By trade I am a financial planner and my wife is a CPA. That’s right, we are boring like toast in skim milk. However, that means that we don’t really do anything major without going through the columns and rows of the spreadsheets to make sure that what we are doing is viable.
I have gotten questions from time to time from folks, even though its none of their business, about how much money we have sunk into the homestead project. Many of the questions almost sound like some followers think that this project is a flash in the pan and that someday we will move to a mini-mansion on a fairway somewhere in knobby knee, bermuda shorts world. So I thought I would walk everyone through how this will play itself out.
To be clear, in terms of relative costs, we have a community up the road from us in the city that is called Legacy Ridge. It is a subdivision of homes on a golf course over looking the foothills of Boulder. Those postage stamp houses go for 500k to over 2 million dollars. We own 3 pieces of property. The sum total of those 3 don’t add up to even ONE of the mid-range houses up there… but we don’t have the debt either. That is the key point.
The first rule of financial planning is to define your goals, timeframes, risk tolerances, and resources.
- Goals: We intend to be here as long as we still can see above the dirt. Most of society’s definitions of success, to us, smack of trying to impress the neighbors. We love this lifestyle and we will work from now until our retirement to make this homestead be as self-supporting as possible. So our overall goal: Build the farm, be as self-sufficient as possible, become debt free, and need almost no money to live day to day when we retire.
- Timeframe: From now until we can’t see above the dirt.
- We are moderate in our aversion to risk. Long term time horizons don’t phase me now that I’m going on 30 years in the financial planning business. I also have an expert tax planner as a spouse. I know more about managing risk than just about anyone I know.
- Resources: Our ability to earn a living, our common goal of using that living to build our farm, ingenuity, and continuing to create multi-functional layers on all that we build here.
- Potential Drawbacks: Taking care of ourselves physically. I suffer the most from that problem. The well running dry. Storms and climate change catastrophes: no solutions. Peak Oil: need to take up bicycling. Major medical expenses: that’s why we want to live on as little as possible.
- We may, at some point, have more than one family living here. Who and for what reason is not determined, but I imagine it would be a friend or two, my mother, and my sister’s family. Who knows. In any case, they best like digging in the dirt.
Ok. So a huge part of homesteading, prepping, and financial planning for the future, is to have what you need in terms of physical necessities and financial assets prior to leaving work and living out one’s “golden” years.
I have long told the middle class saver that one of the most important things you can do by the time you retire is to be debt free – including your mortgage. Forget what you have ever heard about the interest deduction being good for you. Pay off your mortgage, all credit debt, and try, if at all possible, to have no vehicle payment.
For instance, we still maintain a house in the city because we need it for work convenience. We got the farm at the bottom of the foreclosure fiasco of the financial collapse. We will use the equity from our city house to pay off the farm mortgage at retirement. If the housing market fails again, I have no qualms about using other savings to pay the mortgage off. This is our fortress and we will keep it no matter the cost.
Here is what our homestead should look like when we pull the plug on trading our lives and time for paychecks:
- The farm mortgage will be paid for. The only ongoing expense for the place will be insurance and property taxes.
> There isn’t much we can do about insurance. However, we will have our agricultural status for taxes and if we play our cards right and are able to hay the place, the hay should pay the taxes and have enough left over to feed our grazing critters.
- No utilities: We won’t have an electricity bill now that the solar is installed. We will have a minimal propane expense as we are installing solar hot water and a stove, along with a solar hot air condenser that I will be building for heat. The sun will provide much of our heating and hot water needs. We are on a well and the solar panels power the pump. We will have to replace the pump and solar inverter at some point, but those things last a good long time. The only utility expense we will have is trash removal, but even that will be minimal. We compost all of our food scraps, burn cardboard and paper, and recycle. It seems unlikely that we will generate much waste that needs to be removed.
- Because we raise our own food, our food expenses will be minimal. We can grow our own greens year round, and given the success of our pigs and chickens, its seems unlikely that the industrial grocery cartels will see much of our money.
- Vehicles: Once the farm infrastructure is built, I will not need as big a vehicle as the pickup. Being retired, we won’t be commuting. Therefore, we won’t have auto payments and our fuel bills will be very small.
- Given the sociopathic society we live in, the biggest expense we will have is paying for medical insurance. Hopefully, someday more altruistic heads will prevail and recognize that healthcare is a right. I will not go to a nursing home… ever… that’s what the .22 is for.
- The expense that will replace some of our food bill is feed for our food! Once the fields are growing grass again, the goats, pigs, cows and chickens can forage to their heart’s content. There will always be feed costs, but in the scheme of things, it will be much cheaper than having to buy everything from a food system who’s future is anything but rosy. We will offset a lot of our fertilizer needs by aggressively composting manure and grass.
If we do this right, then our ongoing expenses will be: taxes, insurance, some gas for transportation, some propane for what the sun can’t do for us, trash, medical insurance, some minimal food, feed for our food, some seeds that I can’t save, and the occasional new pair of overalls, boots, t-shirts and toilet paper.
“So what will you do when you are too old to do such things?” That is what our savings and investments are for. We will do our best to keep them from being touched until absolutely necessary. Personally, I don’t think I’ll get far along enough in life for that to matter, so it will all be left to my wife and son.
Because the goal is to be self-sufficient and also to live on as little as possible expense wise, we should be able to make all of those expenses on Social Security – EVEN if the benefits are reduced as seems more and more likely because of the mis-management of the funds we have all paid into all of our working years. Like most people, we don’t have pensions. Therefore, by having minimal monthly living expenses, our savings and investments will be allowed to be held in reserve for emergencies and upkeep.
“Well”, asks the citiots, “what will you do to keep yourselves busy?” ” Aren’t you going to travel the world and the seven seas?” “Won’t you get bored?” (As I type this, I am laughing hysterically).
- First, most city folk that I have encountered in my almost 30 years as a financial planner will not be traveling and doing all of those dreamy wishes and fantasies, because very few have saved even a fraction of what it would take to do that and then not run the risk of running out of money. Most will run out. Sorry. Just a fact. Be sure you are on good terms with your kids.
- Second, I have always believed that one should build a life you don’t need a vacation from. We will do so many things here that we may be busier then than we are now. Among the tasks and hobbies: Gardening year round to produce food, taking care of the animals, going for hikes, astronomy, archery, hunting, quilting, carving, navel gazing, wheat harvesting, movie watching, cooking, canning, freezing, writing, photography, and belonging to a community. There is NO chance we will run out of things to do.
The forethought we have put into this is pretty extensive. Too many of us never stop to think about what we want to retire TO. Most of us think about what we want to retire FROM. That is why the retirement failure rate is so high. Remember, it is highly likely that you will be retired LONGER THAN YOU WORKED!! Unless you set goals and put tangible numbers to those goals, you might as well stay dreaming…. it will never happen. I can attest to that fact by having watched people postpone retirement and other goals because they lacked vision and only saw consumption and spent everything along the way to what they had only “hoped” for and never “planned” for.
So yes, while we are working, we have poured a lot of resources -not to mention sweat equity- into our homestead. However, most of the expenses were “one time” expenses that don’t suffer from planned obsolescence. We are getting lean and prepared. However, the planner/prepper in me is always aware of the fact that the best laid plans can also come unglued…. and we are trying to prepare for those possibilities as well.
There you have it. Homesteader, Farmer, Hippie, Prepper, Financial Planer/CPA. That is how we will bug out… by having as many ducks in a row as possible and having little or no obligations to “the man” when we get there.
Have you done the numbers? Have you set goals and developed a plan to get there? If not….. I would suggest getting after it while you still can.