It seems we spend our lives tearing around working and earning money with little idea of how much is enough. Enough work? Enough money?
During the last boom when farmers were busy buying up the neighbours, my phone rang hot with farmers who were not buying the neighbours, asking how they – who were buying – could do it?
My simple reply was: It was done with debt. More lend, more cows, more worry and stress and more debt. Many were very successful at running the multiform businesses – not without its stresses – and some failed, losing equity, if not nearly everything.
There are people out there now who own many assets and are worth millions, but from what I can see of it they are no happier than you and I. In fact, it appears the more load and stress you have the more vulnerable you are to health issues.
Health issue lurking
Dare I remind you that cancer, stroke and heart issues are always lurking in the assets for retirement background? It seems many of the very wealthy are struck down just as fast as Mr Average. Many leave their wife and family with this huge multifaceted business structure, who then have no option other than to sell down the assets and or farms, distribute the money, leaving everybody wondering: ‘What was all that about?’
I know in my rural bank days, there was limited loan money around so it was our job to lend so that each borrower had an “economic unit” and we had to consider what was fair. In other words if they had enough land for an economic unit. That was it – there was no more money. Those days are long gone, but it will have influenced my thinking.
I accept there is a lot of fun chasing money and assets, but at the end of the day how much do we need and how much can we manage?
Assets for retirement
Sixty per cent of the population will retire on the pension with little or no savings. So it is important to save and create some income earning assets for retirement, but the caveat here is when you have got enough to stop at the ‘enough’, protect what you have and enjoy the ride. Fundamentally, we are all “trying to keep ahead of the undertaker” and forever chasing more money and more wealth and it is probably not in our best interests as we age.
I have a client who had a modest dairy farm, sold his cows and shares to get rid of the last of the debt. He leased the farm to his friendly neighbour for a modest rent. He lives in the house on the farm in a rural community he knows, is actively involved in, and plays golf. As he says to me: “What else could a fellow want?”
Lease the farm
Shifting money into other income earning assets is unchartered territory for many farmers and fraught with problems and issues and that is why I do advise many to try and hold the farm and lease it out.
How much is enough will also depend on your expectations. Do you need a world trip every year and a new car as soon as the old one loses its new smell? Or are you happy to travel around this paradise and clean the old car?
There are many who live quite happily on the pension alone, but it is not easy. I guess the point here is when you have got to your ‘final position’ accept your situation, be careful and protect what you have and enjoy the fruits of your labour.
So, how much is enough? Largely it will depend on how you see the world. I guess the point I’m trying to make here is asset building is one part of our life. Holding on to it is another challenge, then, when do you stop striving to make more assets?
Disclaimer – These are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought. Don Fraser is the principal of Fraser Farm Finance and a consultant to the farming industry. Contact him on 0800 777 675 or 021 777 675. A disclosure document is available on request.