#159 The Money Making Secret You Aren't Doing
SW Financial Literacy
Successful Farming
Want to Know How Your Farm is Really Doing Financially? Check These 2 Documents
Lisa Prater wrote an excellent article last week highlighting the pros and cons of a balance sheet vs cash flow statement and how to best use each of them.
You can read the article here: Want to Know How Your Farm Is Really Doing Financially? Check These 2 Documents
NW Call to Action
The Money Making Secret You Aren't Doing
It has been raining a lot.
We won’t be getting into the field for harvest any time soon, which has me really down. It also isn’t ideal when I go outside for my 5am runs. I don’t have a treadmill, so I either need to suck it up and run in wet socks or skip.
Do you know why I never skip (unless there is lightning)?
I’m in the middle of a training block for my next ½ marathon, and I’m chasing a new PR. The fastest ½ I’ve run was earlier this year, at 1:37.44 (1 hour, 37 minutes, 44 seconds). But I’ve been running all summer and am in better shape. My new goal is sub 1:35; and ideally pushing towards 1:29 if I have a good day.
There has been an injury (pinched nerve) and illness which has left me behind on training. I can’t afford to skip any days now.
I don’t skip because I have a goal (sub 1:35) and a deadline (Nov 8). The pressure is on to perform now.
Did you know I set a Net Worth goal every year?
On December 1 I will update my balance sheet. As soon as it’s completed, I add it to a 5 year trend to see my trajectory of Working Capital and Net Worth. Based on the previous year’s results, I create a new Net Worth goal for the upcoming 12 months. I’ve been doing this since I had a 4 figure Net Worth (Total Assets minus Total Liabilities). That would be a Net Worth of $9,333. Aren’t student loans great!?
I’ve set a Net Worth goal for 10 straight years and have hit that goal 9 out of 10 times. The 1 goal I missed? I hit it the next year.
An annual Net Worth (or Working Capital) target works for 2 reasons:
1) I have a goal ($X)
2) I have a deadline (December 1, 2026)
The reason why I hit my Net Worth goal is the same reason why I’m clipping off PR’s in running.
· There is a target to work towards for direction.
· There is a deadline to apply pressure.
· You never take a day off in between.
How many farmers create their breakeven at the start of the year and that is their ‘goal’; to be above breakeven?
Answer: Almost all of them.
That is the wrong goal. Why?
· There are too many factors that change the breakeven throughout the year, so you have a moving target.
· Grain might not be delivered until halfway through your next growing season, so there is no true deadline.
· Farmers aren’t completing their 2025 breakeven spreadsheet in the summer of 2026, we are already focused on the next crop, so there is no determining if you even achieved your goal.
If you want to take your financial situation seriously, goals need to be set on the balance sheet, not a cash flow or breakeven statement.
Imagine I told you to drive to Edgefield, South Carolina. You have 1 week to get there but you have no map, no internet, and no phone. How long will it take? Can you even make it?
Now imagine I told you to drive to Edgefield, South Carolina but you do get to use maps on your phone.
Who gets there first?
Answer: The person with the roadmap. The person with direction. The person who can track where they are at and where they are going.
The farmer with balance sheet goals can easily DOUBLE the Net Worth of a neighbor without direction over the course of a career.
Start building your balance sheet and tracking your goals at www.farmbalancesheet.com. I built a Financial Goals tool that links to the balance sheet, just for you.
P.S. And to celebrate your financial progress, I added Milestone achievements to encourage you along the way!
Have a great week!
Grant
