When do you know when you are done?

[Ima saver]

I wonder where the OP lives? I would love to buy land for $500-600 per acre. Around here you can't buy a lot for under $30,000, something with a view goes for $80,000.

[cptacek]

If someone buys milk from you (I assume you milk cows and sell the milk?), and I pay $2.99/gallon, then inflation increases in one year to where I pay $3.99/gallon, did your revenue go up 33% too?

Your farm may be an inflation hedge unique to you.

I am a beef producer, so my cows have calves once a year and I sell the calves when they are about a year old. Calf prices are tied (loosely) to the price of grain, as well as foreign policy (and many other things). Here's why. Grain fed beef is better than grass fed beef, in most people's opinion - more uniform marbling. Grain = corn and sorghum. If corn and sorghum prices go up, it costs more to put the optimal amount of weight on the calf before butchering, so the feed lot (the most common buyer) pays less for your calf at auction if the price of grain is high. So, the rising demand of corn for ethanol is causing beef prices to go down.

Also, Japan and South Korea are blocking our exports, for what they say are "health concerns" but really look like political reasons. When markets like that are blocked, prices go down.

On the other hand, people now have more discretionary money to spend on food, so they go for beef, which is relatively more expensive than chicken, but to some people tastes better. That makes the demand for beef go up, so prices go up.

There are lots of middlemen between me, the beef producer, and you the consumer. So your prices going up trickle down to me, but there isn't a direct correlation.

Tina, I agree with your assessment. That is what I want to do, but I guess I take the rules-of-thumb to heart too much and don't modify them to my unique situation.

Ima, I am looking to buy land in the middle of Kansas. There is absolutely no chance of subdividing the land and breaking it into lots to sell at a profit (no big cities around). This is farm land, and that is it, so it has to be looked at through those glasses...will what I produce on it be able to pay it off down the road?

[tinapbeana]

yuuuuuuuuummmm, beef.... although, i personally prefer pampered grass-fed, but that's just me...

anywho, back on topic! re: whether what you can produce down the road paying for the land thereby making the whole venture at least break even (which, since you could live there, would still be a fine situation)

you said your cows are almost paid off, right? well, here's how i would do it: take the estimated yearly income from your current lot of cows and calculate a per-cow yearly income. multiply that by the total head you think you could easily support on the land you're looking at (not viably, just easily, b/c you're making a conservative estimate here) to get the estimated yearly income from your possible herd. would the cows cover the land payments for the year? if so, then i'd consider it a win-situation.

income would increase with more cows, or with higher beef prices due to inflation, not to mention the money that you could save by growing your own veggies, setting aside some land to rent to others for horses and such, or land for a house. granted, lower beef prices would hurt the income, but then it should be viable to add more head of cattle since the original estimate is based on an easily manageable herd, not the largest possible herd...

[zabbkoff]

cptacek,

Just remember that since you're young, all of your savings contributions will have time on their side. If you stop and then start again, you might lose several years of interest that could really make a difference.

I'm not in the same boat as you exactly, but I can see your ship in the distance (but my boat doesn't have any cows!) so I understand about the worries of funding for your later years as well as being prepared for the years between now and then. It's all about balancing it out. Also keep in mind (at least I think this is true), that you can withdraw money that you have put in to a Roth IRA without any penalty. You can't withdraw the interest made without a penalty, but the amount that you have actually contributed to your account. For me, it's just nice to know that it's there if the cr@p hits the fan.

I guess the way I look at it is, if in your 70's or 80's you start running out of funds, you'll have wished that you had "overfunded" for your retirement.

So if you retire with more than enough, you can be sure to party till the cows come home!

[Fern]

Youre in an enviable position, are are doing excellent at such a young age. $2 million does sound like an adequate goal for now, but as you pointed out, how will various variables change that number, such as the rate of inflation, spiraling healthcare costs and the unpredictability that is life, in the form of job layoffs, temporary disability or, god forbid, a more serious chronic illness, car accident, etc., all of which could really mess up your future earning plans, so i wouldn't 'coast' until you've reached your $2 million goal.

However, you do have a higher than average income. Have you already purchased real estate/residence? This would be a good time to do that, too.

[TBH]

I've always had this thought, too--that if I save like crazy while I'm young, I'll be able to scale back later.

I wouldn't stop saving for retirement, even for a little while. It sounds like you could get away with it, but I think it's dangerous to get out of the habit of contributing to your retirement accounts. But buying the land sounds like a good investment, especially if you may want to be home with possible future kids. Maybe having a larger herd bringing in income will allow you to reduce your hours at your other job, and give you more time at home with your kids.

So why don't you scale back 401k contributions til you're just putting in enough for the match, and suspend IRA contributions for a limited period of time (say, 2 years) and funnel all that money toward buying the land?

Somebody else asked if you own a house. That's another thing you probably want to take care of before you have kids. I didn't, and it was hard buying a house with a new young family.

You really are doing great. It's very inspiring to hear your story.

Best of luck to you.

[cptacek]

I am buying a house now, and even better I have a roommate that is paying half the bills and about half the mortgage. But she is moving out either at the end of this month or maybe next month. I've been paying all the bills, and then when she pays me, that check goes directly to the cattle loan. That way, when she moves out, I won't be in a money crunch because I haven't budgeted for it out of my take home pay, but I won't be able to send so much to the loan.

I called my banker yesterday, and told him in a few years I would like to buy some land, so what would it take to get a loan from them at that time. He said ag loans are typically 25% down, so if I wanted to buy 160 acres @ $500 per acre, that is $80,000 * .25 = $20,000. But he also said he would work with me because of my history with the bank, my aggressive payment schedule in the past, my job, and the collateral with the cattle. So I'll be able to leverage the work I've done in the past for more opportunities in the future.

As sad as this sounds, I have never done these numbers.
Salary (bi-weekly): $3341.60
Before tax deductions (Medical, vision, dental, Accidental Death, 401(k), Healthcare FSA): $620.50
Taxes: $857.93
After tax deductions (Short term disability, long term disability): $41.38
Take home pay: $1821.79

That is $47,366.54 per year...a lot less than I thought!