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Dave and Anke
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Sunday, January 17, 2016

Shadow Dollars: Assets vs Liabilities

From Albert Yaw Opoku's Life Lesson 50
 (Permission pending)

Asset:      A possession which makes you money.

Liabily:  A possession which loses you money.

-- Paraphrased from Rich Dad, Poor Dad by Robert Kiyosaki

Shadow Dollars: Assets vs Liabilities

Is our boat an asset or a liability? Simple question; not so simple answer.

The standard definition of a (hard) asset is any (physical) possession that stores value. We have equity in it (some portion we own). It can be liquefied, presumably by selling it at what price the market will bear, though that's a trickier aside.

Well, lessee.

We live aboard home-built, plywood boats that're kinda funny looking, have no engine, little standing headroom, little to no plumbing, low electrical production and tend to get banged up.

We don't 'work' the vessel in a commercial venture. We don't live near the kind of water-hippy communities that might barter for her. It's a buyer's market. No one will insure us, much less accept the boat as collateral for a loan (should we or a prospective buyer get crazy).

So we consider the recovery of intrinsic value (the value of its gear + scrap value of copper) to be a decent return. In other words...

Standard Asset Value of Our Vessels = Surely You're Joking.

 Even so, yes; in the standard sense our boat is likely to be an asset; just not much of one.

Yet, in terms of the more dynamic definition quoted above, value is not static but seen as flow. We should be asking, “Is our boat making or losing us money?” The thought plickens!

We maintain that our humble vessel is a money making MACHINE! It makes money for us hand-over-fist. Not in cold, hard cash, but in Shadow Dollars that exist 'off the books'.

Let's break it down by fiscal year... conservative estimates throughout (conservative, indeed, for urban Alaska):

Rent saved at $1K/mo                                                   $12,000

Utilities saved at $150/mo                                            $   1,800

Groceries saved (forage) at 75% of $200/mo            $   1,800

Transportation at $1000/yr (2 RTs out-of-town)         $   1,000

Sub-total                                                                       $16,600/yr

Now this figure doesn't include a vehicle or entertainment costs. Both are avoidable given sufficient discipline, but they remain temptations.

Nor does it include the costs of having steady, in-town employment, necessary to foot the bill for that core outflow. Clothing must meet a certain standard. Local transportation costs – even if primarily bicycling – stack up.

Nor furnishing, moving and storage costs. Nor search, transaction and non-refundable deposit costs.

It doesn't include pro-rated medical costs incurred by exposure to in-town stresses. Noise, traffic risks and exposure to exhaust, in-town 'bugs', etc.. The observed propensity for less exercise. Occasional over-indulgences (e.g., potato chips) from which our boat life protects me. Hard to quantify, but also to dispute that I live healthier out-of-town.

Taxes – assessed and paid in full for our income amount to – zero. If we're channeling all that rent as real money, it goes up.

All told, I figure our boat makes us at least SD$20,000/yr in Shadow Dollars - money neither earned nor spent. Over a the span of a typical, 30 year mortgage, that totals $600K. Not bad for a couple of boat bums.

And it gets better.

Any feature or piece of gear aboard can be subject to the same kind of asset analysis. Copper sheathing saves haul-outs, antifouling and town-time costs. Hand tools save professional and fabrication costs. Anchor gear saves moorage costs. Low tech saves initial and maintenance costs.

Liabilities – those items which lose us money – stand out clearly against such a backdrop.

An engine with its associated fuel and paraphernalia. Navigational software and accessories. Radar. A fridge/freezer. None of them bad things at all, and occasionally very useful. But they don't pay their way, in our lifestyle, against perfectly serviceable alternatives. For us, these things are money losing  liabilities.

Oh, we accept a few luxurious liabilities. Coffee, chocolate, music system and even LED lighting aren't necessities. The trick is to know what you're buying and at what cost. Then choose how much liability you're willing to accept and support.

Unlike our assets, the money, time and energy lost to liabilities is actual coin of the realm. Coin that must be earned by committing ourselves to some paying proposition.

Our assets, for the most part, return Shadow Dollars. They don't appear on our 'books'. They needn't be earned, banked nor spent. They are invested, however.

We invest them in freedom.

In his post, How to Quit your Job, Rob Green lists several helpful rules for living with little to no money (full essay well worth reading! Tip o' the hat to Volkscruiser):

Simplify your life

Where possible, share resources

(Get out and) Stay out of debt

Eliminate bills (what are they but recurrent debts?)

Focus on your health

Always make entertainment free

Where possible, Do It Yourself (not on his list, but...)


  1. Great post Dave. Most people don't understand it is what you don't spend that provides an enormous tax free benefit.

    1. Hi Alan,

      Andrew Tobias, in THE ONLY INVESTMENT GUIDE YOU'LL EVER NEED, devoted a whole chapter to the striking returns on money saved (not spent).

      Dave Z

  2. Ahh, the sweet luxury of time to do as you wish. Apparently it was much the same with the shantyboaters who were somewhat looked down on by the townies but everyone knew these were the fun people to hang out with down on the river or the bayou. Folks with the freedom to bag a odd job to go coon hunting all night and were vastly skilled at expectorating dragonflies out of the sky in the middle of a bluegrass jam.

    Let's say Joe (custom microbrew) 6-pak loses his job well short of expected retirement. He's got a bit of possible capital to play with despite the house re-fi but it is going pretty quickly due to the "flow" (nice point that value is flow and not static). He has time now since being laid off. Thus very beneficial to build the very structure you detail in this fine post. He's making money actually and getting back in shape to boot. Technically he is unemployed. BFD to all judgmental melon farmers on that one.

    You could make the same argument for a off-grid tiny house in a super low tax area. Or taking said low captial and moving to latin america or Thailand to live cheaply for years and years too. But for salt water lovers just a fine choice to choose boats, used or built.

    Great post, in black and white economics and undeniable logic, and eminently practical, as are trilos. Thanks.

    1. Hi Bob,

      Harlan and Anna Hubbard are classic examples of both (afloat and ashore).

      Their adventures and philosophy are laid out in SHANTYBOAT: A RIVER WAY OF LIFE and PAYNE HOLLOW. Great reads, while we're at it.

      Dave Z

  3. A fellow told me a while back that he and his wife were trying to figure how to live on only 75K a year so they could retire. I told him I live on just about 10% of that. Clearly there is a disconnect there somewhere. He just shook his head and said he didn't know how that was possible. I didn't bother to tell him, he really didn't want to know.

  4. You said, "I didn't bother to tell him, he really didn't want to know."


    On one hand, I've tried to pay attention to that exact same thing more in recent years and reduce or eliminate probable wasted energy in such cases.

    On the other hand, I'm conflicted. If we don't tell them, regardless of what they want or don't want, where does that leave us collectively?

  5. Yes, a conundrum indeed. My instinct tells me that a person wedded to a high salary existence is ingrained with the necessity of it. The idea that they might make money by not spending it simply does not make sense.
    It takes a lot of work to live on a margin. I know the fellow I speak of quite well and he would be oppressed by repairing his own house or tending a garden large enough to sustain his family. He would rather go daily to a job that stresses him mightily and complain to me how it's taking him down. I don't understand his point of view anymore than he does mine.

    I'm sure he would function well, should some calamity force him, but in the meantime he will be unlikely to change his consumptive ways. Be careful about trying to change a person's mind - you can't predict what you'll get. My philosophy is simple. I'm here to help someone who truly needs it, but reluctant to convince another they need my help.

    1. Hi Doryman and Yoda,

      I often think of the saying:

      You can't teach a pig to sing.
      It won't work and annoys the pig.

      Some of the best 'argument', I feel, is to persuade by example, as best we may. Living the good life without heaps of $$$ turns heads.

      Still, I'm humbled by the extent of my own consumerism, and the slow progress I've made away from consumer economies. Constantly reminds me that most all of us are somewhere along the path.

      There's a log in my eye!

      Dave Z

    2. Doryman: "Yes, a conundrum indeed. My instinct tells me that a person wedded to a high salary existence is ingrained with the necessity of it."

      Though not the originator of it (just like the Internet), Al Gore brought focus to an old corollary, something along these lines: "It's difficult to get a man to understand something if his salary depends upon his not understanding it" ... or if his lack of understanding, real or feigned, justifies his salary.

      Re: Dave's singing pig:

      I heard a version of that many years ago from someone advising against a senseless action -- "It's like putting lipstick on a pig. It just wastes the lipstick and annoys the pig."

  6. P.S.

    "There's a log in my eye!"

    Sorry to hear that. With my perfect vision, I just can't relate! ;-)