farmer investment planning

Growing up on my family’s mink ranch taught me a few important life lessons: work hard, be honest, follow-through on your promises, and no job is complete until it’s done right. I apply these same lessons to my career today. I’m very fortunate to work at a practice that shares a similar background. Peterson Wealth Services (PWS) helps an array of clients. One niche that we focus and pride ourselves on is our farming and ranching clientele.

At PWS, we believe in the code of the West. We take great pride in our work, we keep our promises, we see jobs through until completion, and we maintain that anything worth doing is worth doing well. This code, along with the core values learned working on the ranch, is what helps us earn a client’s trust. We work hard, we are honest, and we do what we say we are going to do. Farmers and ranchers are known for working hard and living a simple lifestyle. The professionals at PWS try to take that same approach when creating financial plans for our ranchers and their families. We recognize how hard it is to earn a dollar these days, and we take the time to fully understand the short- and long-term goals for each client and their family.

Our approach is modest and we take great pride in the planning we do for our clients. We do not promote “hot stock tips” or any “get-rich-quick” investments and are proud of that fact. What we do is help our clients determine their goals, whether it be investment strategies, estate planning, or tax minimization, to name a few, and then we work with them to implement plan(s) to achieve their outlined goals. Anyone that has been in the farming business understands the importance of planning for unanticipated future events.

For example, a water line breaks and requires immediate fixing, or hired help quits and new hands are needed. Further, the market prices for crops and livestock are always fluctuating. These events parallel unforeseen items within the financial planning industry. We deal with life issues and financial ramifications of those issues, changes in estate and tax laws, as well as unexpected events that rattle markets. All of these possibilities are taken into account when planning for a client’s future. We strive to have the best strategy in place to deal with each potential scenario.

I would like to touch briefly on a common theme we see among our farming and ranching clientele – the bank account. Having some cash in savings is a good thing, but having too much cash in savings can be a bad thing. With rates so low, banks are not paying a significant amount on their interest-bearing accounts. Plus, once inflation is factored in, savers are actually losing ground! If inflation is costing us 2% per year and savings accounts are paying us .5% per year, the cash “safety net” is providing a NEGATIVE 1.5% real return. Also, recognize, one may not notice the loss of purchasing power day-to-day, however, 10 years from now you will definitely realize the difference in what consumer goods costs. Consider the price of your operating costs or the hourly wage you paid hired help 20 years ago.  I’d be willing to wager they were both considerably less than today. That is the power of inflation. To help combat the effects of inflation and assist in keeping your money invested, the PWS team uses a strategy called the “bucket approach.” The bucket approach includes three buckets: one for short-, one for intermediate-, and one for long-term needs. Short-term needs consist of a 1-5 year period and include items like feed, equipment purchases, and payroll. The use of low-risk, low-return investments would make sense for money in this bucket.

The second bucket is for the intermediate-term needs or goals, usually 5-7 years out. Money in this bucket would have a longer time horizon and would be best invested in a balanced portfolio, which is designed to potentially earn a moderate return and help outpace inflation rates.

The third bucket is for long-term needs or goals consist of things like retirement or a child’s college education 7 years or more into the future. This bucket would be more weighted towards growth investments in order to assist in targeting higher returns necessary to accomplish the long term goals. Whichever bucket we are examining here at PWS, we understand that maintaining liquidity and not tying money up in illiquid investments is typically a rancher’s top priority. The bucket approach is a basic strategy and easy to follow, however, without a financial professional it can be difficult to select the correct investments for each bucket. There are thousands of ways to invest your money. Having a financial advisor who truly understands your industry, your goals and your values should be a top priority.

Helping farmers and their families achieve their goals provides me with immense satisfaction and is very rewarding. If you are unsure if your current approach to money management is right for you, or if you would like a second opinion on your investments, feel free to reach out to our office at 801-475-4002.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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