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Honored Advisor

My take on leasing...

...is twofold.  If it is for a one-time or infrequently-used item, then it makes perfectly good sense. 

Our son leases certain construction tools, for example a metal break, since he does very little metal trim work.  We needed an aluminum-sided rental house trimmed around some window changes he made for us, so paid for the metal break for a few days.  He may not need one again for two years or more. 

My BIL leased a track Cat tractor one very wet fall, to make sure he could tow peanut combines through soggy fields.  People with only wheeled tractors lost a lot of a cash crop.  Good leasing situation, well worth it.  Needed it once in all the years he farmed, so not worth buying it.

Bad leasing decision is exactly what some have already described...one where you end up with nothing of value to use or trade in for the new upgrade.  For us, the only reason to buy a new piece of equipment is to meet a new need, eliminate a bottleneck in a process, or make a timely repair that cannot wait for a re-man. 

Granted, we are not in an expanding mode, but we do step up some processes over time, especially in haying.  We did go out and buy a haylage baler a few years back, and the machine to wrap the bales in plastic.  A standard round baler would have made big bales for sheep and horses, but would not have accomplished any nitrate reduction by ensiling the high-moisture forage, which is a serious concern in our drought-prone hayfields.  Now, we have a significant option if we need to bale and it's been too dry...we can still make safe feed.  Good reason to buy a piece of equipment. 

If you want a good take on leasing routine needs, listen to Suze Orman on car leasing sometimes.  On her "Can You  Afford It?" segment, I do not think I have ever seen her approve anyone for any purchase if they were leasing a car at the time.  Not everything Suze says is engraved in stone, but she makes so much sense, it's hard to argue with her on this one. 

If car dealers didn't come out like fat rats, they'd never offer it as an option.  Our neighbor wanted a car he couldn't really afford - I think this was right in the middle of two bankruptcies -  but the dealer was all over leasing it to him.  That said all I needed to know. 

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Frequent Contributor

Re: Debt free farming operations

Credit cards make splendid sense... if, and only if, you pay off the entire balance each month.  If you do that you have a 30 day interest free line of credit.  Even in these days of low interest rates that's a deal that's hard to beat.

 

But I guess very few people do that, from what I read.

 

What I always told my kids, over and over again, is, "the secret to happiness is to spend less than you make."

 

You're absolutely right, money is the last taboo.

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Advisor

Re: Debt free farming operations

Though I understand your frustration with education and the percieved uselessness of your degree, one cannot discount it entirely.  The purpose of a liberal arts education is not only to allegedly provide training, knowledge and competency in an area of study, it also encourages the student to think about a range of topics and to study everything about each subject.  That's the "liberal" concept of liberal arts studies.  It opens the mind to be able to view an issue from many perspectives prior to making conclusions about it.

 

Perhaps your training in education studies did not prepare you for that, but I know mine prepared me for my career.  I have a business degree with an emphasis in accounting,  though I still had to learn some things the hard way, like appreciating the value of a positive cash flow and managing debt without endangering the business.  Even so, my education in gen ed prerequisites like English and composition did enhance my ability to communicate with business associates and improved my writing skills as an opinion writer of local and regional publications. 

 

Taking classes in classical literature encouraged me to think for myself and express my own interpretation of the literature.  I cannot imagine how my skills would be today if I hadn't received this exposure to this "liberal arts" part of education, though, like you, one can easily dismiss the value of the education because there is no definitive connection to what we are doing today.

 

Having said that, yes, our educational system is failing our children.  My spouse teaches at a local college and she can testify to that.  Incoming freshmen are ill prepared for college.  Many are not only not qualified to be in college, but they also have mental impediments as well, not to mention a very short attention span that was recently reported by news media on research that confirmed that the time spent on video games and other electronic media was hampering their intellectual development.

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Senior Contributor

Re: reply to Kay, cz and Smokeyjay

So many good points. I will touch on several in this one post.

1st Kay yes 'leasing' for short terms is good business (or personal) financial practice. I probably should have pointed out the difference in short and long term 'leasing'. Forget that others have different usage of terms and words. I/we would think of 'lease' as long term and for short term deals we refer to them as rentals. I will therefore 'rent' a truck to make that one trip that I need it for but would lease the truck for 5 years so it is always available in my yard.

2nd cz, I agree credit cards are good money management if used correctly. We use a no fee card regularly. Makes many payments easier, allows us to delay actual payments for up to 30 days AND ours pays a % 'kickback' at the end of the year for every $ used. The point to using it properly is to always pay it off before the 18% interest starts and it starts from the day it was charged.

4th Smokeyjay, a 'good' education teaches or perhaps it 'allows' people to "think"! There is no doubt that 2+2=4 but so many things in life are not so cut and dried and that is where those who learn to 'think' shine.

I find so many on this forum are unable to see and understand that many things are not black and white but just shades of grey. Few of us are 100% correct in our views OR 100% wrong (a few posters on Agforum excepted) and that is another part of a good Liberal Arts education. It is seen by some as wishy/washy not taking a stand but is just a sign of someone who can see the others point of view or way of life even if they choose not to follow it themselves.

 

And getting back to the original topic the difference in what people feel comfortable with partly determines debt tolerance.

Few are able to start farming without debt and are unlikely to be successful if they have everything handed to them but many of us strive to become debt free others seem to enjoy the highly leveraged lifestyle. Perhaps being 'debt free' is a disincentive to work harder, smarter and better to keep up with the payments so it is those with debt that move the industry forward to better efficiency.

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cornbinder
Senior Reader

Re: Debt free farming operations

I "retired" several years ago, dropped the rented land, kept the same machinery, and still farm our home farm which is less than 200 acres.  We are debt free and pay no interest, pay no rent and repair my own equipment which is way oversized for a small acreage.

My point is that it very important to be out of debt when you retire, then you can do what you want to as long as you are healthy.

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Honored Advisor

Re: Debt free farming operations

Your Grandpa farmed it what I`d call the golden age of farming. From about 1940-1970 there were no bad decisions, everything made money. The thing was you had to have a strong back and love work or have some dullards to hire cheap. There were farmers wanting to quit and go to town for a easier life. Things changed by 1973 Dad decided to quit renting a 80. The land owner had a bearcat of a time finding a new renter. Dad recommended several who`d maybe be interested, by `74 there was a herd begging to rent it. In the golden age you could actually buy a farm with mostly borrowed money and it would provide a living and pay for itself to boot. Today $7,000 land and -$4 corn.....not so much. The old philosphy was "If you want to double your money, fold it and put it in your pocket". Today it`s "Spend yourself rich!!!" which does seem to be working quite well for most.

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Honored Advisor

Re: reply to Kay, cz and Smokeyjay

There are so many replies on this thread, and this format is a bit new, so I am not sure if some points were being made to me or to others.  My own degree is a BS, not a fine arts degree, and I have never felt it was a "waste."  Some days, I  wish I'd had a better business management background, and I am pursuing a new degree ( associate's in nursing). I wish we had been given more of a fine literature/music/arts exposure, but an ed program is chockful of both curriculum content and methods in how to teach it, so not so much room for the classics and electives.  Still, although I do not choose to teach, my education degree taught me a lot about life and the world. 

As for credit cards: I buy everything with ours, and have all of my regular bills except one posting to ours.  We pay off the balances in full every month, get money back for rebates and pay no fees, as some of you have said.  This saves me hours of bookkeeping each month, and also gives me consumer protection with anyone who accepts the card as payment.  That has been worth its weight in gold once or twice. 

I am almost always able to see another person's point of view very well, but I am blunt when I do not agree with it.  I know that may not be the easiest way to win friends and influence people, but I also know that sometimes, people respect you when they know you will tell them the unvarnished truth, even if it hurts.  I will often say, "Do not ask me, unless you want to hear what I really think." 

 To me, a lot of those "gray areas" mentioned are simply rationalizations made to excuse poor decisions or bad manners.   There aere very few black and white areas in life, more spectra of all sorts of behaviors, ideas and choices. 

I fully accept that not everyone manages the way we do, nor would I expect them to...I certainly make mistakes.  Overall, though, we haven't done all that badly, so I will probably stick with the program, and dance with the one that brung me. 

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Contributor

Re: Debt free farming operations

From what I have observed the farmer that came out of the depression and was in his 50's never expanded or took advantage of better times. Those younger than 50 did the expanding and used credit to buy more land or expand with livestock. Today's generation has not had adverse experiences so they are not afraid of indebtness. Most of us gained our net worth through inflation but hard work and good management gave us property that could inflate.

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Honored Advisor

Re: Debt free farming operations

You are probably right about a general inclination to avoid to indebtedness on the part of many who were of a certain age during the Great Depression. 

I think it was largely the accommodations made for GIs returning from WWII that changed our country in so many ways...Gi loans for homes, assistance for education, etc.  Giving so many men a means of leaving agriculture was a tremendous shift in our country's economic foundation. 

It sort of interests me that when the chemicals that were produced by companies that had powered the war effort came about, then so much less labor was required for many crops.  (Chicken & egg issue here....)  Now, everyone wants the food without the chemicals, but no one wants to help manage it by hand labor, so we end up with an illegal immigrant workforce. 

One problem generally begets at least two more.  From there, the proliferation of problems is exponential. 

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Senior Contributor

Re: Chicken or egg

It was not just `the chemicals`` it was also the machinery.

I am old enough to have helped harvest with horses. When tractors became more available the horses were shipped.

But was that what started all the changes or was it the higher paying jobs in town so there was not enough help left at home to do the harvest.

Yes you are correct, chicken or egg.

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