In many traditional businesses it’s possible to do the math backward to determine what input is needed to reach the desired output. It's simple to do the calculations to figure what needs to happen to reach a specific revenue goal.
Such is not the case in agriculture, which makes planning for money goals more difficult. Sure, I make projections for the farm, but so many factors are out of my control. *If you are in agriculture and you can plan your income within even a few tens of thousands, I’d really be interested in your method!
Since I’m an extreme eternal optimist, when I started my cow herd I projected incredible breed back percentages, strong heifer crops, low death rate, and zero unforeseen circumstances. By now, my herd should have 10,000 cows I can assure you it certainly does not!
So how I’m currently planning with money is a true mix of scarcity and abundant thinking. Most days, I contemplate purchases from a place of scarcity; we don’t know how much money we will make next year, don’t buy anything. Other days, I live in abundance and I buy food at the grocery store that isn’t on sale.
Jokes aside, the only concrete money plan we have right now is our loan priority payoff list and investing in our IRAs. We don’t know how much we can pay ahead per year, but we do know which loans we want to pay first; when there is extra money it goes straight to those loans ASAP. We are also committed to a yearly amount for our IRA contribution and we do what we need to in order to find the money. The plan is to always be open to continue investing in assets that have a promise of return. Invest in our future as much as we can possibly cash flow to get there.
The numbers in this graph are what keep us contributing to our Roth accounts. The following is an excerpt from the website where I sourced the graph,
"Over 40 years, a person contributing $5,500 per year to an IRA (the current limit), and capturing the market's historical 9.4% annualized returns, would end up with an account balance of more than $2 million. Here's the awesome catch: They would have only contributed $220,000 out of their pocket. The market's compounding returns would have generated nearly $2 million in growth over that period." *The IRA limit has since been changed to $6,000 per year.
Did you read that?! With time on our side as young investors the math works out to have us turn $220,000 into over $2,000,000 over a period of 40 some years! Time is on our side!
*This is not advice. I am not an expert. I am a regular person sharing how I find $6,000 a year to put in my IRA so I have money for retirement. I've said it before, and I will say it again: someone once told me they wish someone would have taught them this. No one told them that this was possible. I am here to show you the opportunities and possibilities! PS-We work with an investing company.
Everything else, is a take it as it comes. Sure, I would feel more in control if we had a steady monthly or yearly income and I could plan where the money would go, but we don’t.
I’m finding control in planning with what we have when we have it. That’s the most of the money goals we make: when we have checks in hand, deposit them wisely. Using our own method to prioritize which loans need to be paid in full first, so we have enough money to take new loans.
We all use money. We should talk about money and share what works for us so that we can all grow our net worth.