Where is it written in the farm family rule book that you can’t talk about money?
Recently on a coaching call, a farm family admitted a huge taboo topic had caused great stress to their over-40-year-old son. This non-farming son did not have any clue about the profitability of the farm, what the parents needed to live on or what the plan going forward was for income streams, labour and type of enterprise that would be making money. The parents had assumed he was just not interested in the farm at all. They assumed wrong.
When your adult children are not coming forward to talk about money expectations, you as the parents can take the lead. Family meetings are the forum to get clarity of expectations.
Dick Wittman, a veteran farm family consultant and founder of Wittman Consulting, tells all families, “If you are in business together, partners should be able to talk freely about their business wealth and the personal side of their financial realities. The two go hand in hand.”
A veterinarian in my audience agrees. They shared with me the struggles of a business transition fraught with unknown personal finance expectations. “Elaine, our partnership buyout would have gone so much smoother had we realized what the personal wealth expectations and needs of our exiting partner were. There were too many unmet expectations and surprises in the buyout process.”
What is your plan to be able to talk more freely about money on your farm?
If the story you tell yourself suggests it’s nobody’s business how you spend your money, ask yourself how you got there and why it has to be like that.
I hope you would agree with me that the emotional factors around money affect the farm transition process. Mixing emotions with money and unmet, unspoken expectations is a recipe for farm drama, legal battles and unresolved conflict.
What is a more helpful approach?
- Figure out what money means to you. Bruce Sellery’s book Moolala: Why Smart People Do Dumb Things With Their Money addresses this question. Bruce is a good friend of mine and podcaster of Money Made Simple. I suggest you start tuning in to increase your vocabulary and aptitude for talking more freely about money. Money – to me – is a form of energy or a resource to create solutions. For younger producers in my audience, it means survival and a way to pay off debt. Older farmers see money as security and freedom.
- How much debt can you sleep with? Do you expect to be debt-free by a certain age? Are you a young farmer who is afraid of large debt or has not been taught how to cash flow debt at a reasonable workable level? Coaches like Glenn Dogterom can help you figure out what is a reasonable debt load. If you are the farm parent expecting to transfer farm assets without any debt, you may have unworkable expectations in 2024. Does your spouse understand the different levels of current, intermediate and long-term debt? If spouses are fighting about farm debt, your transition plan will be stuck.
- Mine your data. Look at your bank statement for clues as to your patterns of spending and revenue. Can you accurately share with your successors and farm business partners what you are spending on family living? A young farm successor disclosed he needed $60,000 for mortgage and shop debt, and $80,000 for living, which is $140,000. This leaves no room for tax-free savings account (TFSA) contributions or debt servicing for growth of his business to buy into his parents' equity. Many farm families need $75,000 to $85,000 for family living. Do you know what your family living number is? Once the family needs (not wants) are met, you can carve out allocations for other expenses. Frugality is a great gift, but the next generation is accustomed to “Amazon-style” living. Measuring what you spend and sharing the data will help you have a concrete conversation about where you may be able to make changes to accomplish your financial goals.
- Learn how to read and understand financial statements and share them. I suspect you don’t want to feel stupid asking your accountant, lender or investment broker to help you get more financially literate, but we all start at the beginning of our learning and keep growing. Many farm women who have not been actively involved in the finances of the farm business are shocked when they start learning about their net worth and the responsibility of managing wealth when they become widows. Why wait until death strikes? Grab the bull by the horns and be proactive about your financial education journey. Get your accountant to spend time helping you understand balance sheets.
- Suppertime conversation starts with young teens and their queries. As entrepreneurs, we talked about money, risk, debt, loss and all kinds of financial issues at our supper table with our teenagers. We also defined what confidentiality meant so there was no fear of spreading information to peers. Positive conflict resolution involves creating solutions. If you have a culture in your farm family of not owning up to financial mistakes and making repair together, you likely don’t have an open culture of talking about money problem solving. You get to choose how you want to change the culture of not talking about money.
- Ask your parents to tell stories about the hard times in farming. Tears flowed at a family succession meeting when it came to light, through the father’s story; he was carrying a lot of emotion around how hard his parents had worked to keep the farm going. Deep emotion from past stress may be creating fear of failure for the future finances of the farm. Ask, “What are you afraid of, Dad?” You might be surprised at the answer. When fears are disclosed, you can start unpacking the thinking and feelings you need to navigate toward new money scenarios.
- Set a date for a family meeting. Get expectations and curiosities out in the open so you can create solutions. Bring some financial data to the meeting. Be clear about confidentiality and define what that means to everyone in the room. Share with each other what money means to you, your hopes and goals for the future.
Imagine how good it is going to feel when you can freely talk about money in your farm family.
