Financial freedom almost sounds too good to be true - having enough 'off-farm' assets, generating enough income, indexed to inflation, to cover your annual costs of living, without having to work, for as long as you live.
In the bush, it can even feel like a fantasy, but this needn't be the case. A goal of financial freedom should be at the core of every agribusiness, and here are five distinct reasons why it is so important, and how it can be achieved in rural Australia.
Building 'off-farm' assets helps facilitates handing on a viable business: When you retire, someone has to pay the bills, and it's vital you have enough assets to generate the required income to cover all your bills.
Selling the farm may be the answer, but if you want to hand on the farm with minimal debt, leave an estate or just help your kids out, then relying solely on the farm as your superannuation is not enough.
An agribusiness with too many mouths to feed will struggle: Life expectancy is pushing 90. After the next generation takes the farming reigns, it doesn't feel long before the grandkids are home and keen for a crack! If you don't provide for your retirement, the family farming business may end up supporting up to three generations.
Few agribusinesses can financially support that many family members - or differences of opinion - and certainly cannot thrive under this structure.
'Off-farm' assets can offer some tax breaks: An example of this is superannuation, which, when used correctly, can be taxed at concessional rates to encourage you to use it. And why wouldn't you?
'Off-farm' assets can be liquidated: In a severe drought, an investment property could be used as security for additional lending, or a share portfolio might be fully or partially sold to tide you over in a tight period.
You can't work forever: Most farmers don't like to admit it, but there comes a point where old muscles tire easily. Or perhaps you just want to slow down, travel, enjoy life. With a non-farming income you'll have more opportunity to do the things you actually want to do.
- Ben Law is an authorised representative of Charter Financial Planning. This article offers general advice only. You should seek advice tailored to your particular circumstances before taking action.
