Investment, savings vital for rainy days
As we build on last week’s column, let us dive deeper into the savings and investments option for full-time and working farmers, especially when we speak of diversifying your investments. Farming is an investment in a business venture, which requires diversification in terms of what you farm with such as livestock, crop, poultry, etc.
However, it is also important to diversify what you invest your funds into. Savings and investments into bonds, stocks, real estate, money market, treasury bills and other wealth-creating investments must be considered. This will ensure financial stability and long-term success, as your eggs are not all in one basket.
To reiterate from last week, savings and investments are the components that are crucial and may require more focus and awareness in our communities. Savings do not necessarily create wealth, especially when there is no strategic financial plan for those savings and the rates earned on savings may not be sufficient. Interest rates may also vary between banks and financial institutions, and their product offering and risk categories should thus be considered with careful analysis and diligent comparison.
So, how do we invest the farming retained earnings or any other earnings that may be invested in long-term wealth-creating vehicles/assets/investments? The number one rule/advice is that before any investment, one should create an emergency fund of at least six months of expense savings, especially for farmers who have so many operational uncertainties.
It is thus imperative to have some cash reserve for life’s unforeseen circumstances and expenses. Additionally, consider reinvesting in your farming operations, such as purchasing farming equipment that may create efficiency and helps you scale up. More importantly, invest in training and education for your business, as some courses may just be a refresher to keep you up to date with current market trends and changes.
You must consider diversifying your investments. This may include but is not limited to stocks, bonds, and real estate as highlighted earlier. You may seek advice from financial advisors on what exactly to invest in and how the different products work, and what the returns are depending on your profile and risk appetite. Always ensure to have a financial plan that has considered everything depending on your profile and which also aligns with your farming goals.
It is important to note that saving and investing are long-term strategies, so it is vital to be patient and stay disciplined. Remain focused on achieving long-term success, financial security and financial freedom for yourself and your farming business.
Mekupi Kambatuku: Managing Consultant at Simpli Business Advisory admin@simpliadvisory.com www.simpliadvisory.com/