I was recently having a conversation with a friend of mine who shared with me that she had paid off her home mortgage. This is a woman whom I have known for almost 30 years. I watched her go through a pretty horrible divorce, raise two kids by herself (one with special needs) on a service industry job. She never complained, she was always cheery and grateful, lived within her means and provided for the needs of her family…and then she paid off her home mortgage!
It was wonderful to hear her talk about the ‘freedom’ she felt at not owing anyone anything. True, she lives in a modest home (darling, well-cared for, perfectly cozy) and doesn’t drive the fanciest automobiles or wear the most expensive clothes, but she has all of her needs cared for and most importantly, she is content! We laughingly shared what a free-ing feeling it is, but sadly, because debt has become a ‘norm’ in our society, people that don’t have any are almost ashamed to admit it. My friend’s suggestion: we should have some type of secret sign-like we all paint our front doors red or something! I love it. I think we should have a Red Door Club!
I don’t often cross the bridge of finances publicly, but after ruminating on my conversation with my friend, and knowing that my Blog is the place that I can be brutally honest (though sometimes forgetting that other people might read it) I have decided that it might be good to touch on this as it relates to small farms or at least, how we feel it relates to our small farm.
I am not going to lie, Shaun and I have used our fair share of credit, but have always tried to be very conservative in doing so. Small farms like ours just simply can’t service a large amount of debt. I know, I know, most farms take out operating loans on a yearly basis and that is just how they do business, but when you run a small farm, in my humble opinion, that is a death knell.
Often it is simply timing that requires the use of credit; you need a piece of equipment to do a job and determine that a purchase (in the long run) will be better than renting it, but your cash flow is slim during the time you need the equipment, so you borrow and pay back over a very short period of time (like 6 months or less). Truly, though, good planning avoids that and provides some self-control in knee-jerk purchases. Have we always followed that? Nope, but I wish we had.
I have often laid-claim to being the ‘Queen of 90 Days Same-As-Cash’. Never, and let me repeat NEVER, would I pay a dime of interest, but I was happy to use someone else’s money for 90 days. The problem with that method is that even though I have a good plan laid out, we still OWE money. That, to me, feels something akin to a very large pillow securely tightened over my face and smothering the very life out of me.
Every year, on January 1st, we spend the entire day looking at our farm plan for the year. It is really a great day to do that because in the dead of winter you are less inclined to sway to the whims of the seasons. In the worst weather your most urgent needs are actually more evident. During that day, we do our best to anticipate what our large needs are going to be and budget when we can make those purchases. If our income projections fall short, we have to wait. It is as simple as that. If we don’t have it we don’t spend it. Has this slowed down our ‘success’? Yes, I suppose it has. We have watched people blaze ahead of us with the successes of their farms, selling cheese soon after purchasing fancy equipment and leaving us in the dust while we work with our ‘non-traditional’ budget tools, but then we have subsequently seen those people lose their business, animals, and ultimately their farm & home. If that is the result of fast success, we will stick to our slow ‘cash’ method.
In addition to slow growth on the farm, we both work! I know to some that feels like a sell-out, but we believe that in order to have something you need or want, the best method of funding that is to use this interesting concept of self-funding called work, save, plan and then spend! Is it slower than an online crowd funding program? Yup, but then again, I suppose it would be slower than pan-handling too. Do I have an opinion about those on-line crowd funding programs? Ummm, yes! My point is, each purchase we make is carefully evaluated based on a real criteria of need because we have worked for every dime of money that it will take to make the purchase, so I tend to believe we are slower to purchase and more properly cautious about each purchase than if we were given money. Kind of like how people say that college kids who have to work for their education appreciate it more than the ones that mom and dad foot the bill for.
Is our way of doing things right for everyone? Absolutely not and I am not here to preach what works for us will work for you, but based on the nature of small farms, I hope that a word of caution can be gleaned from this truthful post. It is very difficult to service debt and make money when you have a limited land base and limited growth potential. Truly, the only option is adding value and often adding value means making costly adjustments to your business which might include purchases of expensive equipment or facilities. Too often small farms are romanced by ‘easy’ financing options or ‘Crowd Funding Sources’ without a solid plan and the result is disastrous.
And let’s face it, some of this boils down to contentment. Our farm isn’t all that remarkable, but we are very pleased with it. We work hard to make improvements and changes as we can afford to and that are within our ability to do. Personally, we are happy with simple ‘things’ and Craigslist bargains. Like my friend, we don’t drive the fanciest pick-up truck or have the very top-of-the-line equipment (our tractor isn’t green), but do you know what we do have? A membership to the Red Door Club, and to us that feels better than anything money could buy!