Long time readers of Grainews know that I developed the Fivelegged stool financial strategy around 1993. It has five parts and I’ve written about them so often I won’t do it now. I do have an essay on the five-legged stool and I think this strategy is important enough that I will send it to you free if you send me an email ([email protected]).
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Anyway, as you or any other farmer gets closer to retirement, maybe it’s time to adjust the legs on this stool. Here are my thoughts.
Maybe one leg should be some farmland you keep and rent out. This is cash flow and your farmland has a good chance of going up in price. Leg two might be health insurance to protect you from some unknown health problem in the future. Insurance might also include some estate planning insurance to help you deal with children not involved in the farm. Some days I wonder why some people have insurance that pays out when the parents die at age 90, when the kids are 60 years old. Seems to me most young families could use some cash while they are young and have young children instead of a lot of cash when they are old.
I dropped most of my life insurance policies when I retired because I figure our family can live quite a while quite well even if something happened to me. My wife and I can have a very nice holiday for what I was paying into that policy, and, besides, I’m self-insured for the same amount now anyway. Some people don’t feel that way and that is fine.
The third leg is a second skill, and for older folks maybe that second skill should be how to manage some money on your own. Maybe your second skill was how to use your hands and now maybe the second skill should be how to work with your head.
Combine these strategies with learning how to make money with stocks inside a TFSA and a trading account and a person can earn and keep a lot of extra money.
So maybe we older folks should leave the five-legged stool for the younger farmers. We older folks should adjust our stool so it’s a three-legged stool as follows: own and rent out some farmland; have some health and sickness insurance; and learn a second skill where you work more with your head than with your hands.
This morning our priest stressed how we should take the time and as he said it, “prepare yourself” for the real Easter season. Later I got to thinking: as many people retire, they suddenly have a lot less to do, they have a big wad of money and they don’t know what to do with it. It must be a strange feeling to spend years managing a pile of money as it flowed through your fingers day after day, come back once in a while and keep going and then suddenly see a big fat pile of cash sitting in a bank account. There are no bills to pay, no urgent need for the money, but a very low return and no skill to manage the money with.
I think younger farmers should learn the skill of making money with stocks just so they can diversify their income and net worth. Then they won’t have to learn it for their old age. But if you have not learned that skill and you are heading for retirement perhaps it is time to “prepare yourself.”