From the Zweber Farm

Learning new things

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I will never tire of learning new things. Maybe that’s not surprising as I think, all people are naturally curious. In college, there was a saying the professors and every motivational speaker at conferences would say: “Keep your saw sharp.”

They weren’t referring to woodworking equipment, although it is a very good idea to keep those saws sharp as well if you want to do your best work efficiently. They were talking about skills and knowledge, which not so coincidentally also are important for doing a task well.

There are a number of teeth on my proverbial saw I didn’t get around to sharpening near as early in life as I wish I had.

The most recently discovered one I’ve been vigorously filing in an attempt to get it razor sharp is my understanding of the financial world.

For many years, when our kids were young and we put most of our time and money into the farm, we didn’t have enough money at the end of the month to worry much about where the little left over went.

We bought the insurance policies our representative told us were a good idea to have and made extremely modest investments in retirement and savings accounts. Had I spent more time learning about insurance, investing and banking, I would have made a number of changes earlier which I am making now because what happened yesterday is not worth dwelling on. It’s best to just get things straightened out and move forward.

One of the lessons I’ve learned is that the world is full of ways to spend and invest money. Many of them will yield a return, but some return pennies and some return dollars. The risks and returns aren’t always obvious or connected. Reading prospectuses for investments and contracts for policies is tedious and often confusing without a lot of Google searches to sort out what various terms mean but is super important. What someone is looking to sell is maybe the best option of their limited tools they can offer but not necessarily the best option for you.

I recently read the book “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns” by John Bogle, the founder of Vanguard Group Inc.

A quote that stood out to me in the book was, “In investing, you get what you don’t pay for. Costs matter.”

I had always known that a portion of our investments went to pay management fees, but the idea of a number as small as 0.15% mattering much didn’t occur to me. After realizing how fees add up to huge numbers over time and seeing how funds we picked failed to live up to even half of their historical returns, we’ll be changing a number of our investments. Similar to cattle numbers growing exponentially if you don’t sell any and have low death losses, money will accumulate faster and faster as compounding interest works its magic. But, if someone keeps stealing a percentage of the calves each year, that growth gets held back. Thankfully, monetary investments growing don’t require building more barns and buying a bigger manure spreader.

As for insurance, I’ve learned that it’s a wise thing to have. However, if you can get the most things covered for the least expenditure, do that. There are a large quantity of complicated insurance products out there to do simple things, and they are best avoided. In the end, the less debt a person has, the less insurance they need to carry to cover that risk. How to balance paying for insurance while also paying down debt quickly is a discussion for someone far more qualified than me.

The next dull saw tooth I’ll be working on is taxes. I have had only a general understanding of taxes and hire a professional to help. We do what she suggests at tax planning time and hope we saved enough up to cover the bill. I would prefer to have a much better understanding of actions to take throughout the year to minimize taxes but also maximize our farm’s profitability. Wish me luck on learning more about that topic. I’m going to need it.

Until next time, keep living the dream, and keep your literal and figurative saws sharp. You need both types in top shape to stay in the dairy business. It hasn’t gotten any easier.

Tim Zweber farms with his wife, Emily, their three children and his parents, Jon and Lisa, near Elko, Minnesota.

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