The Admiral's Angle
Admiral’s Angle # 23 - Keeping Finances Afloat
After decades of making cruisers feel like third-class citizens for the unforgivable sin of not being fixed in one place, the financial world has come abruptly around to a mobile mentality. Where we used to have to jump through hoops to maintain any kind of financial identity back home, now we can do almost all of it with a flick of a finger on the Internet keyboard from anywhere in the world. Likewise, where we used to have to carry a hoard of cash to swap with money exchangers for expenses in far-flung destinations, now all we have to do is to pop into an ATM and withdraw just what we need in the local currency. Electronic banking, miraculously turning up in some of the most out of the way areas, could well have been conceived with cruisers in mind. The cruising community has been quick to adapt.
Most all my Admirals report a similar approach to handling their finances while cruising. They have placed their funds with a bank or investment brokerage house with online banking, enabling them to get complete summaries of all accounts – checking, investment, and IRAs –and to pay any bills that come up, all via the Internet at any time from anywhere. Many have chosen a firm where they maintain a relationship with a money manager who is willing to communicate with them by email to move monies as needed from checking to investments and back again.
Simplifying recurring expenses wherever possible really helps. Boat insurance and health insurance, for example, can be paid in one annual lump sum, often earning a discount. Membership fees can be set up to be renewed automatically (DAN, for example) or paid for several years at a time (SSCA), and other recurring payments – loans, phones, storage rent, and credit cards – can be set up for automatic debit. Similarly, income items like social security, pension benefits, investment dividends, or earned income can be automatically deposited.
As recently as ten years ago, cruisers avoided credit cards unless they had someone at home they could rely on to monitor charges and pay the bills. Sometimes this was a professional bookkeeper, but often as not it was a family member. Online banking has changed all that, although it can still be a challenge to make monthly payments on time. Several Admirals hedge their deadline bets by keeping a positive balance on their cards at all times.
These days, most cruisers carry several cards, keeping one exclusively for getting cash from ATMs and at least one other for making purchases. For ATMs, choose a card that doesn’t charge cash advance fees, usually either a debit card or a card that is attached to your money market fund. Some of these, like our Merrill Lynch Signature card, function as a credit card 29 days a month and then become a debit card one day to automatically deduct expenses from your account. Yvonne of Australia 31 uses a Visa Gold card from their Australian bank, because their gold card saves them ATM fees. Bank fees are always changing, so be sure to investigate your cards before you leave, and be sure to set up PINs and passwords for cash advances!
For purchases cruisers, for obvious reasons, tend to favor cards that earn frequent flyer miles. On Tackless II, we’ve switched to Capitol One because our earned miles can be applied to tickets on any airline instead of just one. Another consideration when choosing a card might be what kind of travel or car rental insurance is included and whether or not they charge foreign currency fees on international transactions.
Whichever card you choose, it may be prudent to carry both MasterCard and Visa, as cruisers can find themselves in locations that will take only one or the other. Also, foreign travelers occasionally get caught short when the system flags a “suspicious charge” (as when you order a part from the US and then buy fuel on the other side of the world!) or when a card company has a membership list compromised. When that happens, replacement cards can have a hard time catching up.
American Express, of course, has long been the traveler’s ally, as much for their travel services as the credit card. Donna of Exit Only used American Express offices for getting mail forwarded on their circumnavigation because they hold mail for cardholders until you either pick it up or send them forwarding instruction, unlike post offices which often have time limits on holding mail. Donna and her husband Dave are the exception among my Admirals in distrusting online banking. Instead they used their satellite phone at the end of each month to pay the charges on their one card.
Even cruisers armed with a full house of credit cards are very careful about where they use them. Some areas have bad reputations for credit card fraud, and THAT can really ruin a voyage. All in all, it is probably safest to get cash straight from bank ATMs (some people feel independent ATMs can be suspect), and pay local expenditures in local currency. And for those online purchases, a Pay Pal or Amazon account, set up in advance, can help protect your credit cards from Internet exposure.
It is, of course, important to track all these transactions online whenever possible. This, of course, means getting connected to the Internet, which unlike email has not yet followed us effectively to sea. Many harbors worldwide have wifi and most have internet cafes ashore, but it can be risky to do banking via a public computer. If you must, be careful to log off and clear the browser of any temp file trail you’ve left.
Prudent cruisers continue to carry a reserve of US dollars (still the international currency of choice), because there are yet places in the world without ATMs…or even banks. Don’t waste your time with travelers’ checks. These days, in our kind of destinations, they only add hassle. On the other hand, be smart and check exchange rates online before sailing for the next country and, if possible, change some money in advance. Occasionally you’ll find yourself needing to pay entry fees in local currency in ports where there is no bank.
Surprisingly, checkbooks can still have a place in the cruising life. Some overseas businessmen – like marina owners or marine contractors – keep accounts back in the US, so a US check is quite convenient for them. Additionally, there are times – such as extended stays for boatyard work – when setting up a local checking account is convenient not just for paying contractors but for having money wired in from home.
There is one financial obligation we all have that persists in being problematic for cruisers, and that is taxes. Cruisers who make regular trips home often try to plan them at tax time to take care of taxes personally, or if that doesn’t work, file extensions until they can. There is of course much you can do long distance. You can download a free version of Turbo Tax, download tax forms, check W2s, K1s and 1099s etc. all online these days. If you use an accountant you can have him/her send you prepared tax forms in PDF attachments to print out to sign and fax home. Or you or the accountant can e-file.
The one thing that just doesn’t happen over the Internet is you can’t get the tax guys to use email for those nasty notices telling you something’s amiss. “I came home this cruising season,” says Jane of Lionheart, “to a whopping tax bill due to a previous filing error that had an even nastier interest bill attached…all because someone won’t use email!”
The system may not be perfect, but for sure we are in much better touch with these things than we used to be. It’s hard to be sure, though, that all this is an advantage over the good old days when cruisers sold everything, closed accounts, cut up cards and sailed away to a life of simplicity.
Contributing Admirals: Yvonne Katchor, Australia 31;Judy Knape, Ursa Minor; Jane Hockley, Lionheart, Lisa Schofield, Lady Galadriel, Debbie Leisure, Illusions; Ellen Sanpere, Cayenne III; Donna Abbot, Exit Only, Kathy Parsons, Hale Kai; Maribel Penichet, Paper Moon; and others.
All text and photos on this site Copyright Gwen Hamlin 2007, 2008, 2009