Paying Off Debt to go Sailing

Paying Off Debt to go Sailing

How was I able to pay off all my debts and save enough money to quit my job and go sailing? That is one of the most frequently asked questions I fielded when I announce that I was, in fact, quitting my job and going to live my dream of sailing the world.

To answer honestly, I found that there are five simple steps to paying off your debt and saving enough money to do, well, what ever you want. They are not hard things, actually they are rather simple and straight forward. So, without further ado, here are the five steps I used to pay off over $150,000 debt and save $100,000 to go sailing.

1 Liquidate Debt

We have all heard about liquidating Assets, but there isn’t much talk about liquidating debt. To be honest, it is actually much the same, except you are selling off your items which you owe money on to pay them off. Alright, so it is exactly like liquidating assets, but let me explain why I feel it is different.

Selling it off:

When we liquidate assets, we sell things off which we own or have equity in, which I will cover in Diversifying income. The main difference, is the reason to sell off the asset is solely to clear the debt, even if it is at a loss. If there is a profit from it, that’s great, but sometimes you’ll be further ahead paying the deference rather them paying interest over umpteen years.

You have to take a close look at each thing you owe on, look at the value, how long it will take to pay off, interest rate, and whether or not it is needed.

Let’s look at a couple examples from my life. My rental property is the biggest one as I planned to use the income to help support me on my trip around the world. I owed over $80,000 on the property when I sold it and it was assessed at $130,000. Because of when I had gotten it in my life, and the type of loan I needed to finance it, the interest rate was on the higher end. Between the mortgage, maintenance costs, and property management fees, I was spending money every month to keep it.

When I considered it all, it would be another five years before I could pay it off. This was not acceptable as I was planning to depart on my sailing journey in half of that time. Additionally, while I owned the property, I could not put that money into savings to draw from during my voyage. And lastly, there was the hassle of dealing with any issues that came up, authorizing repairs, etc. So I sold it to reduce the debt and increase my usable income.

Another example is when I sold a vehicle at a loss. I was making about $350 payments on it, which isn’t a lot. But, I still had 28 payments to pay it off. As cars loose value over time, I found that I could lonely sell it for less then I owed, abut $800 less then I owed. When I took a close look at the numbers, I saw that I could take that $350 and apply it to my student loans (which had a lower interest) and pay them off quicker. Plus I’m not stuck paying for another two plus years in which the car will become worth even less. So, I took the loss. It cost me less then three months payments, but relieved a lot of debt instantly.

Buying yourself out:

I know this sounds odd, but you can buy yourself out. As you work through the list, you should find that you have extra money. Most people think, “Great, I’ll put it in the bank.” Well that works, but doesn’t get you ahead. There is a theory called the Snowball Effect, which was probably best explained by Dave Ramsey, he sells numerous books now on finance.

If you don’t want to read a book though, I will do my best to summarize. Basically, take your highest interest rate debt, and put all of yours extra money towards it. When you pay it off, then you put all of your extra money, which includes what you now have extra from paying off the last debt, and apply to then new highest interest rate debt. Basically it is buying yourself out by taking all your available funds and reinvesting in the highest interest rate debts so you limit your payout to interest.

I will admit that I didn’t follow that plan exactly. I modified it a little because I had a couple debts that, though they were lower interest rates, I was able to pay off quickly, which allowed me to make bigger payments to the largest interest rate, without loosing too much to interest.

2 Cut Overhead

Yes, I stole from the business world on this one. But it makes sense. Look at what you spend, oh yes, this involves tracking and budgeting. So, once you know what you’re spending, look at each item. Do you need it? Can you reduce what you spend? Can you get it cheaper from somewhere else?

Those are the questions you need to ask. A big expenditure for some is going out. Whether it is going out to eat, a movie or a bar. This is a huge expense that can be reduced to almost nothing. Let’s just take a normal dinner as an example. A dinner for two, obviously deepening on where you live, but I live in Alaska at the moment, so yeah. So, two dinners at $40 each, plus two glasses of wine, $14 each, plus dessert for one, we decided to share, $15. Grand total $123 plus tip, 20% cause we don’t want our date to think we are cheap… grand total $150; for dinner!

I know this is an obvious one, but I know people who eat out every day and wonder why they have no money. Even if you go to a cheaper place, it is still much more expensive then shopping and eating at home. Additionally, if you meal plan right, you can get it down to much less. I was eating in Sitka Alaska for $100 a week; that left $50 a week for wine and spirits. So, I ate and made merry all week for the cost of a dinner.

This can be done in all areas. Turn down the thermostat, plan trips to drive less, buy generic instead of brand name, wear last years cloths. There are thousands of ways you can reduce spending. That old adage of “a penny saved is a penny earned” is true. Consider what a penny bough back then too.

I now walk when I can, go to the store on my way home from work, and live my life in a coat. But it has all been worth it when considering how much I saved, how, as of this writing, I left my job and am now on my way south to live my dream of sailing the world.

Help Support my journey

3 Diversify Income

Again this is a no brainer. The more money you have coming in, the better, right? Of course. But what does this really mean. How do you diversify your income. There are several ways.

The most obvious one is to take on a second job. Whether that is to get a part time job, freelance online, or become a YouTuber, it all falls under the second job aspect. There is no shame in working a second job, it doesn’t define you as anybody except as someone who is willing to work to make their dreams come true. So, do it, even if it is just starting a blog or YouTube channel.

I will just mention if you enter the online industry, you will further diversify. Products, sponsored content, ads, affiliate marketing, etc. There are thousands of ways to diversify your online income. I am continuing to learn as I go and find the ones that are right for me. But won’t go into that too much here.

Another income stream is liquidating assets. Yes, I covered that above a little, but this is where it belongs. There are many ways to sell of your assets, or even junk you don’t use. My dad had an estate auction after my mom died and people bid up to $7 for a bucket of rags made out of torn up old T-shirts. So have a garage sale, put stuff on Ebay, or take it to a pawn shop. If you don’t need it, haven’t used it in the past year or two, why keep it. It is cash money sitting there not being used.

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Another way to generate income is renting out property. I know photographers that rent out cameras and lenses when not in use, Air B&B for empty rooms, renting out a house while you travel, and many other things. If it is a tool that you use, or you just refuse to sell off, rent it out when not being used.

There are a lot of other ways to diversify your income, and sub ways into each of those I mentioned. I could write a thousand page book on the subject alone. But, all you have to do to get the information is Google how to make money on the side. That will take you too 1.8 billion articles on it.

4 Limit Spending

Wait didn’t we cover this in step 2? No, no we didn’t. Cutting overhead is things we need. We need food, clothing, warmth, shelter. We die with out it. Cutting overhead is simply cutting the cost of the things we need to live. Limiting spending is completely different.

Limiting spending is about not buying things we don’t need. Do you need that new set of speakers? Do you need that new computer? Do you need that next generation cell phone that gives you everything you already have for only $1200? NO, you do not. Well, maybe the speakers, I’d die without music.

Anyway, when I say limit spending, that doesn’t mean you can’t have anything, but you need to take a look at why you need it, if there is a cheaper alternative, and can you do without it. I am telling you, in most cases you will find that you either can get by with what you have or don’t need it. In cases you actually need it, you can find it on sale or a cheaper source with a little research. In the rare cases that you need it now, well, sometimes it just happens that way. But this should be the exception to the rule, not the norm.

5 Repeat

So, once you go through all the steps, now it’s time to do it all over again. This is more of a fine tuning of things. Once have gone through once are there areas that now need adjusting? Can you cut some spending more? Can you find a store with a little cheaper food? Is there areas that are working better then others? Can you adjust those that aren’t working?

After you go through at least twice, take a run through once a quarter, or at least once a year to see if there is anything that can be done to improve in any of the areas. After awhile, this will become second nature and you will see opportunities to save money or earn a little more.

Wrapping Up

As you can see, these five simple steps are easy to accomplish and pretty straight forward. As long as you go through them, and use the extra money to pay off the debts you can’t sell off, no one want to buy out your student loan, you will find that you will be debt free sooner then you know. Once you are debt free, you will also find that you can save money faster then you ever thought possible. You will have reduced your spending by that point and will be able to live on much less then your income.

Written by: Jon

Originally Published: 5/22/2022

Last Updated: 5/22/2022

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