Is Debt Really Bad? Agriculture Finances | Jessica Groskopf
Mastering Farm Finances: How Strategic Financial Planning Sets the Stage for Future Success
In agriculture, financial literacy is often overlooked, but for Jessica Groskopf, a Nebraska-based extension professional and wife to a fourth-generation farmer, it has been the key to both personal and professional success. Jessica’s journey into financial literacy began when she and her husband faced the uncertainty of taking over a multi-generational operation. Despite the challenges, they took control of what they could—saving, investing, and planning for a future that was far from certain. Their proactive financial decisions allowed them to buy out a family member’s share of the farm and transition smoothly, even during the economic uncertainty of 2020.
When it comes to managing finances in agriculture, Jessica emphasizes the importance of assembling a strong team of professionals who understand the unique challenges of the industry. Rather than relying on traditional advisors, she and her husband carefully selected a group of professionals—bankers, attorneys, tax professionals, and financial planners—who could provide tailored advice for their farming operation. It wasn’t just about having a group of trusted professionals; it was about having a team that worked collaboratively to make informed financial decisions. This team approach played a crucial role in helping them navigate their buyout and set them up for long-term success.
One of the most common misconceptions in farming is that all debt is bad, but Jessica disagrees. She explains that not all debt is harmful, and in fact, debt can be a useful tool when used strategically. Good debt, like loans for purchasing land, livestock, or equipment, is often necessary for farmers to grow their operations. The key is managing that debt carefully, keeping interest rates low, and ensuring that the debt is used to acquire assets that will appreciate or generate income over time. Jessica and her husband used their debt to purchase a farm, and though it was a large financial commitment, it positioned them for long-term success.
“Debt is not dumb. It is a tool. And like any tool, if it is used properly, it can help us achieve our goals.”
When it comes to investing, Jessica stresses the importance of starting early. Time is a powerful asset in investing, and the sooner you begin contributing to retirement accounts, the more your money can grow. For Jessica and her husband, starting a Roth IRA early in their marriage allowed them to take advantage of tax benefits while keeping their investments flexible. They were able to withdraw their contributions when necessary, without penalties, while still allowing the earnings to grow tax-free. Jessica encourages farmers and ranchers to diversify their investments, balancing between low-risk options like savings accounts and bonds, and higher-return investments like retirement funds or real estate.
In addition to investing, Jessica believes every farmer and rancher should have an emergency fund. Too often, when something unexpected happens—whether it’s a broken tractor or a natural disaster—farmers rely on operational debt to cover the costs. However, having an emergency fund allows for more financial flexibility, reducing the need for high-interest loans and providing a cushion during tough times. Jessica recommends having three to six months’ worth of living expenses saved in an accessible account, ensuring that farm operations can weather the inevitable financial storms.
Perhaps the most important piece of advice Jessica offers is the necessity of paying yourself. Many farmers, especially in the early years of their operation, forgo paying themselves in order to reinvest everything into the farm. But Jessica challenges that mindset. Paying yourself not only ensures that you are building your own financial future but also qualifies you for Social Security and other benefits. By paying yourself a reasonable salary, farmers can take advantage of tax deductions and retirement savings, setting themselves up for a comfortable retirement while still investing in their business.
Jessica’s message is clear: take control of your finances, build a team of trusted professionals, and start saving and investing today. Financial literacy is a powerful tool for farmers and ranchers, and by taking small steps now, it’s possible to build a strong financial foundation that will support future generations. Whether you’re just starting out or already managing a large operation, the decisions you make today will determine your financial success tomorrow. By being proactive, diversifying your investments, and managing debt wisely, you can set yourself up for a prosperous future in agriculture.
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