first off, I apologize this post has no pictures. I know that in the short term blog posts are better with pictures, but I'm hoping to do with this blog what is severely lacking with others. You see, all the farm blogs I've read started long after the farm got it's first animal. While they still document trials and errors from that time on, we're not at that stage yet and I have very little resources to use to get us there. Common sense and hard work go a long way, but in the future when we're famous farm bloggers I want this post to exist in the archives.
That all being said, before we can pay our bills with a farm income alone we need to eliminate our debt. Right now our debt makes up a significant portion of our expenses and the faster we pay it off the better. This is precisely the type of stuff a lot of people are bashful about but, as I said before, the more information out there the better. So, some numbers to start with.
Mortgage: $115,000 at 4.75%, $600/month for 30 years.
Big Man's student loans: $18,000 at 3.5%, $100/month for 20 years.
Johnson's student loans: $41,000 at 6.5%, $275/month for 25 years.
If we pay the minimum amount every month we will pay $325,000, a total of $151,000 in interest. The faster we can pay this off the less money wasted in interest payments. For this reason our #1 priority is to get out of debt as fast as we can. How?
Well we have a few tricks up our sleeve. First, if we're able to get a natural gas lease we will get a bonus payment of $60,000 to $130,000 after taxes, all of which would go towards this debt. Most likely this will happen in the next 5 years, but we're not hanging our hats on it, so what can be done in the mean time?
Reduce our living expenses and raise our income. Living in this rural area, even with our higher educations, pay rates are lower than in cities. At the same time our cost of living is lower so it's a trade off. If I were in a major city in a period of economic prosperity I could probably make $25-$30/hour with my skill set. Out here I'll be happy to make $20 and settle for anything above $13 (speaking of which I got a job recently as a machinist in Ithaca. I start on Monday so we'll see how it goes, in the interest of disclosure I'll be making $15/Hr.) Assuming we can both get full time jobs making an average of $14/hr, working 50 weeks a year we'd net ~$41,000 after taxes. During this time we'll hopefully get raises, and always be on the lookout for higher paying jobs, so $41,000 is just a base line, but we'll run with it.
What are our expenses, you ask? Well here's a rough monthly breakdown, based on the last 5 months:
Eating out: $60
Fuel for cars: $45
Auto maintenance/Grease filtration costs: $180
Things you can buy at Target: $125
Property taxes, insurance: $275
What this does not include: Any renovations to the house or farm, farm expenses, holiday and travel costs. So that's ~$27,250/yr just to keep our heads above water. That's $13,750 above and beyond that we can put towards the debt each year.
If we do that, we could pay off all of our debt in 8.5 years, paying only ~$40k in interest and saving ~$111k in the long run. Not bad, and although it'd delay a lot of our projects it would be well worth it.
here's the craziest part, for every $100/month more we put towards the debt it cuts 6 months off the length of the loan and $2,500 in interest that we won't have to pay. This provides quite the incentive to be thrifty.
The two biggest things we're doing so far to save money is heating the house and running the vehicles on Waste Vegetable Oil(WVO). the Auto maintenance/Grease filtration cost number is high because I've been dealing with some growing pains and I think that will go down, but even if it stands as it is that's $2,160/yr instead of the $5,400/yr we'd be spending on Diesel. Can't shake a stick. This year I'd like to devise a system for heating the hot water with WVO which will save us about $40 a month, I hope.
I also plan to get rid of my Iphone, that's $90/month. We'll get a VOIP line and some burners for the cars in case of emergency. Speaking of which, if anyone's interested in an Iphone 3G in good condition with about a year of contract left, let me know.
Where else can we cut costs? Well, I think the numbers for "Auto maintenance/Grease filtration costs" and "Things you can buy at Target" are a bit high due to our recent move, I think we can bring them down to $100 and $75 respectively, saving another $130/month.
That's $260 so far, or 14 months and ~$5800 in interest. This year we're going to invest heavily in the garden, and while I think we'll about break even in 2010 the following years should see a reduction in grocery costs by $50/month or so. By 2011 I'd like to be raising some of our meat, and while that may not be much cheaper than grocery store prices it will be better quality. We'll call it $50/month.
but wait, here's the best part:
At the end of this period, be it 8.5 years or 6.9, or even sooner if we get that big natural gas lease, we'll be at a point where our yearly expenses will be $11,220, or 49% of what it is now.
Now, which is easier, running a farm that nets $215 a week or one that nets $437? Even if we decide not to farm at that point and just work we'd only need to work 22 hours a week between us at $15/hr. in order to pay the bills.
Anybody else have ideas on how to scrimp?