Death, taxes and volatility are farming certainties
As the year comes to an end I thought I might revisit some of my favourite musings on farming life.
So here they are - a 2016 smorgasbord of thoughts, observations and crystal ball gazing: ❚ Death, taxes and volatility – these are the three certainties in life with volatility being much more important for farming. Death is only a heartbeat away but another 30 years represents 946 million heartbeats so you should definitely keep working. ❚ If money was the only thing driving all of our 50-60 year old NZ sheep, beef, dairy, cropping and horticultural farmers then 90 per cent of them would have retired to the beach years ago. It is possible to make a loss in NZ farming for some years yet still get a reasonable degree of satisfaction. Not many other industries could say this let alone fund the losses involved. ❚ It looks as though the world is going to go through a more protectionist phase with trade. We have seen this before and it is not a plus for New Zealand. ❚ There is a shortage of farm workers in many developed agricultural countries including New Zealand, Australia, UK and the United States. Farm workers are often well skilled but many families need two incomes and this is harder to do in rural NZ. The schooling is not as good for special needs children and the percentage of rural children going onto university and trades is lower than in cities. A major disadvantage is housing. A free house that comes with a job is a disadvantage when it comes to the point of retirement. The chance of buying a house when they are younger does not come around that often and they never get on the capital gain trail. ❚ The Government needs to take a 25 per cent cornerstone shareholding in every new large farm irrigation scheme where due diligence has been soundly carried out. Farmers cannot be expected to fund all of these systems particularly as a large and permanent return from the investment ends up in the urban business and government sectors. ❚ Time management is expensive if this is a farmer’s weak area. Many years ago I worked for a farmer who had a good grip on history but was not so good going forward. Every morning we walked slowly to the implement shed while he worked out what we were going to do that day. It soon became apparent that he had not built the implement shed far enough away from the house. ❚ A useless man in business is a shame, but two useless men is a disaster in the waiting and three useless men is a major problem particularly if they are articulate. ❚ With an annual salary of about $440,000 John Key has been overworked and underpaid. ❚ Every secondary school student should be getting more education about financial management. They should be studying farm budgets, household budgeting, the true cost of hire purchase, the strength of compound interest, the time value of money and the true long term costs of home ownership. Why is our education system not covering this? If they left school with an understanding of 10 key financial issues the multiplier effect of this for them in later years would be enormous. ❚ If you are going to avoid the pain of buying and maintaining a house and its mortgage then the alternative is renting, but you will need to be ruthless with your saving and investment habits. Many people are looking at a housing problem as well as an income problem when they retire. ❚ Many farming couples are crackerjacks at developing a farm and its back paddocks but the number who can manage their financial resources outside the farm gate is much, much less. Some of them would be better off finding the best financial manager they can afford and then keeping out of the way. ❚ Lastly, your cash flow is more important than your Mother. This might come across as hardnosed, but many mothers would confirm and recommend it. ❚ Pita Alexander is an accountancy and agribusiness director at Alexanders.
Death, taxes and volatility – these are the three certainties in life with volatility being much more important for farming.
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