“Every front door looks beautiful” is one of my favourite Irish sayings. It came to mind in Deadwood, South Dakota, where I was listening to the woes of a young ranch couple. They have a strong desire to ranch as debt-free as possible but her parents, the owners, are stuck on new pick-up trucks and “keeping up an image” with lots of debt. Sound familiar?
My friend Wayne Buhr in Brandon, Manitoba, is an insolvency manager for Debt Free North. Buhr likes to discover why people are not dealing head-on with their financial disasters. He told me the story of a distraught parent bringing her son in for a serious discussion to find financial solutions to release the stress of too much debt. He has also seen adult children bring parents in to have a reality check on their financial habits that are keeping them stuck.
Recently, I coached a very complex dairy business with more than 2,000 cows that struggles with a sibling who is expecting to be bailed out continuously by the parents. The successors of the dairy are worried about cash flow issues when the estate is distributed.
Solutions to financial stress start with courageous conversations.
The young ranchers brought their parents to my workshop, and the parents heard the message regarding securing income streams, hiring a fee-for-service financial planner and ways to approach talking about debt servicing.
How much debt can you sleep with at night? Do you understand the difference between good debt and debt that is bad for you?
Do you really need a new, fully loaded pickup truck? I once rode with a single young farmer who said he “deserved” his $84,000 truck. I observed he likely was not making money with this new truck, especially since his dad had passed and his mom was struggling with farm cash flow.
Another rancher, who was over 75 years old, proudly told me he was not going to transition shares of the ranch to the next generation, who were eagerly awaiting more security in their future. This rancher had over $2 million in long-term debt. I questioned why he was not letting go, and he said he would transition equity when the debt was zero.
Another farm family reached out because Dad is not accepting that he must settle a divorce with Mom before he can navigate a transition plan. The debt of the parents needs to be settled before the next generation can start charting their debt servicing and equity purchases as they learn how to manage and start to gain ownership in equipment, shares, land or other farm assets.
For 10 years, I served as a mediator with the Farm Debt Mediation Service. This program offers free financial counseling and mediation services to farmers who are having difficulties meeting their financial obligations. You get a farm financial planner who helps you create a recovery plan to present at a formal session to your creditors. Again, open and honest communication is the key here for success in finding a solution all parties can agree to. The number to call is (866) 452-5556 or search online for Farm Debt Mediation Service.
There are also fee-for-service financial planners who may be local or willing to meet virtually, as well as podcasts and other financial resources to help you start conversations.
Is your dairy farm suffering a cash flow crunch? The debt servicing conversation is important, so stop procrastinating and reach out to your lenders to create solutions.
If your money script and attitudes towards debt are very different from your parents, then you need to question if you really want to be business partners with people whose values are not aligned with yours.
Behaviours must shift. “Farm families need to embrace financial transparency for the farm books and their personal balance sheets if they want to be business partners,” says Dick Wittman of Wittman Consulting.My front door is boring white. After my trip in 2011 to Dublin, Ireland, I considered painting it red. “Every front door is beautiful.” When I visit your farm, I hope I find all the generations happily managing the debt.