Financial Push-Ups: 7 Exercises to Grow Wealth
Feb 17, 2017
Daily, weekly, monthly, and quarterly money handling
Exercises have different rhythms.
Some you’re supposed to do every day, some weekly. There may even be long runs or tons of push-ups that you reserve for one day a month.
Handling your finances has different rhythms to it as well. I’ve got seven exercises that people should do on a daily, weekly, monthly, or quarterly basis to increase their wealth.
1) Cash Positions
This is something you should do at least once a month. Look at all your different accounts. There are a few software programs that can aggregate them, but I have a spreadsheet that we look at every week, showing our cash positions and checking and savings accounts.
I have a “crucial figures” document, and my accountant types that up every week when she comes. She logs into all the credit card and bank accounts and types in what my crucial figures are. So I know if I’m running low on cash and if I need to manage things and prepare in advance.
2) Debt Positions
Just like cash, you want to check your debt positions at the same time.
When you’re logging into your bank accounts, log into your credit cards too, and put that information in your crucial figures. You want to know exactly where your credit cards are at.
We do autopay on all that stuff, so I’ve got to make sure I’ve got enough cash to cover the credit cards and the operating is at a good level.
Same goes for long-term debt. You don’t have to check it every week, but it’s something you want to do at least quarterly. Know when you need to make payments, come up with a plan, and execute your strategy.
Inventory is the old crop you’ve got in the bins or at the co-op. Anything you’ve got in storage.
Make sure you’ve got a solid idea of how much old crop you have and its value in real time. You want to look at that probably once a month.
Then there’s new crop, which is either production that you’re planting or growing. You want to know exactly where your levels are at with those. If you were hit with adverse weather conditions, you should adjust those crop potential levels.
And you always want to look one year ahead to future crop and have your inventory estimates for it. If you’re doing a two or three crop rotation, you generally have a good idea which fields are going to be used for which crops over the next few years. So you can always build a forecast.
If the price is really good, you can always start selling grain two years in advance. Your banker will love that, especially if your production costs are on the downside and the future price for that crop is on the upside.
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4) Cash Flow
This is something you’ll want to look at probably every month.
Your statement of cash flow, your commodity sales plan, your debt service plan . . . that’s what we’re talking about here. When it comes to credit cards, obviously you have a payment every month, so when you’re looking at your debt positions, make sure you have enough cash in order to service that debt.
Especially when it comes to long-term debt. If you bought equipment, generally you have a payment once every year, not like a mortgage, which you pay once a month. So make sure your cash flow has the flexibility to service that debt payment. The last thing you want to do is run out of cash and call your banker at the last minute.
You always want to be ahead of the game. If you see yourself running out of cash soon, you can call your banker up, explain the circumstances, and ask to increase your line of credit with an intention to sell commodities soon.
5) Production Costs
Make sure you know what’s happening on every field. If you’ve got fields that aren’t making you money, you’ve got to know that.
Also, know what your trends are for input spending. Know where fertilizer has been the last several years and where it’s projected to be right now and for next year’s pre-pay expenses.
Know those trends, because your banker is always going to ask you. You can look in farm magazines, but they’re rarely reflective of current realities.
We all need to know exactly what’s happening with our production costs on a field-by-field level and on a macro level with input spending. The Cash Cow Farmer software was built specifically to help with this. Farmers just have to type in the numbers and the answers are right in front of them.
6) Daily Markets
These are your daily push-ups, your eight-minute abs every day.
I recommend you do this twice a day, actually. Basis can change from morning to evening.
Have a worksheet you do every day. Write down your local basises at whatever delivery points you have for options, on all your commodities. Then write down the futures price at least once a day.
You’re going to notice trends. You’ll know that today, the basis came down like crazy, and you should sell a little corn. Sometimes it’ll stay down for a few days until enough people realize and sell their grain until the co-ops fill their contracts.
You want to sell when the co-ops need your grain, so keep checking every day.
7) Off Farm Income
It’s a good idea to have some source of off farm income. A good business will make money every year, but there aren’t always opportunities to reinvest every single year. The farmer should invest in other things—stocks, bonds, real estate.
Look at these every quarter. If you’ve got stocks, look at their quarterly earnings calls and make sure the management team is still confident with the growth, or make sure that whatever reason you invested with them still holds.
This post is based on an episode of the Cash Cow Farmer Podcast. To hear more content like this in audio form, subscribe to the show here.