In today’s episode, I’m going to talk about what I think I’ve learned to be the most important issue in farming that nobody is talking about—earning a living with farming.
What does it mean to earn a living?
I think that this is a topic that needs to be talked about, so today I will be real, raw, and I will not be holding anything back.
Run a Farm as a Business (03:25)
I’ve seen a trend of rinky-dink farms that may never really grow that big, which is fine if it’s meant to be a side-hustle for extra income.
Then there are farms meant to run as businesses with the goal to run it full-time to have a living wage. Yet some of those farms are small, and consequently, the income they produce is small.
If you intend to start a business to make a living wage, then it needs to be capable of making a living wage on paper from day one. If it can’t get there, you need to question why you’re doing it in the first place.
Loser Attitude (4:27)
A sad and scary attitude I see from all scales of farming is farmers making excuses about not making enough money.
I think that saying, “I don’t need a lot of money to live,” or, “I’m spending time with my family,” translates to, “I can’t make a lot of money,” or, “I don’t know how to make a lot of money.”
Who doesn’t want to make a lot of money?
More money means you could hire more people, you could give food away, you could start a non-profit, you could teach youth, you could restore more land.
“Why wouldn’t you want more money as a tool to exercise your ideals and manifest what you want to see in the world?”
This loser attitude stems from bad business models, poor business choices, and not having the skills to take it all the way in terms of business success.
If you’re not trying to be the best business owner in the world, or in your country, or region, and you’re doing it full-time, why are you even doing it in the first place?
I think you need to want to be the best to succeed.
All the positives of farming life—being your own boss, spending time with your family, being self-employed, and having access to high-quality food are all great reasons to farm. But they’re 100% unsustainable unless you can make a living doing it. If your goal is to be a full-time farmer, but you can’t make a living wage, then you might have to get another job.
Don’t tell me that farming is the only way that allows you to work from home, spend time with your family, be your own boss, and have access to high-quality food. You could be a web designer, a freelance graphic designer, a consultant, among other things and it would still give you all those same benefits.
Farming isn’t a vacuum. You can’t hide poor economics or an ugly business model behind lifestyle.
As grand as the lifestyle is, it doesn’t matter if you can’t make a living wage doing it.
More Money, More Problems (10:00)
In this episode, we’ll be using full-time farming as the success metric, meaning being profitable from farming full-time.
Some people may say, “more money, more problems. More money, more headache.” And you know who say that? Poor people. Do you know what’s more problems and more headaches?
Not having enough money. Living paycheck-to-paycheck.
In college, I got down to $78 to my name. It wasn’t a comfortable place to be. I never want to go back there. I would rather have “too much money” problems than “not having enough money” problems.
You don’t have to lose your values and become a super consumer just because you make more money. You’re not going to change if you don’t want to change.
People associate being wealthy with giving up your ethics and everything you stand for and it’s terrible.
It’s not true.
More money allows you to do more, and it allows you to put more of your values out into the world. You want to make more money.
A Living Wage (12:35)
According to Wikipedia, it’s defined as the maximum income necessary for a worker to meet basic needs. Needs include food, housing, and essentials such as clothing. The goal of a living wage is to allow the worker to afford a basic but decent standard of living without government subsidies. Because of the flexible nature of the term, there is no one universally accepted measure of a living wage is.
When you think about your business, it needs to produce a take-home living wage for you: the cost of food, housing, essential needs, and a small margin for unforeseen events.
MIT’s Living Wage Model (14:55)
The living wage model is an alternative data measure of basic needs, drawing upon geographic-specific expenditure related to a family’s likely minimum of food, childcare, health insurance, housing, transportation, and other basic necessities.
The model generates a cost-of-living estimate that exceeds the federal poverty threshold. The basic needs do not include pre-prepared meals, budget for entertainment or leisure, no savings or investments, as well as retirement funds or home purchases.
This living wage is what your business needs to generate after taxes.
We’re far from the wealthy, we’re very close to the poor. We’re just on the other side of being on welfare.
Although, yes, you can live on minimum wage, but is that really possible long-term? Many people claim to not need fancy things, but I don’t think they want to stay on this level of financial frugality.
I find it hard to believe that you dream about living just across the line of seeking public assistance.
We’re talking the razor’s edge if complete poverty here. Nobody wants to just be, “a little better than poor.”
Not everyone is a Buddhist monk who wants to give up all their earthly possessions. Why work hard just to barely get by?
I’m not saying go from working poor to Jeff Bezos. I’m saying get about 50% above the living wage.
A Closer Look at Expenditures (22:50)
Calculate your own living wage: housing or rent, utilities, childcare, health insurance, transportation, minimum food, other basic necessities.
So, what’s not in that living wage?
Purchasing property. Putting on a down payment. Eating out. Paying debt. ‘Luxuries,’ could be going to Starbucks, or it could be going to Tiffany’s. Phones. Entertainment. Vacation. Savings. Retirement.
If you want to include any of that, you need to start dialing up that minimum wage.
My interpretation of a comfortable living wage is a living wage plus entertainment, debt payment, vacation, savings, retirement savings, some simple luxuries.
So, add an extra 50% on top of that minimum wage.
Simple Pleasures in Life (29:00)
Some people have a cow and flip out at me when I say they should treat themselves to Starbucks. They say it’s not even good coffee, and it’s $6. Okay, that’s your opinion, but you shouldn’t be sweating a $6 purchase once a week. The principle is that if it’s something you enjoy, do it. Or go out to eat, or see a movie, or get ice cream, and say, “I didn’t have to make it, I could just buy it,” and think of it as a reward for all the hard work you do.
What’s the point of working hard if you don’t have some money and say that you want to buy yourself something. If you want to buy Tiffany’s jewelry, or a Louis Vuitton purse, or a really expensive car, that’s great, that’s you. But it can also just be really simple things.
You should be able to do or buy something for $100 or less a week and not have to look at your bank account or pull out your spreadsheet to do it. You shouldn’t be stressing out about every single purchase.
I like to call it the Netflix test: if you need to cut off Netflix at $12.99 a month, then you’re not making enough. Your business is not making enough.
Because $12.99 doesn’t mean jack in the long term.
A living wage keeps you alive and off of government assistance, but it also keeps you poor without any luxuries.
The Numbers Don’t Lie (32:45)
Let’s look at MIT’s living wage calculation for where I live, San Diego County, California. I’ll use my situation: two adults (one working) and three children. The living wage for me is $38.34/hour. Before taxes, I’ll need just under $80,000 as my annual income.
Without children, I’ll just need $15 an hour, and I can live on $32,000 a year.
The more people in your household, your business better get bigger faster.
Let’s try Portland, same situation. You need to make $34 an hour and $60,000 a year. For Morgan County, Indiana, the living wage for my situation is $27 an hour and $51,000. In Vermont, you’ll need $28.50 an hour with $60,000 a year.
Can your business generate this amount of money? If it can’t, where do you make up the shortfall? Do you have an outside income?
Retirement (38:45)
The really scary thing about the farm business community is that very few people think, “what the hell am I going to do when I retire?”
You need to get time working on your side.
It’s very hard to save a lot of money in 50 years, and it’s even harder to save up that same amount of money in 10 years.
Let’s say you want to retire at age 65, and by that time, you’ve shut the farm down and get about $1,000 a month with or without social security. That means you’re going to need $12,000 each year to fund your retirement. Which means you’ll have to earn an extra $14,400 pre-taxes per year to be able to fund your retirement.
You’ll have to start funding your retirement somewhere down the line. When are you going to start? Where will it come from?
Adding in the concept of time, can you make the amount of money you need if you’re working 40 hours a week?
Some may say, “okay, then I’ll work 80 hours a week.”
A lot of people grind for 80 hours a week to meet 40-hour wages. Thinking long term, how many years can you work for 80 hours a week? How long will your body let you do that? How long will your family let you do that? How much will your mind let you do that?
In the long-term, working that much is likely unsustainable.
So, asking again, can you generate your basic living wage in 40 hours a week?
If yes, then that’s good, we’re on the right track.
But if you have to work 80 hours a week for a 40-hour wage, then you might as well just get a corporate job, work 40 hours and get paid 40 hours. You’ll probably even have a better quality of life. Why go through all that stress when you can make the same amount of money working half the amount of time working on the farm?
It’s like you’re working two separate jobs just to make that 40-hour living wage.
Build More (50:10)
What if you get sick? What if you need to take time off? You’re going to have to hire an employee sooner or later, which takes more money from your business.
When your business grows, you’re going to have to hire more employees. Not just that, you can only go to so many farmer’s markets. Sooner or later, you’ll have to find ways to move more product. Many farms have done that and are generating good amounts of revenue.
That’s where you need to strive to be.
If you can’t grow your farm big enough, you have three choices: (1) you can cut your expenses; (2) you shut it down; (3) you get supplemental income.
With regard to having a supplemental income, there’s a lot of things you can do. You can open tours, you can teach, you can invest in value-added products, you can be a content creator, or you can do some consulting on the side.
According to the USDA, farms just can’t generate enough to produce a living wage, which is why they have large sources of off-farm income.
It’s because farming is hard.
I’ve worked on dairy farms and large-scale grain farms, and they all have the same struggles. It’s not a scale thing, it’s a farming thing.
Farming is just really hard.
So, do what you can with what you have.
Business Talk (01:00:25)
I’m saying, I think you should be saving for retirement. And that you should eventually hire someone.
Can everyone get there? I don’t know.
It’s possible, but not everybody has the makeup to go and grab it.
You need to be a stone-cold business-killer when it comes to growing and building a large-scale business. In a lot of ways, I think you’re just born with it.
But some people are just born with a bigger hearth of work in them.
If you don’t understand what your business has to produce, then what are you doing running a business? You have to know where you have to end up financially.
These issues aren’t like wine that gets better with age. They need to be solved now. Otherwise, the ripple effect will just get worse over time.
These need to be talked about within the farming community so we could try to find solutions and help each other.
If the solution is to shut down the business, then shut it down. I don’t think businesses are more important than families. And I don’t think that businesses aren’t always the solution to a better life.
I think you can be happy working a job you love.
My greatest emphasis is on the preservation of relationships and families—shut it down, make it a side hustle, or grow it.
If you’re not striving to be the best farm, why do it? You’re taking time away from people in your life to build this thing. Make it worth it.
Listen to the Episode: