Importance Of Personal Financial Planning For Seafarers
Lack of employer’s official support in taking care of his future and retirement needs leaves a large gap in a seafarer’s requirements despite the handsome salary that he is assumed to earn. With the available tools and plans world over, it is possible for a seafarer to plan Financial Freedom at his own pace and means.
Challenges for a seafarer
In the maze of information on various aspects of training, onboard work and plethora of new legislations, a seafarer is hardly expected to be able to bring himself up-to-date with the dry subject of his finances.
The expectations, with which a cadet or a trainee enters the fascinating world of shipping, remain largely unfulfilled when he discovers that the earnings are only for his working period. He finds it unsettling in the first few years to make his income last for the period of vacation and examinations, which in recent times can be inordinately long.
He tries his best to work for the highest paying company and trade (tankers or LNGs) so that the remuneration can be best possible for his work.
Things still do not match up to his expectations and requirements. In the first 10 years of his life, he barely manages to have any cash reserves after completing his exams, paying for his educational loans (which most of us take in our cadetship, since the fees are very high).
Things get worse or at least threaten to get worse when later he has a family and added responsibilities. Eventually, he is unable to have a house of his own above his head without any loans (also called mortgage) liabilities.
Lack of employer’s adequate and sufficient support for the seafarer
I have served in the maritime industry for a little over 28 years. Having entered the industry as a teenager, like most of the seafarers, somehow I felt that behind all the bravado that my seniors displayed about their happy-go-lucky nature, there was no sufficient depth in terms of certainty and security of future.
Some Indian and International companies across the globe had a well defined provident fund system, which was actually very lucrative and beneficial. The attraction of higher salary and better working condition took us to “foreign” companies. Paradoxically though the salaries were higher in these companies, somehow we seafarers were not at a very great benefit.
What is important to understand that barring one or two, there is no shipping company that actually looks after your social welfare (in terms of pension, provident fund or emergency funds). Even for one or two where it exists, the benefits are so less and far apart that one would only actually benefit if he or she were to stay for over 15 to 20 years. This is at best a hypothesis in today’s corporate culture.
Moreover, the medical benefits are getting so rare and tough to obtain that they cannot be relied upon for actual benefits. There have been cases where the seafarer did not report his illness or ask for the shore medical advice, fearing of getting marked by the company.
Polarised life of a Seafarer while on board and on leave
There are many more aspects to the seafarer’s life which will never be taken care of by any MLC legislation. The main reason for the discomfort is that a seafarer immediately gets disconnected from his mainstream earning life as soon as he goes on leave or is done with his contract.
I observed all these things related to the seafaring lifestyle very closely and by questioning my seniors during my sailing days.
Somehow at the very time in 80’s, I got interested in savings and finance. The word investment was still not very popular those days, especially among mariners. I started identifying the lacunae in the onboard working conditions and also those in the shore industries. My repeated requests to various shipping companies, to initiate a pension fund met with discouragement. Each and every employer wanted a loyal and dedicated workforce without the commitment of a long term relationship from his end.
With my minuscule formal education in economics, I started to learn about various pension funds in the world. This information was difficult to come by in the pre-internet days, but I persisted. During this time I discovered the modus operandi of the best pension funds in the world. Coincidentally, at this time the private mutual funds were allowed by the Government in India.
I discovered this as the ultimate tool for the financial planning and freedom for the seafarer. With the help of one of the pioneers in Indian Retirement Planning (who is sadly no more, may he RIP!), I learnt and put myself through the test of this new field.
The results were encouraging!
Then I extended my knowledge and observation to my colleagues who sailed with me on different ships. Saturday finance classes were looked forward to more than the Saturday drills. The attendees included seafarers from Sri Lanka, Bangladesh, Pakistan, Philippines and Russia. I even remember a First Engineer from Ukraine.
Starting with this first “general overview” article, I will be explaining the basics of life and financial planning for seafarers. This will not just include savings and investments but other topics as mentioned below.
(I will not recommend any particular plan to you unless you request me in writing.Rather I will enable you with all the tools so that you can make all the decisions by yourselves.)
During the course of our learning we will address the following topics:
- Meaning of Financial Freedom
- Mistakes Seafarers make
- Importance of Savings
- Wonderful world of compounding
- Difference between Savings and Investments
- Planning for contingency: Insurance. Correct risk coverage
- Importance of investments; investments as a co earner
- Types of investments
- Importance of Mutual Funds
- Drawing of Life Plans for various age groups
- Strategies for various situations
- Tax efficiency and tax issues of various issues
As I have already humbly submitted in the beginning, I do not have any formal training in the field of finance. However, I have learnt from the best in the industry.
As a seafarer, you are requested to first read through all my articles in order to acclimatise with the field. My conservative and risk minimisation approach will not make you a millionaire overnight, but it will also not prevent you from being one in the long run.
I will also try not to use any fancy finance jargon in my articles for you. The length of an article will be short enough to be read in one sitting, and interesting enough to be read over and over again.
The only thing that I will request and expect from my reader is TO HAVE AN OPEN MIND. Please keep aside all your preconceived notions and information collected from various sources and people, irrespective of your age or rank.