Monday, August 29, 2005

Appreciating vs. Depreciating Assets

Amy Scott hit the nail on the head with her comment on my last post regarding used vs new cars.

"The difference is in spending your money on appreciating vs. depreciating assets. "

In fact, that is the very point I was trying to get across. A car is a good example because everyone buys and owns a car, for the most part. This concept can be applied to almost all purchases on the homestead/farm. Single use machinery and buildings are good thing to stay away from whenever possible. Of course there are exceptions to this, but in general ( particularly in the early years) we should spend money on things that can bring in multiple incomes. Most single use machines are very expensive and just like a car only get old and wear out. One of the great ironies of agrarian life is that while we are the people in our culture who probably care about money the least, we have to be constantly watching our pennies and be exceptional business people because of the nature of our businesses ( slim margins-weather-ect). Take for example a house. If you buy raw land you need to build something to live in. The first thought of many will be to build a house. For this example, you are just getting started and have limited capital. How much money do you plan to make with your house? Granted the house won't lose value and is a good way to preserve wealth it does not make you any money. If it costs you $75,000 to build it, that's $75,000 you can't invest in assets that appreciate, like feeder pigs, chickens or a pasture cage. Why not buy a used mobile home for the first few years and free up all that money for things that will make money. This is what I did. We bought our mobile home for $1000. We had been praying that the Lord would provide us with a way to have a home and found out about a guy who had bought a new trailer and needed to get rid of the old one. It was a real nice mobile home and we didn't think we could afford it, but the zoning nazis had started fining him for having it on his land. I offered him $1000 and he said "get it out of here!" It ain't a palace but we are grateful for it. We spend no money on rent or mortgage payments or interest on loans. We own it free and clear and can always build something of our own when we can afford it. That's the key I think. If you can't afford it you don't deserve it. We live in an age where we think just because we are Americans, we deserve a real house and a nice car. Nothing wrong with owning it if you can afford it, but there is something wrong with going into debt just because we covet other peoples possessions. Wait for God to provide and He will. Now I realize these are some crazy ideas. I know some will misunderstand me and think I am saying we should never own anything nice......that ain't what I said. Let the nice things come latter, after we have worked for them. If we have a multigenerational vision, we should care more about building for the kids than our own comfort. We must be willing to live a little bellow our means even, so that the children can have a running start. As always I welcome comments, ideas, rebuke and sharp pointy sticks when needed!


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