In today’s world, deciding whether interest is a cost or an investment can be a bit mind boggling, especially if you want to expand your farming operation but the only way to do so is to take on more debt. Recognising that there are ways that you can leverage your farm to increase your net wealth down the track is just one strategy farmers are using to grow their farming business.
Here’s a bit of background info: interest sits on the profit and loss statement as either a cost or an expense. If you want to increase the productivity of your property through acquisition of assets (purchasing additional country or another farm, buying livestock or purchasing machinery) we can make use of leverage and pay interest (cost) with a view to increase our return (profit) in the future.
Leverage can be useful tool to use when looking to increase your net wealth but, as always, there are accompanying potential risks that need to be considered before making a decision. In saying that, the agricultural industry is particularly well suited to using the farm as leverage for growth and expansion, if it is managed well as part of an overall plan.
In this example, Pete has used debt and paid interest (cost) to help build his net wealth. Interest could be deemed an investment rather than a cost.
Getting a financial adviser onboard (especially one who’s familiar with the world of agriculture), can save you a lot of time, effort and potentially cash in both the long and short-term.
As we say here at Lifesolver Financial, having a second set of eyes look over your plan is never a bad idea – they might pick up on something important you’ve missed or an opportunity you didn’t see. Want us to take a look? Contact the team at Lifesolver Financial. Leveraging over 30 years of experience working with farmers, our team can help you with everything you need to achieve farm business success and a bigger future. Call us on (02) 5750 0519 or reach out to Matt: Info@lifesolver.com.au
*This blog/article is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. If relevant: Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
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When it comes to creating a secure financial future, the right adviser can make all the difference – that’s where Matt Meehan comes in. Committed to guiding you toward a secure financial future, Matt offers extensive knowledge and expertise, providing personalised financial strategies designed to meet the unique needs of farming families, individuals and business owners.
We are pleased to advise that Lifesolver has merged with Advisory Partner and Practical Systems. Through this new group, we are able to strengthen our focus on rural people and businesses, with excellent local service (and offices).
