Farmers who are 21 today can prepare themselves for retirement by paying down all debt, building grain storage and anticipating technological change. That’s according to Jerry Gulke, president of the Gulke Group.
“I wanted to become a cash generator,” says Gulke, remembering the early days of his farming career and his focus on building on-farm grain storage. “As you become debt-free in that sector … use that grain bin money to invest in something else.”
In his view, Section 179 is one of the worst things to have ever happened to farmers because it has encouraged people to defer taxes and hold onto debt.
Gulke says getting an MBA was an important turning point for him.
“It was the best thing I ever did for my personal life to understand the miracle of compound interest, what it will do for you or against you,” says Gulke, speaking with "Top Producer Podcast" host Pam Fretwell at the 2016 Top Producer Seminar. That’s because once he began to build cash and get rid of debt, lower commodity prices hurt his business less and less.
“I could see a plan out there that there was no reason why I couldn’t die a millionaire,” Gulke says. “That’s the beauty of being in ag and self-employed. The market doesn’t care if you have brand new machinery … . The market wants to know who’s the cheapest seller.”
Anticipate rapid technological change
One of the biggest mistakes Gulke says he’s made is not anticipating how quickly technology can change.
“Being an electrical engineer, I never guessed what would happen now,” he says. He never imagined seeing $7 corn or 135 bu.-per-acre farmland that yields 200 bushels. That means even as prices appreciate, it’s still realistic to be profitable.
Listen to smart people
Gulke remembers listening into educational sessions from Darrell Good of the University of Illinois Extension.
“When I started farming, I spent 2% or 3% of my gross income on marketing,” he says. Many farmers still turn their profitability over to grain merchandizers rather than doing that work themselves, Gulke says. A little research and education will go a long way toward higher profitability.
Register now for the 2016 Tomorrow's Top Producer business conference happening June 16-17 in Nashville!