Author Topic: Commercial Fisherman Seeking Input/Suggestions  (Read 1267 times)

FIfisherman

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Commercial Fisherman Seeking Input/Suggestions
« on: August 29, 2017, 01:34:16 AM »
Hi Mustachians,

I am a 27yr old commercial fisherman, married, and expecting my first child. My wife is currently not working, and has no plans to in the near future due to the coming baby. I essentially job share with another deckhand on the fishing boat I work on and have 2-4 weeks off at a time throughout the year, typically ending up with 3-4 months of vacation per year. This has given me a taste of early retirement, although it still seems far off when Iím on deck at 2am and the boat is covered in ice.

I get paid as a contractor and receive a 1099 at the end of each year. The job has no medical/retirement benefits and I pay all taxes out of pocket as if self employed.  

Salary: I have averaged about 100k per year since I started 4 years ago. This has varied from 85k-120k though. Pay is not consistent throughout the year and I regularly go for 2-3 months without a paycheck between seasons.

Expenses: Our yearly expenses are around 42k, not including taxes. The largest part of this is a $2,100 mortgage payment. ($305,000 purchase price, 20% down, 3.4% interest for 15 years, $220,000 remaining) The second biggest expense is medical insurance which currently hovers around $600/month with a large (~7k) deductible. There is no debt aside from the mortgage, just monthly bills for car insurance, electricity, groceries, internet and gas. We donít have a specified budget, but are both reasonably frugal. We do eat out occasionally and we donít track every dollar that leaves our wallet. Perhaps Iím missing something major here by not having a detailed spending log, but it doesnít seem like it. We donít have expensive ďtoysĒ or obvious, singular hobbies that are expensive.   

Taxes: Taxes are typically 25% of my income, this is about $25k/year.

Retirement Investments: I have started maxing out a SEP-IRA each year and will also fully fund individual IRAs for my wife and myself going forward. Currently I have a Roth and she has a traditional. I have put additional savings in a taxable account. Current allocation is approximately 90% stocks/10%bonds in Vanguard index funds.

SEP-$40,000
Roth-$5,500
Traditional-$5,500   
Taxable-$20,000

Savings: Currently we maintain a checking account of $15-20k, and have an Ally bank CD with $15k. This cash, along with the current contributions to the Roth cover about 1 year of living expenses. I prefer maintaining this much cash because of my occupational situation. 25% of each paycheck also goes into a savings account earmarked for taxes, currently sitting at $18k.

Summary:
$100k average income
$220k debt on house
70k retirement savings
~30k cash

$25-35k of investable/saveable income/year going forward.

Iím hoping you all can give me some suggestions for improving my current financial trajectory. I feel like the low hanging fruit is minimizing taxes and medical insurance, but the mortgage also feels like an anchor dragging down my savings rate.  


former player

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #1 on: August 29, 2017, 06:39:54 AM »
Hello, and welcome to the forums.

Not many come on these forums with that net worth at that young age.  That's a combination of great income and mustachian-level expenses.  Well done.

On your mortgage, you've got a decent interest rate, a short mortgage term, put down a good deposit and have a debt only a little over two times your annual income: that's all good stuff.  Remember that the proportion of your payment that goes to principal is in effect "savings", and that this proportion will increase enormously the further into the mortgage term you get.

You obviously know that you have one of the most dangerous civilian jobs there is.  Some life insurance, even just enough to cover the mortgage, might give peace of mind for the period your little one is not yet in school and employment would be difficult for your wife.

The long periods of downtime from your job do give you scope for a sidehustle if you felt the need to earn more (although you are already doing so well on that front).  Alternatively you could use some of that time to take over the childcare and give your wife the opportunity to get into work/start a business at some point in the future.

Best of luck.
Be frugal and industrious, and you will be free (Ben Franklin)

Sun Hat

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #2 on: August 29, 2017, 09:22:06 AM »
Hi FIfisherman!

You're in great shape! I can't comment on your taxes or medical expenses since I'm Canadian and our systems are too different.

However, based on some quick playing with my favorite calculator: http://www.financialpost.com/personal-finance/calculators/investment/index.html

Saving $2500/mo at 5% over 15 years will get you 800K by the time that you pay off your house, and from there, every year that you work is gravy, since you'll be able to put away $4500/mo. Two years of that, and you'll have $1mil by the time that you're 44. 

You've got a really hard and risky job, so get both life and disability insurance!

 

Goldielocks

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #3 on: August 29, 2017, 01:30:48 PM »
Hi FI Fisherman!   My grandpa was a fisherman, too, until retirement. (Contract employee, did not own the boat  / license).   Due to health (basic stuff like high BP and minor heart concerns) and the nature of the job, he retired at age 50 and spent more years retired than he ever working.   Also, unlike his 6 brothers who stayed on the farm, he died at the age of 92 and they all died before the age of 70...!  Fishing, eating fish,  can be great for a long life span.

It's not what you asked, but I would suggest that you factor into your plans a career change after the age of 40.  It is perfectly fine if everything goes great and you continue fishing for many years beyond that, but the job is a bit like a sports athlete,  or military, you know?   Please consider spending your months of down time,  in building up another trade or part time business, or gain education and skills to transition into in a new job with short notice if you need to.

Good Luck!

FIfisherman

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #4 on: August 29, 2017, 09:37:44 PM »
Thank you all for the responses! I do have life insurance for $250k, but the disability insurance is something that I should probably look into. Thanks for the calculator link Sun Hat, I'll have to dive into that some more. Finding a side hustle or alternative source of income is something I've been thinking about for awhile. I'd like to be able to have the option to retire from fishing when I'm around 40, as Goldilocks mentions. Having an enjoyable/part time/low stress job I could transition into would be ideal. I just need to figure out what that could be now.

Sun Hat

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #5 on: August 30, 2017, 10:34:24 AM »
As a pleasant future hustle, how about small engine repair? In my pre-navy sailing days, I remember getting handy at repairing all manner of things on whatever boat I worked on, and that experience could probably translate into working in a local shop on shore either repairing marine engines, outboards or other small engines like ATVs, lawnmowers etc. It's a friend of mine's dream retirement gig.

CU Tiger

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #6 on: August 30, 2017, 09:05:48 PM »
Disability insurance would be my first thought to safeguard your future, when you have a dangerous and physical job.

You have way more invested than we did when we were your age, so well done you. I do think that set it and forget it is the way to wealth. We set up automatic investments and let them happen month in and month out, raising the percentage until we now save about 40% of our income.
We are not super savers like some of the truly intense folks here, but we are on schedule for early retirement.
There are two ways to get enough: one is to continue to accumulate more and more. The other is to desire less. - G.K. Chesterton

Laura33

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #7 on: August 31, 2017, 08:33:03 AM »
First, I strongly second the notion of disability insurance.  You are at very high risk of being injured and losing a significant chunk of time in which you can work, which means you don't get paid.

Second, I think the 15-yr mortgage is a good choice for you; there is a reasonable possibility that your body may not allow you to continue your current work much into your 40s or beyond, so having the house paid off by that point frees you up to cover your expenses with a much less-demanding and lower-paying job if and when the body starts to go.  Before then, I would focus on savings; you have a low rate mortgage, and the market will likely do better than that over the next 15 years, and if something happens you can always use post-tax savings to pay off the mortgage if you want.

The other thing I would add is tracking your expenses and budgeting.  This may be hard to accomplish because it will likely fall on your wife because you are gone so much, and she may not be interested and will soon be dealing with an infant.  But you want to make sure that your budget -- including your savings -- is based on your worst-case year, not your average year or best year.  That way, if you have a bad year, you at least don't have to worry about meeting the bills or achieving your savings targets -- and if you have a good year, you can throw even more at savings, and maybe take some of the overage for a treat (like a vacation with the family).  I also agree with your larger-than-usual EF, given the seasonality of your pay.

Finally, I really like the idea mentioned above about planning for your second career.  You obviously don't need to jump into anything right away, especially with a baby coming.  But over time, use that downtime to think about the things you like to do -- and even if you don't want to start an official side hustle right away, use the time to research, learn, prepare.  E.g., if you are interested in doing small engine repair, maybe take an online class, or develop a relationship with a local shop where you can spend some time there learning (like a DIY internship).  Etc.

Good luck -- you are definitely off to a great start.
Laugh while you can, monkey-boy

FIfisherman

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #8 on: August 31, 2017, 05:03:59 PM »
Thanks, for the continued input. I did take a small engines class in school and enjoyed it. That's a good option to consider. Like you all have been saying, fishing much past 40 may get much harder, or not really be a viable option. I've been hoping that by the time my house is paid off that my investments will be able to cover my basic living expenses, and that work becomes much more of an option. Reading the MMM post about the 4% rule makes me think this will be possible, even if I don't have quite 25x expenses saved. Just a small amount of supplemental income seems to make the rule nearly fool proof.

lhamo

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Re: Commercial Fisherman Seeking Input/Suggestions
« Reply #9 on: August 31, 2017, 05:50:38 PM »
You may also find that spending so much time away from your wife/family is harder on everyone once there are kids in the picture.  Have you considered transitioning into some other field that would make use of your seagoing skills? I'm thinking maybe coast guard.....
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