It’s hard to fix a problem when the problem itself is unknown. When it comes to finances, not knowing where your money is going makes planning difficult.
Living and working in the same place can make this even more challenging. On the farm, separating true business expenses from personal costs is critical to financial preparedness – whether in the transition process or day-to-day business management.
How much does it cost to live?
“The biggest factor is so many things are blended. Sometimes it skews our idea of the cost of living,” says Audree Morin, an FCC business advisor based in Guelph, Ont.
A dairy farmer herself, Morin lists a variety of expenses that commonly get confused between personal and business costs, including fuel, utilities, vehicle payments, and even seemingly straightforward expenses like rodent control. Putting the right expense in the right category can surprise farm families when they see just how costly it is to live on and maintain a farm property, or alternatively, how much it would cost to live away from the farm.
The consequence of not knowing these things is, for example, being unsure how much you need to retire. For an incoming generation, it becomes challenging to accurately determine how much income the farm needs to generate to support the family, and potentially multiple families, plus how much off-farm income may be required.
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