Saturday 1 October 2016

It's never too late to get financially fit

Ann Fitzgerald

Published 08/04/2015 | 02:30

Identify the current state of your finances to get financially fit.
Identify the current state of your finances to get financially fit.

I recently attended one of the Get Farm Financially Fit 2015 events, in Thurles, Co Tipperary and it was a very informative experience.

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While yours truly had a small involvement, in facilitating a panel discussion, I'm not trying to claim any part its success.

Rather it brought together a team of good speakers who gave succinct presentations and panellists who spoke freely and honestly.

There was also a lot of useful information on the stands hosted by the 20-plus semi-state and private organisations that teamed up with Teagasc in the running of these events, which were aimed at helping farmers take better control of their finances.

Teagasc economist Trevor Donnellan said the need for farm financial fitness arises for three different reasons - income volatility, investment and farm viability.

Survey results he presented showed how farmers themselves rate the risks they face as follows: market (movement in prices and input costs), production (e.g. adverse weather), personal (accident), institutional (farm subsidies) and financial (interest rate changes).

In terms of investment, dairying is the hot subject at the moment and, if milk output is to increase by the projected 50pc over the next five years, it is estimated that this will require on-farm investment of €1.5bn.

In terms of viability, Teagasc research shows that over one third of farm households have incomes below the minimum wage, where they do not have an off-farm job.

The first step to getting your farm financially fit is to identify the current state of your finances and Teagasc have come up with a checklist.

The full list is available www.farmfinancialfitness.ie website. The items include 'do you read your bank statement on a monthly basis', 'how many days were you in overdraft in 2014?' and 'are you using the skills of family members to help manage your finances?'

Teagasc's Mary Ryan suggested that none of us are claiming all that we are entitled to, whether that is in the terms of tax credits or reliefs, etc.

The more I thought about this the more I realised that she is probably right.

These things are changing constantly so you could be losing out unless you have a very vigilant accountant or financial adviser.

Tom Dawson. president of the Agricultural Consultants Association, pointed out that a lot of people depend on their bank or accountant for their financial advice but he suggested that they are not necessarily best placed to give it.

Mary said about one-third of those eligible for farm income supplement or farm assist are not claiming them.

Advice on these matters is available from a number of agencies including Citizens Information. She also advised a visit to Bonkers.ie to identify savings on utilities such as electricity.

Another agency which has relatively recently become involved in the agricultural sector is the Money Advice and Budgeting Service (MABS). It has drawn up a single A4 page budget sheet on which all income and expenditure can be recorded.

Interestingly, Mairéad Lavery of Irish Country Living magazine said research has shown that the very exercise of documenting how much you spend works to reduce spending.

Apart from obvious culprits such as smoking and drinking, items such as the lotto and pets can soak up a surprising amount of cash.

Paying for children's education, especially at third level, is a big challenge on many farms and Mairéad described how, when their twins were born, she decided that she would put away the children's allowance every month.

She soon found that she was only able to save one of them but, nonetheless when the time came round, it was enough to put one of the children through college.

Agri-taxation

Something which has not got a lot of coverage is that, as ICMSA deputy president Pat McCormack pointed out, while direct payments to many farmers will be increasing this year, many others in what would traditionally be considered the more prosperous parts of the country, are facing significant reductions in their basic payment.

IFAC accountant Billy Holland detailed recent changes in agri-taxation, including those aimed at improving young farmers' access to land.

It is only when you hear a broad presentation like this that people might consider things that would never have entered their minds.

For example, a landowner can earn up to €40,000a year tax free (though it is subject to PRSI and USC) on land leased out over 15 years.

If the land is in joint ownership, both owners are eligible for the income tax exemption.

Looking to the future Pat O'Meara of AIB Nenagh said volatility would become the new norm.

Over the next three years, one-third of farmers they surveyed plan to make investment.

Over 40pc of this will be in upgrading infrastructure, 36pc plan to upgrade machinery/equipment, while 26pc plan to increase output capacity without increasing land.

At one point, Pat put up a loan repayment schedule over different time periods, from 5 to 20 years.

The first thing I started doing is mentally comparing the total cost of the longer terms with the shorter ones. I expect I am not alone in this but my natural instinct is to want to pay off debt as quickly as possible but this can cause cash flow problems.

There were over 100 people present at the event and the nature and extent of the information presented is the sort that really needs to be experienced first-hand.

Anyone there in a personal capacity was already on the right road.

To use the underlying physical analogy of the event, I expect we only really get the benefits of financial fitness, the sense of well-being, strength and resilience, when we have actually become fit.

As Teagasc's Cathal O'Donoghue pointed out, while it is never too early to plan, it is also never too late.

afitzgerald@ independent.ie

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