New Era

Investment, savings vital for rainy days

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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/

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