How to build capital

If you’ve ever dreamed of owning a farm, you probably read the real estate ads in the back of the newspapers and farm magazines. You have seen the price tags that come with a farm and you’ve wondered how on earth can anyone afford that without a lottery ticket. Let me show you how you can build your savings account to make that possible. The first saving you need to have is the squirrel fund.

I first heard the term “squirrel fund” watching Shameless one night. I found I liked that term a lot better than “rainy day fund” or “emergency fund.” Squirrels hoard vital supplies and that’s what this fund is, it is a hoard of a vital supply of money. It is basically an amount that you hide away, out of sight to get by when things get bad. The squirrel fund needs to cover at a minimum 2-3 months worth of expenses including rent, groceries, utilities and any other normal monthly costs.

When you are trying to determine how much money needs to be in the squirrel fund, tally up the bills you have every month and multiply by 3 for a starting point. If you have a farm income statement, take the two most expensive months as your guideline. Regardless of what stage you are in your farming journey, you will need to have a squirrel fund.

The fund is there when everything goes wrong, if you have an accident or lose your off-farm income. This fund should never ever be touched outside of a terrible event happening. If you do need to use the fund, it is important to replace the money as soon as possible. 

Check on your squirrel fund every quarter to make sure that the amount is still going to cover 2-3 months of expenses as your operation grows. I would place this amount in a Tax-Free Savings Account (TFSA) so that you don’t pay any tax on whatever small amounts of interest the fund might earn.

Now let’s talk about how you can fill your squirrel fund and your savings account. First, focus on moving up your career to a job that will bring home at least $40,000 or more after tax. The more you can bring home and save, the closer you can get to your dream. Work maximum hours, take on overtime, whatever hustle you need to do to bring home a bigger paycheck should be your focus. Minimum wage at a dead-end job is not going to cut it. Look outside agriculture, many of the trades have very useful skills for farming and good paychecks that go with them. Invest in an education that you can fall back on when times get really hard.

Once you have somewhat of a nest egg saved up consider operating without owning. This means launching your farm operation using leased land and infrastructure. Operating a profitable farm enterprise before buying can also help build your savings and gives you assets to borrow against. I’ve talked about this option at length HERE.

If you are going to own and operate a farm, start out debt-free. You do not want to start out with student loans, credit card debt or a vehicle payment. It is entirely possible to graduate university or college without student loans or to pay them off within a year of graduating. If you are investing in a formal education, look at all opportunities for grants and scholarships.

For your credit score, do make sure you own and use a credit card. Use the card responsibly and pay it off entirely every month. This means you will still have a score but no debt. Credit card interest is crazy so never ever carry a balance on the card. Use it to buy basic purchases like groceries and fuel for your car.

If you can learn to live within your means from day one, this farming journey will go a lot smoother and allow you to save more money. Save every dollar that you can and place them in high interest saving accounts. You will not receive a lot of interest but every penny will help. Live as cheap as possible to save as much money as possible. There are a million different budget tips and tricks out there to help you save. These are some of the money saving methods I personally use:
* Cheap phone on a cheap plan with limited data
* Replace cable/satellite television with Netflix and internet
* Cooking from scratch
* Shopping at thrift stores for clothing
* Local day trips instead of vacations
* Drive fuel efficient older car

If saving and cutting living costs is a struggle, I would suggest checking out the Financial Independence Retire Early (FIRE) movement. 

The Squirrel Fund

Income Sources

Be Debt-free

Live within your means

This will depend on the price of the farm. The general rule is that you need to have 20% of the purchase price for the down payment. On top of this, you’ll also need money to cover the closing costs of your purchase, the land transfer tax and moving costs. That means that if your dream farm costs $500,000, you will need at least $110,000 saved up.

Don’t be afraid to ask family and relatives for help. Chances are if they are involved in agriculture, they will understand your passion and might be able to help you through a loan of the down payment or in some other fashion. 

How much should you save?

Explore your options and find your path

Unlock the farm dream

Starting Guide

Overview of farm sectors

Operating without Owning

Agriculture Annotated

For Canadian Farmers • By A Canadian Farmer


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