Near the end of our homeschooling stint, we discovered a wonderful family who have for 35 years pulled together a spectacular array of historical and educational speakers. Formerly called CHEF (Christian Home Education Fellowship), now called Family Covenant Ministries.
Mr Pratt’s most recent blog discusses using debt properly. Now, okay, my mind goes immediately to the song, ‘Neither a borrower, nor a lender be. Do not forget, stay out of debt.’ Which then led me to wonder where that came from. I knew it was from Shakespeare’s ‘Hamlet’ (Polonius counsels his son, Laertes in Act-I, Scene-III of William Shakespeare’s play, Hamlet by saying, “Neither a borrower nor a lender be; / For loan oft loses both itself and friend.” But what about the tune?
Completely surprised when i discovered that it was created and made famous on the TV sitcom, Gilligan’s Island, which i watched religiously when i was young. SO FUNNY! It is sung to the tune of the Toreador Song in Bizet’s Carmen.
The Bible also has advice on debt and teaches us to guard against being in debt, likening it to slavery and bondage. However, debt does not seem to be a sin, but a tool to earn money wisely, but counting the cost before taking on the burden.
May 9, 2018
from the Ranching for Profit School
A lot of people tell me that they want to be “debt free.” They are tired of making big interest payments on land, livestock, machinery and their operating note. They have had too many sleepless nights worrying about making the next payment. They believe that if they didn’t have to borrow money they would be more profitable and financially secure.
But the proper use of debt makes us more profitable, not less. And being debt free doesn’t make us financially secure. In fact, for most of us, short of winning the lottery, the appropriate use of debt is our only realistic path to financial security.
The problem isn’t debt, it’s our misuse of debt. The two most common ways we misuse debt are:
We put finance first and economics a distant second
We use debt on the wrong things.
Using debt effectively begins with understanding the difference between economics and finance. It boils down to this: In economics we ask, “Is this profitable?” In finance we ask, “Can I afford to do it?” If we are going to be smart about our use of debt, economics must come first. If it isn’t profitable you don’t have to worry about how you’ll pay for it, because you shouldn’t do it in the first place.
When RFP grads evaluate the profitability of a livestock enterprise they include opportunity interest on the herd as a direct cost in the calculation. If the enterprise has a healthy gross margin it tells us that borrowing money to expand the herd will increase profit. If we haven’t included opportunity interest in our calculation we can’t be sure if expanding the herd is a good idea.
The other problem is that people use debt on the wrong things. There are two primary places where we put money in our businesses: fixed assets and working capital. Simply put, fixed assets are things we intend to keep (e.g. land, cows, infrastructure, vehicles, equipment). Working capital is the money tied up in things we intend to sell (e.g. calves). Most of us have most of our money invested in fixed assets. This is the biggest financial problem in agriculture. It’s a problem because when most of our money is tied up in things we intend to keep, we have relatively little to sell and generate very little income relative to the value of our assets. Making matters worse, a lot of the income that we do create gets spent maintaining the fixed assets. That’s why most ranchers are wealthy on their balance sheet and broke in their bank account.
Borrowing to buy fixed assets may be a smart long-term investment strategy, but it might cause you to go belly-up in the short term. We’d be better off to use debt to buy assets that directly produce income.
We shouldn’t be afraid to borrow money, provided the economics of our enterprise is rock-solid and we use the borrowed money to buy income producing assets.
Interesting class she has: 22 students representing Sweden, UAE, US, Canada, France, Jordan, Germany, and somewhere else i can’t remember. All speak English and some speak 3 or more languages! Kids these days…… Totally different than Tegucigalpa where the first several weeks were spent teaching English.
These past two months have been such a blessing with our whole family together at home. Daughter Jessica, returned in June from her two years in Tegucigalpa, Honduras, having taught kindergarten at The American School. She made so many friends, both at the school and the US Embassy. She had purchased a car and explored the countryside as much as possible on long weekends. On longer breaks, she took in Panama, Guatemala, Nicaragua, and Ecuador. She was able to come home for visits occasionally. She will miss her classroom assistant, Ms Cuty, very much – she just loved that wonderful lady. As she gave me a hug (the boys and i visited Thanksgiving 2013), she says to me, ‘in the classroom, Miss Jessica is my boss, outside, she is my daughter.’ I will never be able to adequately thank this wonderful lady!.
Now, she has just landed in Dubai, UAE via Delta Airlines for her next two year stint at teaching. This time, she will be teaching kindergarten at Dubai American Academy, a world class private school.
Taking her to Kansas City International Airport yesterday was a difficult task for me. Emotionally, i’m just a basket case. Of course, i’m thrilled she has the courage, tenacity, and hard work ethic to graduate number one in her Central Methodist University class of 2013 with honors at age 21, then to apply for and obtain a foreign teaching job, then do it again, travel all over while she’s in those areas, but at the same time, I want her safe at home. But she’s probably not in any more in danger on her travels than she is on our north Missouri farm.
It was certainly nice not to have to leave home at 2am to make the flight like it was for Tegucigalpa! But it is now 23 hours from our house to her apartment in Dubai.
So, maybe i burst into tears occasionally because of the change? my children are grown and leaving (left) the nest? making lives of their own? Geesh, those should make me happy! What’s wrong here? I am happy – just not ready.
Since it is Friday, we probably won’t hear from here until Sunday or Monday, when she is settled into her apartment and utilities are turned on. What a difference in weather and culture! It’s currently 93 feels like 107F in Dubai – not bad, we’ve been having that in north Missouri, EXCEPT, it’s 1 am in Dubai.
There’s one thing that I should say straight off the bat. I have never thought of myself as having a mental disorder or a syndrome. When I was still in grade school (I would be home schooled from the third grade and beyond), I was a quiet lad, never asking questions unless asked and rarely talking to my classmates; just sitting quietly listening to the chatter going on around me. Rarely, if ever, injecting anything into the conversation. Conversations especially were and still are difficult for me. Whenever I tried to start a conversation, I am reminded of wading through mud. Every topic, every sentence, every word was a trial and effort. Sometimes I would just get so tired of trudging through the mud that I just have to rest, but I keep wading through the mud until I can find a dry and solid ground on which I can rest and enjoy the peace that comes from being out and away from the mud. After a while, once rested enough, I might feel like wading through all the mud again and so I’d go back in to the mud, but the mud feels thicker than before and thus harder to wade through and then after awhile I get back out and rest and, after a time, the rests get longer and the wading gets shorter until finally I stop going back into the mud. Then I rest for the night and I’m ready to start the cycle again. But sometimes clogging through the mud gets to be too much. Instead of going through the mud, I stay on my little dry patch, even if I don’t particularly like it, it’s still better than fighting through the mud day after day just to interact with other people. So I stay on my dry patch of ground that I don’t particularly like and I just stand still. Sometimes, I work off the will to venture off your little island because I’ve become lonely or my little island has gotten too little and I just want to stretch my legs a bit. I find the mud is easier to walk through than I remember and I start taking more trips through the mud to interact with people and so, I slowly begin to take part of the world again.