MIND YOUR BUSINESS: Early plans best for super future outcome | Stock Journal

Timing of a decision is not something, it is everything – this is a saying I revisit on a constant basis.

The trouble for most is they don’t learn the lesson until it is too late or well after the event.

Procrastination can be identified as a reason why decisions are not made on time but there are many who do not realise what the effect of poor timing has on them and their business.

Decision making really comes to the fore in the planning process and farmers, if well organised, will have five plans in place – business, personal, retirement, estate and succession.

The former two plans are seen as here and now plans and many farmers delay formulating the remaining three until later in life.

Delaying the decisions on retirement, estate and succession planning is what creates so many problems for so many people and businesses.

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World renowned business guru and author of the book The Seven Habits of Highly Successful People, the late Stephen Covey, lists “begin with the end in mind” as one of the most important habits to practice.

If this is to be the case, retirement, estate and succession planning should be dealt with very early in a farming career.

Having entered semi-retirement, I now have a very real perspective of the need to accumulate sufficient wealth so as to achieve the quality of life I am accustomed to.

In retirement planning, having a true understanding of the time value of money is very important.

If a retirement target nest egg is to be $2,000,000 in today’s dollars and inflation runs at 2 per cent average across 35 years, there will need to be double the original amount or $4,000,000 to be able to afford the targeted lifestyle.

For most people it will take a lifetime to accumulate these amounts of money, you cannot just turn the tap on for 10 years and think the bucket will fill to the desired level.

Nothing beats making good bankable profits when it comes to having options in life. Investing in and improving skills and knowledge in developing these plans is an investment that will never go to waste.

While not in a position to do so at this stage of my life, it would be interesting to do a longitudinal study of say 10 differing young farmers, who from the day they entered the farming business have all five plans in place.

If these 10 individuals were to review and update their plans annually, it would be interesting to compare them every 10 years for several decades to come.

My guess that a lack of discipline and lower profitability businesses would underpin the poorer performing plans.

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When comparing the self-employed and employed people, it is interesting to see if there is anything to be learned from people who have been employees all their working life.

I have been told several times that if employed people save and invest 15pc of their salary for every year of their working life, they will be able to retire on 75pc of their final salary.

This retirement salary may be a little lower now investment returns are lower these days. With compulsory superannuation contributions only commencing in 1992 and contribution rates nowhere near 15pc, the baby boomer generation will fall well short, unless additional savings have been channelled into a retirement fund of some sort.

The saying goes that the early bird gets the worm but the second mouse get the cheese.

If the pension is the cheese bit, then you have to make sure you enjoy that sort of cheese.

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