Why Farmers Need to Think Beyond the Farm

I met with a client a couple of days ago - 3rd-generation farmer, smart guy, runs a tight dairy operation. He’d read one of my blog posts about common financial mistakes in agriculture, and he wanted to talk more about how to diversify from the farm. It wasn't really making sense to him given that farms tend to run at or near $0 net profits annually.

He said, “That’s great advice if you’re making good money. But when you’re running at break-even most years? How does that work?” That’s the reality for a lot of farm families so the idea of carving out consistent investments can feel completely unrealistic.

But I told him the truth: the reason it feels unrealistic is the same reason it’s so important.

---

1. The Farm Isn’t a Retirement Plan

A lot of farmers I meet still think of their land or their operation as their retirement. But that assumes a few things:

• That the farm will keep producing profitably.

• That someone else - usually a son or daughter - will want to take it over and keep it running.

• That you'll be able to sell it or draw from it indefinitely.

  
  

None of those are guaranteed. And many farm tax returns don’t show enough net profit to create meaningful Social Security income when retirement age rolls around. One of the biggest risks I see in agricultural families is farmers getting into their 60's or 70's with no outside investments, no secondary income, and no backup plan.

I told my client, “Alright...You don’t feel like you can spare the money. But frankly, the mental shift is usually a bigger hurdle than having the cashflow for it."

---

2. Diversified Investments Buy You Freedom

I asked him a simple question: “What happens if you get sick? Or your kids decide they don’t want to farm? They don't farm now, why would they start? What’s the plan?”

He said, “Well, I’d probably have to sell some land.”

That’s exactly what I try to help my clients avoid. You don’t want to be in a situation where you're forced to sell something you love, at a time you didn’t choose, under pressure you didn’t create. That’s how wealth gets lost.

The most common phrase I hear from farmers when working on this is, "land is the only real investment."

While land can absolutely be a valuable investment, it is certainly not the only investment. This mindset is so deeply engrained into farmers that it's incredibly difficult to overcome and is partially at fault for the decline in family-farms, large and small.

When you have even a modest outside investment account - something not tied to weather, commodity prices, or equipment breakdowns - it buys you time. It buys you options. It buys you the ability to say, “not yet” or “not this way.”

That freedom is worth more than any machine in your shed.

---

3. You Can Still Invest Without Starving the Operation

Now, I’m not saying starve your operation to fund a brokerage account. What I am saying is this: be intentional. A couple of years ago, I worked with a client that spent about $100,000 on a tractor that was new to him. He justified it because it reduced his tax bill, and he really liked the machine.

But saving $10,000 (on an example 10% marginal income tax rate) doesn't compare to the benefit he could be setting himself up for on a planned, targeted investment/exit/income strategy.

This is something that happens all the time - and he knew it. Not always, but too often farmers find a reason to buy a new thing, leverage it, take the deduction, pay the debt down, and then restart the cycle without ever looking at themselves.

It's noble but not setting them and their family up for success later on when they can't work the farm anymore, don't want to work the farm anymore, or are forced to leave the farm. Thankfully, financial planning is flexible and can be molded to your specific needs.

There’s a time to reinvest in the farm. And there’s a time to reinvest in yourself.

---

Let’s Make a Plan That Respects the Farm - and Your Future

The point is to get started. Carving out a line item for diversification and accepting the fact that capital markets will do what they do (same as commodity prices) is key - the size of the carveout is less important. Make a simple commitment to start small, stay consistent, and meet regularly to update, tweak, and continue.

You don’t have to go it alone. If you’re wondering how to build flexibility, freedom, and long-term income outside the farm - while still respecting what the farm provides - let’s talk.

Jose Alvarez

Founding Advisor

Harvest Horizon Wealth Strategies

Schedule a Meeting

About Harvest Horizon Wealth

Home

The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.