EC SD | hinfarm - 1/27/2024 09:52
Getting to the point of not needing an operating loan for the most part was one of the most mentally freeing things I have ever accomplished. It's still there to it's full capacity if I need it, but we probably won't use it.
This is just my list of priorities, but you do what you want...
1. Self finance operating expenses
2. Additional liquidity for the "just in case"
3. Anything extra can go towards whatever demonstrates the biggest need (replace machinery, buildings, invest in something, taxes, ect)
Agreed!
But it depends on a person's age and ambition, I guess. For me, I am approaching retirement and have no ambition for more acres that require 15 years or more of loans to pay. Yes if the piece across the road comes for sale, I will bid on it, but not that piece of crap goat hill of a farm 20 miles down the road. :)
So I have moved into a de-leveraging phase now where I was able to apply capital toward operations - and last year finally achieved my goal of not having an operating line. I could have just kept borrowing, but at rates well above 5%, I decided to pull money out of life savings to avoid borrowing. I have been leveraged my whole adult life and it has worked out very well. Just saying at this point I want to get what I have paid off...
I think I can make 8% annually on the brokerage money, but it is a lumpy return. Some years well under 8% and even negative returns. Using this capital for loan-avoidance is a sure thing, and I have additional retirement assets to gamble on stocks anyways...
Now if that land across the road comes for sale, this could all change in a hurry... |
Save on operating interest or invest in mutual funds?
