Budgeting, Planning, Dreaming and Praying for a Miracle

This is a continuation of a series about deliberately succeeding…or trying to anyway.  Thanks for sticking with me this far.  I apologize but I’m not going to share my family’s annual income either from on or off farm.  I think this post gives an idea of what our current farm income is…by that I mean it’s low.  We’re learning and education is not free.  I’m working off the farm 12 hours each day so that limits our options and our farm income somewhat.  I do have some ideas to share for moving to full-time on the farm but that will be handled separately.  Please don’t be discouraged by this post.  These are just numbers.  These specific numbers may not apply to you but you should figure out what numbers do apply.  Ready to fix my math?

Let’s do some quick math on a napkin with a mix of fictional and real numbers. I bought a farm. For simplicity’s sake let’s say I paid \$4,000 for each of 60 acres of mixed Illinois ground (I know, right?). I would owe some bank \$240,000. That’s not a small number. Now, let’s say I borrowed this at 4% fixed over 30 years (I wish!). These numbers are bogus but let’s run with it anyway. I have to find a way to generate \$1,145 every month or the bank invites me to leave. We’ll round that up to \$14,000 per year.  (People regularly pay this for houses in the suburbs on 1/4 acre lots!)

It’s not enough to pay the bank. I have to pay the king for the right to stay on my own land. Let’s tack another \$3,000 on to that annual expense.  Hail Caesar…er…Macoupin County!

Now, the bank (and rational self-interest) requires that I insure my land. I need to be covered in case of flood, tornado, fire, theft, unemployment or death. In short, I have to make a bet that something bad is going to happen so my wife won’t be homeless in case something unlikely happens. Let’s tack on another \$3,000 annually though that number is probably high.  (My wife will never be homeless.  She’s so pretty it will just be a chance for her to upgrade to a better husband.)

I realize that ownership may not be for everybody. It might be better to rearrange those numbers a bit and rent or lease. Those options have significant advantages but are not free either. Stay with me as we move forward. To this point, just to own my farm I have to come up with \$20,000 each year for the next 30 years. Let’s peel the onion a bit with additional rough numbers.

We get 4 seasons here. We usually have 4 months that don’t require any heating or cooling, 4 months that require heating and cooling and 4 months that require either heating or cooling. With me? My propane company just sent out a mailer to all subscribers asking that we get our bills up to date before the next heating season starts. It’s July. I’m not bothered by a company wanting to get paid for delivering a product. I’m troubled that late payment is so normal that it was handled in a mass mailer rather than just a quick letter to a few individuals.  I keep our drafty old home at 58 in the winter and heat one room with wood so our propane usage is kept to one tank per year. Even still, that propane isn’t free. Let’s put down another \$600 to stay warm and have hot water, leaving out the little bit it takes to make my chainsaw run.

Being a family of computer-users and avid readers, we enjoy having power on. Further, a little air-conditioning on a hot day is a good thing. I’ll go big and tack on an additional \$150 per month (\$1800). We use city water at \$100/month. We call in our trash pickup once/month paying \$1.25 per bag (\$63/year). We don’t but we could easily buy \$500 worth of groceries each month (including Kleenex and TP). Our ONE CAR needs a bit of repair each year and we continue to make a \$300 payment to ourselves so we can replace it in the future (\$4,000) and don’t forget fuel (\$4000 which would go down if I didn’t commute to work each day) and car insurance (\$600). Oh, and the wife needs a cell phone for \$240 and home internet costs \$600/yr and since we have internet we should get Netflix for a mere \$100/year.

So we’re at \$39,203 just to live – and live comfortably – for a year. Missed several things like house repair(\$800), medical expenses (\$1000), hobbies (\$300), overdue book fines (\$50), clothing for 6 (\$900), Homeschooling supplies (\$600), Tithe (10% of earnings) but we’ve got a starting number.  Rounding to \$51,000 should cover to this point, \$44,000 if you aren’t one to tithe…basing tithe on expected required income.

To this point, to live on my 60 acres I have to produce \$51,000 each year after taxes…otherwise I’ll either eat into my savings or have to get a job off-farm. I have chosen the off-farm option.

But we have only just started.  All I am doing is paying for land and going through the motions.  It’s not exactly a Spartan existence (Netflix) but it’s also not posh.  The dentist smacked me with my own mortality this week.  One of these days I’m going to get old…possibly ill.  That’s going to require some cash.  Let’s put aside \$10,000 each year and hope it earns 10%.  Now we’re at \$61,000.

There is that dream of knocking down the current house (\$10,000) and building a new one (\$100/sq ft).  Sometimes, when farming, a truck is helpful.  Or a tractor with a loader.  But if we’re not careful I’ll have a new house, a 4-wheeler, a pickup truck a tractor and loader and no business.  Let’s add \$5000 to develop our farm business.  We aren’t advertising.  We’re not building an online order system.  We’re just buying animals, housing, fencing and feed plus any licensing we need.  So now we’re shooting for \$66,000.  Oh, heck with the house, tractor and truck.

Oh, and the tax man cometh.  To get to \$66,000 after taxes we need somewhere in the neighborhood of \$72,000.  The tax man is going to penalize me under the Affordable Healthcare Act if I don’t buy some health insurance too.  You will know better than me what that will cost you but for the sake of offering a number, insurance through Samaritan Ministries would cost my family \$370/month bringing our total to \$76,400 before taxes.  Another reason to keep that off-farm job.  Ugh.

If I make \$1 for every dozen eggs I sell (I don’t but let’s play here), I have to sell 76,400 dozen eggs.  That’s 209 dozen each day…that’s a highly optomistic, hard-working 3,000 birds, the magical limit imposed on farms of my license type by the state of Illinois.  BTW, 3,000 birds would need 600 next boxes.  60 10-hole boxes would set you back \$10,000, not to mention the \$4,000 you paid for chicks, \$2,700 for 16 lengths of PermaNet, and, assuming each chicken needs 25# of feed up to point of lay and if you can find feed around \$13 per bag, you’ll need \$20,000 worth of feed to get started.  Then you have to ship 7 cases of eggs every day!  So.  Let’s not start with 3,000 birds.

Still thinking about farming full-time…abandoning the prison job?  I think it is possible.  Keep in mind, though, that I work off farm.  …that Joel Salatin‘s dad worked off farm.  …that Herrick Kimball built his business while working off-farm.  …that Greg Judy had a job off farm.  …that Gene Logsdon kept writing and working off farm.  …that J. Hector St. John de Crèvecoeur wrote about working off-farm.  That working off-farm and living frugally to pay this mutha off is a normal thing.  We recently heard Salatin speak about transitioning to full-time and I’ll explore some of those ideas in an upcoming post, also sharing our trajectory and how we’re working to avoid the ridiculous \$37,000 first egg scenario above.

Luke 14:28 says:

Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?

Pencil these numbers out for yourself.  Add in Scouts, sports and music lessons.  Planning for the kids’ college?  Don’t feel discouraged.  Eat less food.  Make that car last an extra year.  Cancel Netflix.  Don’t get sick, old and don’t ever retire.  Floss!  Seriously, I don’t mean for this to be a “glass is half-empty” post.  I just think it is important to define the target before we begin aiming for it.  Next time we’ll start aiming.

UPDATE:

Dad pointed out I have to come up with the same money weather I own a \$240,000 house in the suburbs or a \$240,000 farm in the stix.  Both of these have their advantages but those advantages have to be realized.

7 thoughts on “Budgeting, Planning, Dreaming and Praying for a Miracle”

1. Wow. OK. This takes the breath away a little, but I’m with you. The thing to remember is that except for the fact that the mortgage is paying for 60 acres and an old farmhouse, this is actually a pretty average budget for an average North American family. One could quibble a few bucks here and there (10 percent return on investment? I want to know more), but basically this is typical even for Canadians with our socialized medicare. In fact, by paying the mortgage for 60 acres instead of a swanky home with an inground pool, you are investing in the opportunity for a second income stream, which in itself has the potential to become the main income stream. Which is a pretty good bright side to the equation.
On the other hand, looks to me with this scenario that the catch is your time available. Most of your weekdays are consumed by your off farm job, leaving about 6 hours daily in the dark for half the year to get through chores, family interaction, meals etc. Obviously, for the other half, you do have daylight, but it’s still gotta be hard to move forward from that position.
I’ve heard Salatin speak on this a little, and I’ve read Judy’s story. Looking forward to reading your take on the next step in the scenario.

• Right. Not the end of the world. We just need to take a sober look at what things cost. And, yes, I should have made greater emphasis on budgeting time. I want to be a farmer. To do that I have to spend 30 years at a desk.

And, now that we have our country estate, we can start looking at the tax advantages for working here, we can start looking for value we can create here and can start evaluating businesses that allow us to be absent 12 hours at a time.

I should further clarify that I’m not preaching or teaching here. I’m learning. I think it helps to write it all out…and I’m doing so publicly.

2. Steve |

You’ve given me a great start on our planning. I’m at the other end of the tunnel so to speak. I’m about to retire from a teaching job and will have a “retirement” (half of current pay) income and time. We may or may not have a mortgage payment if we move to a family members land. The idea is to grow much of the food to eat for us and them, and be able to contribute time and work to help build their vineyard into more profitable venture. Hopefully some other crops or animals can be added to give variety for income. Currently our relative works full time as an ag consultant and farms their own land also. We hope to help with that.

• Wow. Really, growing enough food for 2 couples…not too bad. Pretty soon you’ll find ways to do things a little more efficiently. Then you’ll have extra…and you’ll sell it. Then you’ll find there is demand for product. Then the garden/orchard/meat production will grow.

And that’s how it should be. Good for you.

3. caretaker |

Retirement without debt is an important goal. Another option is to have passive income to pay any remaining debt. I like that you are lining up what you can control. Basically, you are being your own financial planner. So many people I know don’t even try to estimate where they are financially, that is why they always live pay check to pay check.

• check to check or they just don’t check…just spend till it’s gone. Not that I’m speaking from personal experience…

4. caretaker |

P.S. Just so your readers know, not all of those kids in the picture are yours.