Is your Quality of Life a Cost of Production?       

Ever met someone who knew the cost of everything but the value of nothing?  John King is a Holistic Management certified educator living in Nelson, New Zealand.  He discusses how to let quality of life determine your financial planning

As the latest Mastercard advertisements clearly illustrate, some things are just priceless.  But so often in business we forget these priceless moments.  Success is measured in financial terms; production drives conventional financial planning.

After all, the current belief is production produces profit, the backbone of our prosperity or quality of life.  (Unfortunately, all too often this is not true – production does not necessarily produce profit).  But what if opposite were also true?  What if we could measure wealth in its true sense (financial, social, and ecological) and measure success on that?  What if we could use quality of life to determine our financial planning instead? 

For most land managers nothing is more important than farm and family.  Yet the current practice of striving for a dozen different goals every year scatters both financial resources and management focus often at the detriment of the farm and family as a whole.  If there is little prioritising of expenses and time, the scramble for these resources leaves family relationships strained.  How could focusing on quality of life improve the situation?

For example, a farming family decides to take a holiday every year no matter what their financial situation.  In a tight year they only use $500.  The overall profitability or productivity of the business will not be seriously influenced by a $500 reduction in their fertiliser bill, but missing a holiday would influence the dynamics of family life.  A $500 holiday is not everyone’s cup of tea, but what is important is a family knowing what kind of experience they want and creating it with the money and resources they have available.

Using quality of life as the driving force for financial planning doesn’t mean production isn’t important.  It is.  However, if production is gained at the expense of soil erosion, divorce, poverty, crime, increasing taxes and bureaucracy, or the future health of your grandchildren, will the family be any richer?  Being profitable and enhancing the health of your land and family improves quality of life on the farm.  Covered soils, stable families, and good relations with all members of your community all add to quality of life.  The financial planning to achieve these aims is not any harder than what people are already doing, it just requires a change in thinking.

If you don’t believe that production drives financial planning, ask yourself what are the first things you’ll spend money on this year?  Fertiliser, seed, feed, labour, fuel, and so on.  When I ask farmers to list their expenses they only talk about profit when there is nothing left!  This behaviour leads families into pitfalls like the “nitrogen trap”, (i.e., they want to stop applying high rates of nitrogen but can’t due to the damage to clover plants and ensuing loss of production).  The compelling urge to maximise productivity is why so many families try to spend their way out of trouble instead of prudently optimising their profitability.

For most land managers the question is; are you there for the farm or is the farm there for you?  Paying yourself first and then prioritising expenses with the money that is left may sound strange but is no harder than the planning most families do now.  However, you can only do this when the family has a strong sense of what they value about the businesses, lifestyle, and relationships they want from the farm.  This insight requires perceptions of wealth to go beyond money to simultaneously take in the health of the land and the people who rely on it.

Financial planning using quality of life is not about waving wands and waiting for a windfall.  It involves taking a new look at the habits associated with farm wealth.  If prosperity rather than production is to become the driving force behind what families do with their money, then changing perceptions of wealth must occur for farming families to improve their quality of life.  

Planning for profit is the first step in producing profit, and true wealth is not just financial.  Don’t let your quality of life become a production cost.

John King acknowledges Judy Richardson of Vryberg, South Africa for her suggestions to this article.


Published southern edition of Country Wide, May 2002; South African Farmers Weekly, Nov 2002