What Farmers Can Teach Us About Finances

Dear Readers,

In the fast-paced financial world we live in with its focus on trading trends, online platforms and market movements, it's easy to get lost in the weeds and lose sight of the grounding principles of managing your money that are essential to long-term success. So with spring in the air and the buds on the vine, I thought it would be fun to focus on some of the financial lessons we can learn from the people who are more in touch with the land.

If you've had any experience on a farm, you'll know what I'm talking about. For instance, my father learned the reality of "don't put all your eggs in one basket" in his first business venture as a young teen in Sacramento literally selling eggs—a lesson he understood firsthand when he got into investing! Read on for some other words of wisdom from those who work the land—both from folklore and a couple of well-known commentators—that get to the heart of smart money management. It might give you some new insights as well as a few smiles.

"Your fences need to be horse-high, pig-tight and bull-strong."

To me, there's a pretty clear message here: Be prepared, set boundaries and have all your safeguards in place. So what does this mean for your finances? Right away I think of the importance of setting goals and planning ahead to meet them, which also means creating a realistic budget that includes savings. A budget will help you set realistic financial boundaries so you know the space you have to work in. The next step is to fortify your space by having an emergency fund and the right insurance.

Want to make your financial fences even stronger? Create a financial plan. Don't make the mistake of thinking that's too esoteric or only for the wealthy. A financial plan can help you answer some very down-to-earth questions to help fortify everyday finances for you and your family.

"Every path has a few puddles."

You've probably made some good money choices and, like most everyone, you've probably made some mistakes. Financial "puddles" might be small things like blowing your budget now and then or bigger things like falling behind on retirement savings. But whatever the size of the puddle, rather than getting discouraged, figure out a way to get around it. By changing a few financial habits, you can make positive change. In fact, simple financial hacks like setting up automatic deductions from checking to savings, putting bills on auto-pay or creating a financial calendar can make it easy—almost automatic—to jump the financial puddles and keep going forward.

"If you find yourself in a hole, the first thing to do is stop digging."

Digging ourselves into a hole is a common metaphor for getting into too much debt. We know we need to stop, but the question is how. For a lot of folks, credit cards are a major cause of debt overload. So the first step is to cut down on using them. Pick just one card and put the others away. As much as you can, commit to using cash or paying off credit card balances immediately when possible. Then come up with a realistic repayment plan, focusing extra money on your highest interest card. Consider transferring balances to a lower-interest card (watch for balance transfer fees and grace periods!). Set up automatic payments. Debt in itself isn't bad, but you have to manage it wisely so it doesn't bury you.  

"It is only the farmer who faithfully plants seeds in the Spring who reaps a harvest in the Autumn."

I think this bit of wisdom from B.C. Forbes, founder of Forbes magazine, poetically gets across a pretty straightforward message: You have to get started early to see better results. And that certainly applies to investing. A lot of savers hesitate to invest because they worry about market volatility or think investing is too complicated. But while saving is important, history has shown that investing is the best way to make your money grow and beat inflation. And it doesn't have to be difficult. In fact, if you have a 401(k),  you already have an easy way to get started. Still think it's too hard? Try these five simple steps to investing now so you can look forward to your own future harvests.

"Life on a farm is a school of patience; you can't hurry the crops or make an ox in two days."

This insight from a French botanist can certainly be applied to investing! While there may be a lot of current attention on fast trading,  a long-term view is essential to weathering market ups and downs. Once you set your goals and create a diversified portfolio that matches your timeline and feelings about risk, you need to be patient. As is often stated, it's time in the market—not timing the market—that's the key to success.

"The farmer has to be an optimist or he wouldn’t still be a farmer."

These words from Will Rogers can apply to many things in life. And certainly being optimistic is as important in investing as in farming. When it comes to finances, you can't absolutely control what will happen any more than a farmer can control the weather—a market drop, a job loss or a pandemic can certainly set you back. But with the right attitude—rooted in a solid financial plan—you'll be able to more easily adjust and continue to make progress toward your goals.

So take a lesson from the farmers. Build your fences, stop digging yourself into a hole, plant your seeds (early) and with a little patience and positive thinking, you are setting yourself up to reap the harvest of a more secure financial future. Happy spring!  

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.