Shadow Dollars: Assets vs Liabilities

From Albert Opoku's Life Lesson 50

Asset:      A possession which makes you money.

Liability:  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

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 (Shadow Dollars - accountable '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 enjoy some luxuries. 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...)