I know finances are boring and that you don’t want to read about them. I don’t want to write about them – finances are boring. But having enough money to live on is essential to, well, living, and while the farrier profession has the great advantage that no one’s around to boss you, it has the disadvantage that the only person to plan for your financial future is you.
So let’s take a second and talk about how you might make your money work for you both now and in the future.
Your shoe box with receipts does not count. Bookkeeping is worth doing in a very organized and professional way if only because that one time you get audited, you’re going to be super glad you only have to carry a pile of notebooks or a laptop with you to the tax office and not a wagon load of shoe boxes with receipts and notes stuffed into them.
There are lots of computer programs out there now that can show you how to keep records if you want to do the books yourself. Having a professional bookkeeper is even better, although they are, as I said, professionals and are deservedly paid like it. This might be a good bartering opportunity, if you’re fortunate to have an accounts-minded client.
You need this. Your business might not have a very sophisticated cash flow structure, but you do have a long-term need to keep your business (i.e. you) in the black. The price of gas, insurance, tools, etc. creeps up way faster than your prices do, and without a proper budget, you might not notice.
A budget is not just about figuring out profit and losses for the end of each year. It’s also about figuring out where you’re being most productive or least efficient with your money; where you could tighten up the corners and what areas of your business (marketing, education, etc.) you need to invest in to keep your client base steady. It’s a plan you make to ensure your financial stability. There are a ton of online resources for small businesses that might help you organize your finances and see what’s actually happening to the money you make.
Esco Buff suggests having an expenditure plan for tools so you have enough cash set aside to replace tools that wear out and purchase new equipment that you might like to have in the future. As Buff says, simply writing down the cost of the tools you will probably have to replace in the next 12 months and the price tag on tools you would like to have in the next year will give you some idea of how much you should be setting aside.
The same can be said about conferences, continuing education, workshops and any other training that will keep your skills up to date. Putting some money aside for your own further education will make sure you’ll be able to take advantage of professional opportunities that arise. It’ll also let you keep an eye to your own career path; where it’s going and what you have to learn to get you there.
Do you have insurance? Here are two kinds you might want to think about:
Health insurance – with no health benefits and no way to keep money coming in if you’re laid up, this is a must. Public health care coverage varies widely depending on the state/province/country you live in, so your first step might be to figure out what medical services are covered in your area, and what ones you’ll be on the hook for.
Step two should involve an independent insurance broker who can do some shopping around for you and find a policy that fits your budget. A company that specializes in agricultural insurance might have policies specifically tailored for farriers. Disability insurance that covers you in case of an extended lay up also exists and might be worth asking about, especially if you have dependents.
Liability insurance – I know you’re a great farrier, and that you’re not likely to be sued, but now that I’ve said that…
There are insurance policies out there that cover loss or damage to supplies and equipment (yours, your client’s or somebody else’s that you might, I don’t even know – destroy in a fit of rage?), bodily injury and property damage (yours and other people’s), something called “care, custody and control liability” (in case you’re legally found to have damaged a horse), business property insurance for your workshop, the list goes on.
Being a member of a farrier’s association will sometimes give you a discount on insurance rates. Some farrier’s and equine associations automatically provide mortality policies for their regular members, which is also worth checking out. If you’re not convinced, click here for some excellent reasons for taking on the expense of insurance. Then make sure you factor your insurance costs into the price of your services.
Part of your budget should be devoted strictly to savings. You’re obviously familiar with having to keep some money back for tax purposes, but it never hurts to think a little further down the line. With no company retirement plan, it’s pretty much up to you to make sure you can spend your twilight years sipping cocktails on a beach. Banks will often let you talk to an investment advisor for free if you’re interested in making your money work a little harder than it would being stuffed in a mattress. They’ll sometimes run seminars on retirement planning, too, as will some local community groups.
The amount of money you need to put aside now to make sure you can live comfortably later is actually pretty astonishing. As is the maze of tax implications on savings. Having a formal plan will keep you on track in terms of contributions and also (hopefully) make sure you don’t get walloped by the government.
Some financial food for thought!
by Cindy McMann