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Senior Contributor

Getting ready for 2011

Has there been enough change in how you are doing business to warrant a new business plan or review of the current one?  For one thing, how are you going to handle inflation, if it comes?  On oen hand, I don't want to miss out on good times.  At the same time, I'm not sure I'd want any expansion or investment to catch me upside down on the money if things turned bad quickly.  No doubt, any change would be resisted in the form of more money and government action, so the tipping point of a problem could be camouflaged or delayed beyond the natural cycle.

 

At my age, I'm mostly worried about consolidating and holding on to assets, not getting bigger, but if I rent out 5 years from now, I'd want to be sure my tenant was financially solid.

 

 

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16 Replies
Honored Advisor

Re: Getting ready for 2011

Jim, I am sort of on the same page...I guess you would call this "conservative, " in the sense of keeping what we've got...not risking it for more.  We have "enough," on so many levels, it seems just greedy  to even dream of more. 

Any business plans we make right now are more or less diversifications, maintenance for the long haul, or things we want our children to have a chance at doing for themselves.  Have spent this week talking and meeting with our youngest, figuring out which way she wants to turn in a year or two, and laying some groundwork for that. 

You have to wonder when the other shoe will drop, as it usually does.  I do not ontend to take any risk I can't cover out of pocket, from here on out.   

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Frequent Contributor

Re: Getting ready for 2011

My farming business plan for 30+ years has been a very simple one.  Buy land and keep equipment investment minimal.  At this time we are building a farm shop to help keep the older equipment going.  Always wanted one and finally decided now is the time as age is taking its toll. 

 

The thing that concerns me right  now is how do you cut back and just "tread water" with the farm?  Seems that in any business you are either going forward or backward.  It is hard to just maintain the status quo.  Am not going to allow the fear of losing what we have to become my primary concern.      

 

Long term debt was never a major concern of mine as long as it was for land.  Being debt free is not a goal.  I see debt as a tool and one that, when used properly, is an asset to the operation.  I don't want to be leveraged like I was in younger years but good debt still does not bother me.  It all comes down to the simple fact that buying and owning land is one of the few pleasures I still have.  It has nothing to do with building net worth or owning XXX amount of acres. Just like the challenge and satisfaction that comes from finding a good piece of land for the money and farming it.  

 

I just don't want to get up each day with the fear of losing what we have being my primary concern.  

 

 

  

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Advisor

Re: Getting ready for 2011

I think there is a huge difference between being 'fearful" and being conservative in uncertain times.  We are not afraid of losing what we have, but as most people do when they get to a certain age, we are less riskl-averse. 

Any responsible investment counselor will tell you not to put anything you may need within ten years into the stock market.  Most counselors will balance your portfolio more towards income and less towards growth once you have set your sights on the target of retirement within a decade, too. 

I do not know how old you are, but if you've farmed for 30 years, you are probably younger than I am...or, at least I've been at this a while longer.  Those few years make a lot of difference mentally (and physically, too, if we are honest with ourselves.)  Things I never dreamed of feeling and thinking at forty are daily realities at 56. 

Also, being in a state that placed a moratorium on hogs over a decade ago, sort of cramped our style for expansion in our main enterprise.  The doubling ot this farm that was possible then is off the table for good. 

We've made a bunch of smaller spinoffs, some related to farming, and some not.  I think we just committed this week to one more with our youngest child...anyway, we put the ball into her court, and will see if she picks it up and runs with it or not.   That involves remodelling a couple of small commercial buildings we bought this fall. 

We've got to make a decision about improving one rental house, or mothball it.  We can get back the money in the first year of renting, so I am inclined to fix it.  Need to complete a barn we've been "building at" for five years or so now. 

Tying up some loose ends.   Putting some things in motion, but not pushing them...sometimes, it is just back to sit back and see if others want it as badly as we did when we were younger.  That would mean working THEIR tails off, instead of ours. 

  So, not fraidy cats here, just trying to make things a bit better, easier to manage, not so much bigger. 

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Frequent Contributor

Re: Getting ready for 2011

Kay/NC,

Guess I took your original comment "keeping what we've got...not risking it for more" as indicating there was some fear of losing  involved in your decision. 

 

Through the years I have developed my own philosophy about retirement and how to approach it from a financial perspective.  My son and I both have solid backgrounds in finance (mine accounting and his in accounting/financial planning) but I have chosen not to go the route espoused by most financial planners.  Might be the wrong thing to do but I am comfortable with it.  

 

By the way, I am 60 years old and have been farming for over 35 years.  That is not counting my earlier years growing up on a small farm and actively working on it.  I worked public work for 20 years while basically running a full time farming operation.  Have cut back on my hours the last few years but many old habits are hard to change.      

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Advisor

Re: Getting ready for 2011

If I got the right chance to buy the right piece or two of land, I'd probably take on the debt to do it, rather than gutting our liquid assets too deeply.  Two reasons I say this:

  1. Have seen way too many who were "land poor" in my lifetime.
  2. Made a conscious decision a number of years ago not to get into a land grab mentality.  Will buy righ pieces in right places, but no more..land lust is no better than any oher addictive behavior. 

We can't get bigger at the main thing we do, by law.  I have no interest in buying someone else's headahce of a hog farm, either.  My belief is that if it was a good business for a family, then the family that owned it would still want it. 

I honestly believe that there are going to be quite a few instances of bad decisons to buy land at some of the prices I've seen you guys quoting here.   Hope not, but think so.  I will be sitting on a plenty-big piece here, and holding onto three more farms back home.  I always liked the license plate that said "PAID 4."  

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Frequent Contributor

Re: Getting ready for 2011

Kay/NC,

 

Our land purchasing through the years has be a slow, controlled growth.  We might be "land poor" by some peoples definition but, if that is the case, I am thankful to be there.   Hope that is the biggest problem we are faced with in the coming years.   Through the years I have talked with far more people who regret not buying land than the opposite.  

 

Long ago I started treating land as my savings account.  Owing money on land just kept me focused on that priority.  I have seen too many people get side tracked and let money slip through the cracks.  

 

One question for you.  How do you define greedy in terms of purchasing land?   I am curious as to what criteria you use to measure this.  Not sure if you were implying that my desire to continue purchasing land was a symptom of greed.  Please take my comments and questions as a search for a better mutual understanding of each others position and nothing else.       

 

       

 

   

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Advisor

Re: Getting ready for 2011

Not at all meant to be taken personally by you...I am sorry if it seemed that way, since it was not what I intended.  "Land poor" in our surroundings were usually those who ah dinherited the place and could not afford to keep it, but made themselves miserable and deprived their families by trying. 

To me, anyone who cannot make routine property tax payments without hardship is land poor.  Anyone whose family needs something essential, but cannot have it for the sake of the land, is land poor. 

I think you have a very sustainable strategy, and would never second-guess you in your situation by what I have had to deal with in mine.  Our family once had the misfortune to be situated across the road from a certifiable land hog.  His wife worked to support the family, and he was thus able to expend every cent he earned farming on land. 

No problem with that, but he also made a very concerted effort to steal the only right of way to our farm, and thus make ir virtually impossible for us to do things like harvest timber, obtain a standard mortgage for children's houses, etc....essentially make it so we could not use it for much.  He had a surveyor submit a false deed, and citing my husband's statements in it (extremely odd) incorrectly.

I suppose this was to prevent us from making a successful challenge down the line  Took $50,000 to buy an adjoining piece and pay the lawyer to fight the guy, who eventually backed down.  From what other people told me who also owned adjoining land to his elsewhere, it was not an isolated incident. 

That kind of land lust makes me sick.  Wanting to run a family off of a homeplace that they've earned the right to farm is just plain pathological to me.

Greedy in purchasing land is what one of those other people unfortnate enough to own next to him said to me when we discussed it once: "He doesn't want to own all the land in the world...just his and everything that joins it."

I feel virtually certain that descripotion does not apply to you...but, I will bet you've encountered someone like that in your course of business lifetime. 

Land is wonderful.  To me, it is a place to be at peace.  It is a way to insulate yourself from others...if you are lucky enough to own a piece large enough, and manage to situate your home well enough to avoid impacts from the activities of others. 

Our land provides support for us and our children, and gives us all sorts of recreational opportunities.  It gives us wood to heat our homes, water to drink, and fresh air to breathe.  If we never planted another seed or purchased another animal, it would still be able to feed us for generations, too. 

I am sure that if we ever decided to sell some of it, instead of just the timber and minerals on and under it, that it will have greatly appreciated in value in the time we've been responsible for it.  I truly hope that day never comes, but if it does, I've accepted that it is really only dirt, after all. 

You have probably never met a person who has had a more tortured relationship with land, yet still oves it.  Every acre we've ever owned has been fought for in one way or another. 

I take every aquare inch of it as a moral responsibility in stewardship...I truly ascribe to the notion that I've borrowed it from my children.    "Ownership" is a legal construct. 

Lots more I could say, but will wait for your repsonse. 

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Frequent Contributor

Re: Getting ready for 2011

Kay/NC,

 

We definitely are on the same page.  I was initially unsure but your response has pretty much summarized my own perspective on land ownership. 

 

Through the years I too have seen those whose sole intention seemed to be making everyone else as miserable as they are.   Greed seems to do that to people.  When thinking of an example of greed Mr. Potter of "Its a Wonderful Life" comes to mind.  I pray that I will be remembered more as a George Bailey. 

 

While hauling grain the other day I got to thinking about how much of our life is spent either thinking or doing something related to money.  When I thought about it in the context of my own life I was not pleased.  Got to do some more thinking on this.

 

             

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Advisor

Re: Getting ready for 2011

The whole concept of money is an interesting one.  I am just now picking up a book entitled "The Moneyless Man," which was written by a British guy with Freeconomic leanings.  Really very extreme an approach, but I think there may be some object lessons embedded in it for all of us. 

Given your stated age and mine (56), I think we are both on the page of not wanting our entire lifetimes to be about numbers on a ledger.  I have relatives who will never be happy, since no matter how big their bank balances are, they are never enough.  Saddest people I know. 

To be honest, I really enjoy being able to sit down and order a couple of wine kits with Mike, as we just did tonight for his home vintner's hobby.  I wanted a new pair of shoes yesterday, so located them online and they'll show up inside the office door in a few days..  Bought a flower arrangement today for the dining room. 

Didn't need a single bit of those things, but they are some simple pleasures, and feel that as hard as we've worked, we have earned a few of those now.  I am sure you have, too.

I think of life a little bit like this now...one day while driving to school and listening to the radio, I asked myself, "What good is music?"  It serves no purpose of survival, but I cannot imagine life without it, can you?  Flowers are no more necessary, but I'd hate to live without them. 

Our dogs are all allegedly "working" breeds, but it is a good thing they do not have to clock in!  I joke at the checkout when I have 100 pounds of chow on my flatbead cart that "if it weren't for dogs and beer, I'd have some money."  When I see Mike riding around with his little "Suzie Q" in the pickup seat beside him, or when one of the Heathen ( what we call the three Blue Heelers) hops up onto my chaise to keep my feet warm, I know they are worth every cent, earned or not. 

Money can buy you only two things: security or activity, or actually some balance of the two.  If it were all about piling up a lot of money, instead of spending some, I'd have missed a lot of the fun in my life, wouldn't you? 

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