Picture a time in the distant future when you are ready to leave the high-life that is Yachting. Your Yacht-free life is charted out in front of you and the choice of what to do now is all yours, or is it? Blacktower Financial Group specialise in Financial Advice for Yacht Crew and they have come across many who are left financially "painted into a corner" due to lack of planning.
Back in the present, it's easy to fall into the high-life of a crew member. World-wide travel in luxury tax-free income, food and accommodation all paid and 3500-15000 Euros / Dollars a month burning a hole, what's not to like?
But what about the future? Assuming you do not want to end up "painted into a corner" with the only way out being to jump overboard and swim ashore, what habits can you cultivate to make sure you really have choices later in life?
Here are some golden rules that will help you invest in yourself and your future:
Establish your tax-residency
This is massively important. You would be amazed how many crew are unsure about where they are considered tax-resident or believe they are not a tax-resident anywhere. The days of tax-exile status are long gone, worldwide, tax offices are collecting information on investments and bank accounts and sharing it with each other to make sure they get their tax dollar paid. Even traditionally secretive countries like Switzerland are sharing information automatically with tax offices.
Set yourself a monthly limit, once you have reached it, stay onboard where you cannot spend more. Without this nothing else will work.
Bank accounts & currency brokers
Why pay huge fees and lose money on exchange rates every transaction by using your debit card or your bank to move money. Take a look at your bank statement for non-currency transactions and fees, some we have seen run into several hundred a month. There's better uses for this than bolstering the profit of the banks. If you earn your money in Euros, have a bank account in Euros.
If you need other currencies open a multi-currency account. Look into a specially designed Seafarers Account offshore with £ $ and € and free movement between currencies. When exchanging larger sums using a currency exchange broker will save money long-term. It’s easy to set an account up and between the saving in fees and the better exchange rate will save considerable amounts of money.
Loans or card debt
If you have any loan or credit card debt (we are not talking of mortgages here) start with the highest rate debt (usually credit cards) check for 0% balance transfers on Credit Cards and use them. If you have cash in the bank use it to pay the debts off. Having 10000 euros in the bank earning 1-2% if you are lucky, whilst holding credit card debts at 22% does not make any sense, pay them off.
Now you can build up some emergency cash. Ideally 3-6 months’ income in your Seafarers Account then leave it alone. Immediate access is the priority not interest rates. Set this aside as it is for emergencies only.
Personal development & yachting education
Decide which courses will further your career and set aside the money. Don’t forget personal development outside of Yachting. Invest In your education and the benefits will far outstrip the cost. Personal development gurus suggest 5% of income is spent on this, their financial interests aside, very worthwhile.
Property & mortgages
Yacht Crew find it notoriously difficult to obtain mortgages, but this need not be the case. If you already have a deposit saved, we can help with a mortgage whether for an investment property (or a portfolio of properties) or a base for when you are back home.
Medium to long-term savings
Ideally save 25% or more of your monthly income. Yes, it’s a lot, but if you were shore-side you would be paying that much and more in tax so get saving now.
If you need to start saving, a flexible, non-contractual savings plan that allows you to save when you have income, stop when you do not and have access to the money when needed is vital.
You need to be taking some investment decisions here for the medium to long term.
Cash in the bank is almost risk free but you will not make a decent return. Illustrate this is “a ship is safe in the harbour, but that is not what ships are for”.
Investments & pensions
Do you have an old pension scheme languishing in the corner from your pre-yachting days? Or maybe you have a lump sum of money already saved or invested? Regulation and taxation changes all the time and it is important to keep ahead of the game, so maybe it is time for a “Full Financial Review” to make sure your current investments are tax efficient, or maybe it is time to consider investing your savings for a better long-term financial return.
Don’t forget company pension schemes from the past, Final Salary, Occupation Pensions and so on. There are some major advantages to considering a transfer to a different structure.
Insurance, Insurance - so good they named it twice
Much maligned and somehow seems a bit “Old-School” but there is not much point building your financial future, saving and investing and buying property if an unexpected serious illness, medical necessity or premature death pulls it all down in ruins.
Don't forget the freebies
Ask your boat owners what Medical Insurance, Pensions and any other benefits you may get onboard and consider asking for more!
The value of financial advice
Last but no means least, take professional, Independent Financial Advice. The difference can be dramatic. A recent survey by the International Longevity Centre in the UK entitled "The Value of Financial Advice" stated:
The 'affluent but advised' accumulated on average 17% more in liquid assets than the affluent and non-advised group, and or 16% more in personal wealth.
The 'just getting by but advised' accumulated on average 39% more in liquid financial assets that the just getting by but non-advised group, and 21% more in pension wealth