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Tools for Effective Financial Planning by Mary Johnson

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frequently talk with a room full of permaculturists or farmers and ask them questions like: “Are you happy with your current financial situation?” and “What goes into your financial planning?” I usually find myself looking out at a roomful of blank stares, or worse, getting loud sighs or judgmental groans in response to my questions. If you yourself are having a similar gut reaction, I challenge you to take a minute to suspend any feelings of distaste that you may be struggling with. Also, if you think you already know enough about how to manage your life and finances, give yourself this quick quiz and allow yourself the opportunity to perhaps even make some profound and empowering changes in your life, I guarantee you will be happy you did.

Financial Literacy Quiz 1. What information does a gross profit analysis give you, and how can it help you evaluate an enterprise? Why is that important? 2. What is the purpose of doing a cash flow budget and how can the information be used in managing a project or business? 3. Why calculate both a beginning and a projected ending net worth in the financial planning process? 4. What elements could comprise an increase in the net worth of a farm or business? 5. Describe the difference between being profit oriented versus production oriented? Feeling confident, or does this all sound like Greek to you? Unless you are living the life you dream of and feel relatively confident that you will be able to sustain that lifestyle into the future, you may want to ask yourself these questions: “What financial decisions did you make in the last year?” “Do you think you had the best tools to make those decisions in a sound way?” “Do you feel confident that you were using

your precious time, money and energy in the most effective way?” “Did your decisions lead you towards achieving your overall goals for your life in the best way possible?” “Did the decisions support your deepest values?” If you are still feeling good, you probably have a sound basis in financial management already. If your answers to any of these questions come up short, or leave you feeling a little uneasy, maybe it would be a good time for you to take a Holistic Financial Planning course or refresher.

Beginning Women Farmer Program I have been working closely with some of the Beginning Women Farmers from the Northeast that are part of HMI’s NIFA/USDA-funded program, both as a mentor and as an instructor of some of their sessions. Just to give you a flavor of the diversity in the group, one woman has run a successful computer company in the D.C. area for the past decade, after having spent her early years working as a migrant laborer in the fruit industry. Now she has invested a sizable nest egg into renovating a New England fruit orchard. Recently I was at her farm working on developing her holisticgoal with her husband, and testing some

Benefits of Holistic Financial Planning • Planning for and achieving a triple bottom line profit, one that is socially, financially and environmentally sound. • Planning for profit. Once you know how much profit you need and want, then you brainstorm all the ways that you can think of to create that profit by the end of the year. • Prioritizing expenses to maximize investing in the areas that need it the most. For example, focus on wealth generating expenses first, and address the weakest link in the production chain, cap other unnecessary expenses, and stick with the plan so profits aren’t eaten up. • Analyzing your enterprises against each other (Gross Profit Analysis) and in relation to how they help cover overhead expenses and generate return on investment so you can maximize profit. • Monitoring your plan (usually monthly) and proactively making necessary changes along the way so you get where you said you want to be by the end of the year.

Mary Johnson major decisions they were facing in the operation. After $700,000 of investment in the start-up, they were trying to decide if they were really committed to the costly vegetable operation that was taking up a lot of their time, but not adding to their quality of life as they were both really more interested in the fruit side of their business. Another woman, after raising nine children and coaching them through various 4H projects for years, decided to turn their goat experience into an organic micro-goat dairy. She sells organic herbs and veggies to a Whole Foods just outside of Boston, Massachuesetts. All the women have similarly amazing stories about what led them to farming. I have watched their excitement and frustration and listened to their unique viewpoints as they have diligently tackled homework assignments and made the long drive across the state to visit each other’s farms and grapple with the new concepts, sometimes with tears, often with lots of laughter and vociferous conversations that make teaching a challenge at times. Already, they are beginning to integrate the concepts into their busy lives as business women, farm owners, mothers and wives among the million other hats they wear on a day-to-day basis. All seem to agree, it’s not easy stuff, but the thought of being able to make better financial decisions ahead of time, and know they are on track to making a profit, is worth the extra effort. Finding the discipline to do it, now that’s the real challenge. Their mentee groups and the regular meetings help them stay committed.

Reinvestment Strategies As a permaculturist I have noticed how the financial weak link test ties in with the Permaculture Principle of Obtaining Yield—a surplus is a natural part of a well-designed system. Holistic Financial Planning helps us understand CONTINUED ON PAGE 7

Number 136



IN PRACTICE

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#136, In Practice, Mar/Apr 2011  

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