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Senior Contributor

Re: Debt free farming operations

In my case as age progresses, so does more debt, not less.  What you need to purchase has increased exponentially vs what corn and soys are worth---therefore debt also increases greatly just to remain somewhat the same size operation. Thank God for equity inflation!

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Senior Advisor

Re: I'll bet you can do it

And i know nothing about your past or your future. We have had growth and expansion drilled into us for decades from the universities and the farm publications. AS if that is the only way to farm. That unending growth philosphy is BS in miy mind.

 

WE are argue about growth and becoming more efficient, but I believe there is more than one way to skin a cat. The secret is contentment. Being content to be less that the biggest dog on the block. Learning to farm what you have while spending your own money on raising good crops efficiently. What amuses me is that some farmers are tired of working for John Deere or the bank. How about I maintain a modest operation that I can manage with out high dollar equipment or a banker.

 

I pay no interest on operating loans  but some on real estate mortgages. I do not want to farm more nor do I want to borrow money to do it. Admittedly my age health is a factor but a middle aged individual in excellent health could choose the same course. Why, because he doesn't want to engage in the rat race of a high risk venture with borrowed capital.

 

Yet we can find many farmer argue that you must expand or die.  Such nonsense! Is our objective to do more risk more  so we can accumulate more debt to buy more green paint ? That is where the contentment comes in. Knowing what your objectives are and why you have them.

 

Remember, those debt free operators may well be reformed spendthifts that spent too much of their earlier lives with their kneepads on in front of a banker. They wised up and decided they no longer wanted to kiss a bankers butt. Instead they chose to direct their own destiny and manage their own business for their own advantage. Your banker is running his business and you should be running yours. You may well continue doing as you are doing but there are a few folks that have chosen a different path. I would not assume they had everything given to them or they don't know what they are doing. Some are old. Some are tired. Some are lazy and some are just content with a different objective.

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Highlighted
Senior Contributor

Re: You hve to WANT to

You have to want to operate your farming business debt free. It must be a disciplined mind set, similar to the discipline needed to meet those yearly payments on the notes you have accumulated. You must say it to yourself every morning when you get up "I will not borrow any money today".  Even if something big breaks down, you must say "I will patch it up with bailing wire and duct tape to get me by before I borrow money and replace with new."

 

I am not there, but please, do not look down on me. Guys like me keep the bankers in business. We keep the wheels, you savers purchase, on the track. I am not the engineer, but I sure can burn the coal they throw in my fire. The world needs us both.

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Senior Advisor

Re: I am not looking down on you

In fact the contrary.. You ARE me  in years past with plenty of borrowed operating capital. It's merely a change in strategy that has moved me and my finances in a different direction. Possibly you may choose the same path at some point in time. Why? Because one day your objectives may change and you may decide you have enough and merely wish to protect what you have.

 

Not that I wish to be critical of those that wish to better themselves. I'm merely critical of the insane obsession to grow at all costs no matter what the risk. The 80's can happen again and I would advise people to be prepared for it. Some times those lenders that are so generous with loans want it all back at the most inopportune times. Instead of worrying about   business growth you may worry about staying in business.

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Veteran Advisor

Re: I am not looking down on you

Agreed---Things can change like in the 80's----you can't move fast enough to avoid a tricky financial event- even with the new marketing tools----maybe they should of had a product you could have hedged your mortgaged house against deflation for all the upside down borrowers????

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Honored Advisor

Re: I am not looking down on you

Part of this analysis of debt comfort/aversion is similar to investment assessments, which are typically given to evaluate your risk tolerance. 

Part of it can be age - as figured in years between now and retirement.  In general, risk exposure is purposely reduced as you approach the downturn in earning that usually accompanies traditional retiree patterns. 

Another piece can be the flux of the times you are making decisions in...how stable is the economy, what are tax picture considerationsor income and estates?

Start with the last first: What is the estate tax picture going forward, and will the Congress retroactively enact one over 2010?  Who knows?  So, how do you plan? 

Many of us have decided that retirement is not going to be as predictable as we once may have thought..  Although, I've always said we'd probably work in some ways until we drop, that was more by choice than it feels like it is these days.    I heard a news report the other day to the effect that there are for the first time more seniors in the workforce than there are teens.   That speaks to a perception - and probably to a reality  -  that not as many are comfortable living on their retirement nesteggs. 

Some have mentioned the eighties, and we did see so much suffering in that era; but, with interest rates in the lowest range in thirty years, it's hard to make a direct comparison to that time, really. 

The only clear indicators I can find are from looking at California and other very socially-liberal states and cities.  The vast majority of complelely insolvent cities and those with highest unemployment are in such locations, from what I am reading. 

Anyone with half a brain then must see that we cannto spend our way out of this mess we are presently in...and we cannot contiunue hte pretense that everyoen is entitled to certain things that are, by natural definition, luxuries.  We need to refuse the unfunded mandates from Washington, and our state houses. 

I just heard Mr/ Obama touting the new law to cut off payments in the wrong amounts, to the wrong people and to dead people....what the H took so long to figure THIS one out?  And, why did it take a NEW law to curtail these payments???

I love my country, but my confidence in it is so low right now, I am hesitant to buy an extra book of stamps at the post office this week, much less go out on a shaky limb to build a business that is under fire every minute of every day. 

Veteran Advisor

Re: I am not looking down on you

Weel said Kay!

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Contributor

Re: I am not looking down on you

Kay, you did a good job in analyzing debt etc. Your final statement of losing faith in our government is very true.

In 1986 I was developing apple orchards with investors. The new tax law revision came out and my investors

could not deduct their annual costs of developing the orchards, so they decided to lose their equities and "walk away" from their investment. The development costs continue and the general partner (me) had to pick up the deficits until it got

too much. If they want to change tax rules then they should "grandfather" in existing projects rather than destroying

them. The government took away an opportunity to build an enterprise that employed many people and contributed

to our economy. I also lost faith in our government and am still somewhat bitter.

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Senior Contributor

Re: I am not looking down on you

Can you tell me what you mean by not being able to deduct your development costs?  Are you saying they were not allowed to be capitalized as depreciable assets, or what?  Not criticizing, just want to understand.

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Senior Contributor

Re: I am not looking down on you

Having worked in the political arena for nearly a decade while advocating for agriculture, I can sympathize with your thoughts about Washington.  However, the blame for the mess is not unique to this administration or even the Democrats.  Since taking control of both houses and the presidency before losing majority and the White House, the Republican party has presided over the greatest deficit spending spree in history, (three major wars, one still ongoing and the longest war in U.S. history, Blackwater scandal, Cheney/Halliburton boondoggle and profiteering at taxpayer expense) not to mention helping to pass laws that are primarily responsible for creating the economic conditions that caused the greatest recession since the Great Depression.  Credit default swaps, otherwise known as gambling with other people's money, were given legitimacy not only by the Republicans but the Democrats during the Clinton administration.  Sup-prime mortgages would not have been able to be used by large brokerages like Goldman Sachs to the extent it had and we would not be sitting with over a million plus mortgages in default as we speak. 

 

To blame Obama for all our woes is simplistic at best.  Did you vote for those people who created that mess I mention above?  If so, like me, you and I can only blame ourselves for supporting these people who are responsible.

 

While lobbying for disaster aid for drought stricken farmers earlier in the decade, the Republican leadership wrote agriculture off (I said Leadership, not every Republican congressman or senator).  Bush ignored our request for help with 4 billion in aid, yet he had just signed on hurricane Katrina aid to New Orleans for over 121 billion, said it was budget busting and not a good thing to do.  Can you imagine that? 

 

This political hypocrisy has severly tested my patience with such people.  I'm a conservative.  I voted for Bush, twice.  But frankly, I do not give him high marks for his time in office.  

 

What really puzzles me is why it takes fiscally and morally conservative people so long to figure out that the country is in this mess because they participated in creating it.

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