a car? Let's say $1K purchase price. You put 5K miles on it per year - half the national average - at 25mpg and $2/g for gas. Legally required liability insurance costs, say, $100/month. Over five years, you replace the tires with retreads for say, $500, and do your own oil change/tune-ups every 2K miles averaging $25 a pop (oil, filters, plugs, etc). In five years, these conservative numbers generate costs close to $10K!
Okay... that's a $40K lump swept together from $8K/year given over to quite modest rent + vehicle.
If we could eliminate just these two overheads, the same, low income that had been narrowly paying the bills would generate relative heaps of disposable income.
Fortunately, there is a way...
Bootstrap onto the Water and Deep-Six Overheads
Once on the water overheads can be low to niggling - especially for engine-free sailboats, with solar or wind electrical generation and biomass heat/cooking.
If you anchor out, no rent. No utilities (though on-board electrical is in effect a utility cost). No fuel. No taxes. Reasonable costs to meet Coast Guard regulations. Low maintenance. Replacement costs are low and spread out.
How to get there?
Bob Wise, at Volkscruiser, has a lot of good advice on the how-tos of getting a boat under you for reasonable outlay. When I say 'reasonable' I mean obtaining a home for the cost a used car. It's a buyer's market, out there, with a lot of lonely, serviceable boats at fire-sale rates.
With both feet still on land, one can save toward a small cash-down purchase or build. The bar can be lowered by arranging 'owner-financed' terms.
Consider avoiding credit with attendant interest payments (which can easily double the cost of purchase).
Income
We Water Rats have in our favor the ability to take on remote work while providing our own infrastructure, plus the generally handy skills we WILL develop aboard. Having to make-do naturally suits us to a range of jobs that drive Professionals nuts on the urban frontier.
We can get a job done without an employer having to worry about our transportation, care and feeding. Out-of-the-way work affords a substantial and uncrowded market niche for our services.
Odd jobs suit our kind; commuting to regular work does not... leave that to the Lubbers! We strike a bargain, fulfill our commitments, collect our pay and sail off.
Micro-streams of income, thanks to low overheads, can play a large role in our micro-budgets.
Special situations may call for something like a 5-year plan. In effect, we financed WAYWARD by working two extra seasons (seasonal caretaking), between recent every-other-year gigs. That extra push provided the 'extravagant' wherewithal without raising our prospects to anywhere near the official poverty level.
We're now looking forward to recovering from chronic employment. 8)
Location
Much of this presupposes that we live aboard in areas which are not yet rigged to milk us, nor yet move us along. There are generally two types of suitable waters:
Waters remote from population centers - Concerned Citizens - and conformity regulations they tend promote - are few and far between. They're more likely than not to be friend, client and employer material. Much of Cascadia is an example of this type, especially its mid- to northern reaches.
Cracks - In these, regs might well be in place, but enforcement is low to lackadaisical. If Concerned Citizens inhabit the neighborhood, it has enough blind spots to keep out of their view. A bit more shuffling around might be in order to diffuse the profile. The Sacramento Delta is such an area.
Sometimes, a funky marina can be found for a reasonable trade-off between increased income (earned nearby) and low rent. But careful... a lot of us who enter, never return. Escape was hard enough the first time round!
If you wish to attain escape velocity but don't currently live in an area where on-board life is inexpensive, consider relocation as part of your plan.
Savings
Disposable income is very often disposed of. Money burns holes in pockets. A splurge here; a luxury there. Just doesn't seem to accumulate.
Your Money or Your Life recommends we spend consciously. Put that money toward realizing dreams, not impulses.
You might be surprised how quickly it accumulates. How powerful money, well spent, can be!
Our Escape Trajectory
In 1990, Anke and I bought our first boat, used, for $5K - $1500 down and $500/month for 7 months (could see it as short horizon rent-to-own). To pay it off, I flipped pizza at a notch above minimum wage, while Anke worked at a winery and childcare for a notch below. We both quit steady work the day we put paid. From then on, we were able to live on odd jobs (easier to manage from the water), yet sock half our piddly earnings away.
We lived on BRAMBLE for five years, learning to sail and boat carpentry. When we sold her, we recovered our purchase price.
The financial story is a bit more complex than this, but the gist is, the low overheads enabled by that first boat freed up 'capital' for use toward building our own. A sizable portion of our investment in each vessel has passed from one to the next (equity). Our moderate income over the years has been divided between low overheads, family related travel and a short run of DIY, liveaboard vessels.
An important point... BRAMBLE was not our dream boat, but rather our 'kindergarten boat'.
All inadvertently (and thanks to Anke's pragmatism), we lucked into a viable, bootstrap approach which broke the financial burdens of life on land. If we'd followed my lead, we'd have dithered away years - if not our lives - vainly scraping for that 'perfect' boat, anchored by overheads.
From our first days on the water, it has been different.
NOTE: There are many reasons to council that one NOT build one's first boat, but rather buy used. There is so much that first boat will teach you; lacking that experience to inform your choices, it's difficult to justify the time, effort and expense invested in building, unless you simply enjoy the process. Triloboats attempt to lower that cost, while this blog attempts to fill some experiential blanks. But the main goal of both is to help those of you who wish it toward the water!
So here I am, stuck in the middle of both worlds. Part of the year we live the boat life and part of the year we are in a house. What a huge drain of energy, time and money. One day I'm fixing a wiring problem on the boat, the next I'm spending the afternoon under the kitchen sink playing plumber.
ReplyDeleteWhy the divided life? Kids and grandkids. Little kids grow too fast. That's why my lovely wife has a 6 months limit for us to be away from them. Phone calls and Skype only carry you so far.
So here's my evil (clever?) plan. All the stuff for my water life is paid for. Land life is the part with payments. Should our income situation fall apart, it would be easy to jingle mail the house keys to the bank and move onto the boat. No, it's not the perfect boat, but it's good enough to get us out there.
Don't get me wrong. My land life is pretty good. We'll do both as long as it makes sense. Our house is one of those off the grid places with solar, a well, wood heat, and all that so day to day expenses are reasonable. It's the sudden expenses like a new well pump that bust the budget.
Anyway. Looking forward to your boat launch. All the best!
Hi Sixbears,
DeleteOoo. Proximity to progeny is stumper!
I suppose one could make a sort of Waterworld (like Disneyword rather than the apocalyptic kind... hmm... editing out the cheap shot, here); I mean to say the kind of fun-for-all that attracts the tykes to come to YOU?
Glad to hear that you've got the pleasure of both worlds in hand and within your means! And I very much like your fallback position.
May you never be FORCED to use it!
Dave Z
Progeny entire, is a stumper. That's another important detail.
DeleteHere's an engaging article on spending consciously toward building a 'nest egg' prior to making a lifestyle transition:
ReplyDeletehttp://www.cometcamper.com/blog/bespin-tiny-house
There is some lateral thinking and ideas on this website to help get the financials sorted out.
ReplyDeletehttp://www.mrmoneymustache.com/
Hi Brad,
DeleteThanks for the tip... I'm hooked at first glance!
Dave Z
This comment has been removed by a blog administrator.
ReplyDeletePosted on behalf of YURI VEGA:
ReplyDelete"Prime brain fodder for the younger set who are waking from societal indoctrination to be wage-debt slaves. And good to point them at the Comet Camper and Volkscruiser sites for some nuts and bolts. Seems we're finally approaching a true collapse terminus to the bailing wire fix the powers that were have been foisting on us since the 2008 near meltdown ( a mathematical certainty as to “what” but very close now to “when”) and I wonder if there is time to pull off any kind of involved build-from-scratch boat project.
Last months trip to Florida I saw quite a few fixer uppers that are, indeed, available and some for just a few thousand bucks. As the economy gets worse we'll probably see current boat prices plummet even further. Even Florida still has some backwaters one could pull off a floating renovation (Fatty Goodlanders wonderful book “ How to inexpensively and safely buy, outfit, and sail a small vessel around the world” details ways he pulled this stunt off a few times in his youth).
Cutting costs radically by living aboard has worked for us in three different liveaboards (so far!!). And, yes, with more free time than a lot of working folks will ever hope to garner in their short lives. To say little for the just plain old pleasant way to live. Or being systems independent.
Here's to the hope the younger generations might really harken to this excellent post. It would be nice to see something like this go viral instead of the latest news of King Obama's shredded morality and other such braindead ridiculousness. Lots of room out on the wide global waters for more sea gypsy tribe members."
Hi Yuri,
ReplyDeleteThat's my favorite part of it all... Not only is life aboard inexpensive (at least along the low road), but it's SUCH a fine way to live!
We can have our boat and float it, too.
Dave Z
This is an interesting, and in many ways, I think, a practical response to the question of "how." There's a thing, though, about living in some of those remote places you point to as ideal. Everything is very Far Away. Specifically, that would include used Sailboats that can be had for a song. Looking around Alaska, these seem to be far less common or inexpensive than outside. So, a couple or small family would have to work out 1) how to get down there to buy the boat (travel costs, etc.) and 2) work out a way to get the boat up here to the good waters. If they are already accomplished sailors, that may be less of a problem... IF the boat they buy doesn't call for a fair amount of overhaul before making the voyage.
ReplyDeleteI think that your main point is apt: Dedication to the goal is what matters. Still, it isn't easy. I can tell you that even as we press on, our experience with Kairos (work upon which is happily going forward) suggests that the initial hill, however one handles it, is steep. It's probably too steep for many folks "locked in" somewhere by circumstances much different than even 15 years ago, let alone the 30 years back when you and Anke broke free. I know in my own experience, many options were then much easier to pick up on than presently. A 30-year-long social program of moving wealth steadily upward is having its effects.
That's not to say to set the intent and work upon it, though.
And THAT'S not to say that some overhead simply cannot be avoided.
Hi Peter,
ReplyDeleteIt's true, the times they are a'changing, and not often for the better. I most miss the small communities of water rats who once abounded and helped shelter and pass know-how on to those of us starting out.
Down south, it's a buyer's market for boats, but, as you say, those starting out must run a gauntlet of civilization to reach the far stretches. But hook and crook take one a long way on the low roads... there are still a thousand cracks in the system.
For beginners, I advise digesting older cruising / sailing books and getting some sailing experience up front (PDRacers, public programs, Coast Guard boat handling classes, etc.). The escape trip can be plotted in easy learning steps (beware of leaping boldly into the vasty unknown!), gaining experience and savvy as they go.
As to not going at all, I suppose it's an option. But hard times are creeping upon us... starting today from scratch, I'd still give it a go!
Dave Z
PS. One challange for us AK citizens wishing to build or buy outside is that, if it takes longer than 90 days out of state, it can cost one or more PFD checks per head, right off the top. It's one of the factors that keeps us building in state.