Whether you are growing some backyard tomatoes or have 100 acres of farmland, what are some financial lessons to be learned? You don’t need a green thumb to understand these financial principles.
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In Iowa, you can’t get too far without driving by a farm. What are some farm life lessons that can apply to your financial life?
Whether you have a farm or not, it’s important to understand the difference between net worth and cash flow. Maybe your net worth varies a value, but if you are in need, you can’t necessarily get the money off the land right away. Do you know the difference between your overall net worth and your investable net worth?
If you have the land and the resources to start a new project or tend a new garden, you have to consider what kind of predators or pests you’ll need to protect yourself from. When it comes to your retirement, you have to watch out for inflation, market losses, fees, and long-term care needs that might put your investments in harm’s way.
Instead of basing your entire farm on one crop, having diversity helps you in different seasons or allows for a more well-rounded yield in case of bad weather or disease. Same with your asset class, you want a little bit of a few different types of investments. You want diversification so that you are both protected from the market and are participating in the market.
Listen to the full episode or click on the timestamps below to hear the key points.
[1:55] – Understanding net worth vs. cash flow.
[4:41] – What sort of predators might you face?
[7:22] – A diversity of crops is important to maintain.