7th Sep 2020
What onboard budgeting teaches you about personal finance
Why is it that we can manage a budget onboard but the same task for our personal finances gets pushed aside? Many Superyacht crew can find managing personal finances daunting. However, it doesn’t need to be, especially if we apply how we manage onboard budgets to our personal finances.
Building and managing an operational budget requires structure. But more than that, managing a Superyacht budget requires you to be accountable to others. So, what lessons can we take from managing a budget onboard and how can we apply them to our personal finances?
Failing to plan is planning to fail
Every business, a Superyacht or otherwise, starts with a plan that acts as the roadmap for the future. When it comes to your personal financial situation, it makes sense to also have a goal for where you want to get to financially.
For a lot of crew, the idea of setting a budget fills them with dread. It feels like hard work and there are often fears that it will limit financial freedom in the now. In fact, it’s the opposite. Having a budget lets you manage your personal finances so that you can achieve financial freedom.
clear objectives make all the difference
Perhaps you’ve already used SMART objectives for managing your budget onboard or for setting development objectives for your team. This very flexible planning tool can be applied to setting objectives for your personal finances as follows:
- Specific – target a specific area of your finances, such as saving for retirement.
- Measurable – quantify or at least record an indicator of progress (e.g. to save X amount by X date).
- Achievable – be realistic about what you can achieve (e.g. save X amount of your monthly salary).
- Relevant – ensure your goals make sense to you and your lifestyle.
- Time-bound – set realistic dates for when you want to achieve your goal(s).
We often make decisions based on emotion without even realising. It can be as simple as taking a recommendation from a trusted friend. Because you have an emotional connection with them, you are more likely to follow their advice. It doesn’t necessarily mean their advice is bad, it just might not be the right advice for you and your objectives.
This is why setting clear objectives will help remove emotion from decision-making. Instead, you can weigh logical options for managing your money.
Involve key stakeholders in decisions
If you are in a relationship, or you share your finances with family members, it’s important to involve them in the process. You need to ensure you’re all on the same page and your financial goals are aligned.
It’s also wise to discuss your individual attitudes to money, in particular how you approach financial responsibility and whether or not there is anything in your respective lives that could have a major impact on your finances. Be honest about what matters to you. Money can be an awkward conversation, especially if you are earning more and have different attitudes around saving or spending.
Make time for the things that matter
Just as you would set time aside at work for something important, schedule time in your calendar to properly plan and review your personal budget on a regular basis. Financial management isn’t suited to ‘set and forget’. Whilst you don’t need to review your account performance and savings daily, you do want to review them on a bi-annual basis or when there is a significant change.
If you are in a relationship, make the time to do this together. As we mentioned above, you need to be on the same page. Once that happens, and you communicate clearly about financial goals and objectives, you will be surprised at just how much more smoothly things will run. As a result, it will be far less daunting to manage your personal finances.
The devil is in the detail
Understand where your money is going, who is it assigned to and if you are getting value for your investment. Realistically, yacht crew can save upwards of 50% of their salary given the low living expenses. If you hold a senior role and don’t have onshore expenses, you could easily afford to be saving over €3,000 a month. But you could perhaps save even more if you reviewed your expenses. A budget review isn’t always about making cuts, just as it is onboard, but rather it can be about reallocating spending, changing priorities or investing in new areas. All of these things apply to personal financial management.
If you are in a relationship and share all of your personal finances, it’s important to be on the same page regarding spending, and who is responsible for what. The same way you’d attribute part of on onboard budget across the various departments. This is especially important when it comes to larger purchases, such as a car or property. It can be challenging, so try following the rule that until you both agree on a large purchase, it should not be made. Again, this is where having regular money conversations comes in handy as it reduces the chance for surprises and allows you to share your money attitudes.
Make accountability a priority
Reviewing your income, expenses, savings and investments will help you identify cash flow opportunities and challenges. This is what happens in a business environment, so there’s absolutely no reason to follow the same process in your personal life.
Improving your cash flow and looking for opportunities to increase your income are valid reasons for treating your personal finances like a business. After all, the goal is to put you in the strongest possible financial position. Also, having accountability is key to managing your finances smoothly with a partner.
A common way to improve personal cash flow is to increase your revenue. This could be through letting property, returns on investment, negotiating a higher salary or getting a promotion.
Always aim for improvement
Meeting your financial goals takes focus, hard work and commitment. Taking a business-like approach to your personal finances is a great starting point but don’t stop there. Learn as much as you can about things like credit, saving and investing.
Of course, you don’t need to become an expert but it’s important to be armed with the right information. Your research and learning will be beneficial, even if you decide to use a financial adviser.
Don’t be afraid to ask for help
New crew are often advised to ask for help rather than making a costly mistake. The same applies to personal finance. There is nothing wrong with asking questions, in fact it would be unusual not to. Managing your personal finances can be overwhelming, so if you are short on time or have a complex question, it might be time to reach out and speak to an expert.
A good financial adviser can help to review your goals and objectives, update or review your financial plan or simply review your budget to get you back on track. Tax experts can be worth their weight in gold when it comes to navigating your responsibilities and ensuring you benefit from the different tax exemptions available to crew. They can also do a lot of the groundwork for you, giving you more time to focus on work.