Farming Is Getting Harder…… But People Are Living Longer

So farming is getting harder and life and business is getting more complicated.

Stress is everywhere and, added to this, people are living longer.

As a farmer you want your children and grandchildren to survive and survive well through all of this.

It's not going to be good enough to be average and if they are not going to be above average then the advice we give them might be this:

- Take top advice on all fronts.

- Have the ability to say 'No' quite often.

- Have the wisdom to marry someone who understands the lack of money.

- Have the discipline to bypass life's luxuries they can't afford.

One marriage will be enough - this should be self-explanatory and common sense but common sense doesn't seem to be as common as it once was. The next generation should work out a 10 year plan with their spouse. There's no point talking about a three year plan as they won't be able to afford it and secondly it won't give them time to help them reduce the content and expense of the plan.

Start early. When your children are 10 years old start talking with them at Christmas time about the family's capital budget for the following year. By the next Christmas they will have quite a wish list on their capital expenditure budget and you will need to explain to them how prioritising capital expenditure works.  Your children need to understand how this works because it is capital type payments that will cause them the most pain in later years.  This approach to these crucial concepts, best learnt early, will help them spread the pain of understanding them.

Our children come out of high school almost invariably with a poor understanding of financial management. They have a vague understanding about cash and a lack of cash but that is about the end of it. Parents need to fill in this void. Passing on your financial experience that has built up over a life time cannot be covered overnight. A fair proportion of it is best done across the kitchen table if you can convince them to sit down long enough.

Borrowing some of your children's hard earned cash and paying them 3-4 per cent interest is always a good learning curve for all concerned. They will need top accountancy and legal advice from time to time.  Many accountants and solicitors of course know the price of everything and the value of nothing as I have been advised many times by clients over the years but the point still stands.

Don't get addicted to low interest rates. Low interest rates camouflage the long term return on investments and give you warm fuzzies and smudge your key decision making.  Don't let your children and grandchildren think that low interest rates are set in concrete.

One of the best legacies you can teach them is the ability to say "no", but "no" needs to be well packaged into an art form.  It is a critical skill because they will not be able to do all the work themselves so they will need to be a preferred employer in their community.

Don't let them get too down – business is volatile so getting depressed from time to time is almost normal. Sometimes the best channel for them to watch is the Disney channel – maybe for you too.

They don't need to like their bank manager or even their bank but their bank is the elephant in the room so watching, listening and respecting them is essential as changing elephants is not always a solution.

They also don't need to like their farm advisor but most farm advisors want to be a part of a successful team. If they were not good at their job they would be out of work in agriculture very quickly.  Often if their farm advisor is difficult and hardnosed it can mean that they have good advisors and this is backed up if you are still farming and farming well.

Encourage the next generation to wage war on one front at a time. Even crackerjack operators struggle trying to wage war on several fronts  and if they are in this trap they need to pause one battle, while they win the other one.

If they are not getting job satisfaction for 90 per cent of the time then maybe they are in the wrong business. Not getting job satisfaction for 10 or 20 years is no way to have a good life or to fulfil their potential.

At the moment the NZ banking system is rewarding people for borrowing money.  This is not a long term arrangement for your children or grandchildren.  The reward must be pitched at long term profitability and a sensible business return – that is a concept that is long term sustainable.

New Zealand businesses need more financial reserves than 20 years ago – probably a minimum of 10 per cent of their gross income.  Farmers though need more, partly because of the high dollar turnover, partly because of their low profitability and partly because there is also an annual climate effect – sow this seed with your farming children and keep watering it.

Never forget that tough love with your children and grandchildren is real love – it may be invisible for a few years but tough love tends to survive regardless of everything else around it.

The education of your children and grandchildren is more important than fertiliser.  Both pay a real dividend but top education is a 50 year dividend.  A student loan of $20,000, even $30,000, is workable and acceptable.  There may well be more of a problem around the world in years to come with a lack of jobs rather than insufficient food for people.

Don't let them think that reaching 65 and being entitled to national superannuation is the end of work.  In any event it will more likely be 67 for your children and probably 70 for your grandchildren. Many New Zealanders will work long beyond 65 – many because they have to and some because they are still getting job satisfaction.

If you can quietly sow these hard learnt seeds and thoughts into your children and grandchildren you should be paid for this.  You will be, of course, but it won't be in cash.

Pita Alexander is an accountancy and agribusiness director at Alexanders.