Imagine you're the proud owner of a ranch or some other significant asset, and naturally, you start thinking about how it will shape your children's future. You envision it as a tool to make their lives better, a way to give them a head start. But here's the thing – it's a subtle mistake many parents unknowingly make.
You see, in today's world, kids often have dreams and ambitions that don't necessarily align with the paths their parents have paved. Sometimes, they aim higher and venture into uncharted territory. So, what should you do?
Well, in this enlightening podcast episode, Jordan Grumet is here to guide you on aging gracefully without regrets, both emotionally and financially. He's got plenty of wisdom to share. To keep things grounded, Colter DeVries dives into the realities faced by multi-generational ranching families. Together, they create a vivid picture of how to navigate the delicate balance between preserving family legacies, securing financial stability, and embracing the unpredictable journey of life. It's like having a friendly chat with two experts over coffee, and they've got some great stories and advice to share.
It's an episode you should take advantage of. Tune in now!
Imagine you're the proud owner of a ranch or some other significant asset, and naturally, you start thinking about how it will shape your children's future. You envision it as a tool to make their lives better, a way to give them a head start. But here's the thing – it's a subtle mistake many parents unknowingly make.
You see, in today's world, kids often have dreams and ambitions that don't necessarily align with the paths their parents have paved. Sometimes, they aim higher and venture into uncharted territory. So, what should you do?
Well, in this enlightening podcast episode, Jordan Grumet is here to guide you on aging gracefully without regrets, both emotionally and financially. He's got plenty of wisdom to share. To keep things grounded, Colter DeVries dives into the realities faced by multi-generational ranching families. Together, they create a vivid picture of how to navigate the delicate balance between preserving family legacies, securing financial stability, and embracing the unpredictable journey of life. It's like having a friendly chat with two experts over coffee, and they've got some great stories and advice to share.
It's an episode you should take advantage of. Tune in now!
I'm Colter DeVries, owner of Ranch Investor Advisory and Brokerage Services. I'm an accredited land consultant with the Realtor Land Institute and proud member of ASFMRA.
Ranch Investor:The Ranch Investor Podcast is the most downloaded and informative industry-specific content that intrigues while entertains.
Colter DeVries:Thanks for coming on the Ranch Investor Podcast, Jordan. I'd like to get started with your background. What got you into end-of-life care and personal finance and investing?
Jordan Grumet:So there are really two separate stories. When I was seven years old, my father died suddenly. He had an aneurysm or a blood vessel burst in his brain, completely unexpected, and my father was a doctor. He actually treated cancer patients. So at the time I didn't really understand why it happened, but as most seven-year-olds, I figured I had something to do with it, it was somehow my fault.
Jordan Grumet:And so I really developed this sense of purpose, this idea that if I went and became a doctor like my dad, that I could right the existential wrong of his death, that I could somehow fix this problem and take myself off the hook for being responsible for it. So, as a young kid, being a doctor was all I ever thought about. It was the only plan I had and I carried it out. I went to high school and college. I studied really hard, went to medical school. In my first week of medical school I actually volunteered in the hospice program Just to help the terminally ill and the people who we stopped doing active medical treatment and start making them comfortable and prepare them for death. And I knew I wanted to do this because of my experiences with my dad and there was no one really there to help us through that.
Jordan Grumet:So I volunteered and I did it for a year or two, but eventually I became a doctor and went into other things and practiced general internal medicine. But I kept on realizing that I was really good at taking care of the elderly and end of life. In fact, I once had a hospice team come see one of my patients and they asked me why I didn't work for them. So I just started to work for them.
Jordan Grumet:The financial story is a little interesting. I grew up with really smart financial parents who own businesses, who invested in the stock market, who had side hustles, so they modeled this great behavior for me. That I learned, but I didn't really understand it. And so when I became a physician I did a lot of the right things. I invested my money, I bought some real estate. I did all these smart things with money, but I didn't understand what I was doing.
Jordan Grumet:And then I started burning out in medicine. And when I burnt out in medicine I went really down the rabbit hole of trying to figure out how do I extract myself from this life that isn't fulfilling me anymore. And I discovered the personal finance world and the financial independence retire early or fire world, and that gave me a whole new vocabulary to understand my finances and I realized that I probably could stop working or slow down quite a bit, which was really exciting for a moment or two, until I realized I had no idea then who I'd be and what I wanted to do with my life. This was kind of cleaving that last little bit of a bond I had with my father, who died when I was seven years old. So I did the deep dive into personal finance and just became intrigued with this idea of how we manage our money and eventually the idea of how we manage our money in such a way to live better lives, better, more happy lives.
Colter DeVries:Well, this is going to be great because you touch on two big topics. So you have a book about end of life care, right?
Jordan Grumet:So the book is called Taking Stock and it's actually about what the terminal ill and dying have taught me about money or life. So it doesn't get in specifics of how we manage terminal ill patients. It's more like some of the epiphanies that I got from them that took my financial life and made me understand better. Maybe we're striving for some of the wrong things or doing things in a way in which we shouldn't. A perfect example of that is you know, when you're told you're dying, the last thing you're worried about is money, or whether you work tonight or weekends, or even if you got that last raise or promotion.
Jordan Grumet:But you do worry a lot about those things that were purposeful in your life, like, did I do those things that was really important to me?
Jordan Grumet:Did I have the courage to pursue them? And a lot of times the answer is no. So it helped me realize, for instance, first and foremost, a lot of us put our finances before our sense of purpose and identity, and actually we probably should start with purpose and identity and then build the financial framework around it, and so I think that was one of those kind of big things that I learned that I put in this book is getting us to be much more thoughtful about money instead of seeing it as the end, all be all or goal. Realize that money and investing and all the things we do to make money are really just tools to then concentrate on those things that are more important for us. And of course, for everyone that's different, but the dying were able to kind of tell me boy, I really regret that I didn't do these really important things to me, and often they didn't have a good explanation, except they were just too busy or didn't have the courage.
Colter DeVries:Being stuck. I'm going to marry that with your podcast about financial independence and retiring early. What is your podcast called Personal Finance? It's called Earn and Invest. Earn and Invest. And the reason I want to marry that is I think you're going to have excellent insight into what's happening in the farm and ranch world, my world and the listeners why they're tuning into this podcast, the Ranch Investor podcast.
Colter DeVries:Currently, as we know, the majority of United States farm and ranch land is owned by someone older than 63. And that age is increasing. It'll be 65 here before too long. The majority of these asset farm and ranch land owners. They have no intentions of retiring. They will work until they are dead.
Colter DeVries:We think that there's a gray wave and a silver tsunami coming where all these assets, these ranches, are going to hit the market, from the baby boomers that are all retiring out at the same time. Yet to see any indications of that actually happening Although you do see you see a lot of trust lands coming for sale every now and then. But, jordan, what I want my listeners to get from our conversation today is maybe just some out of the box critical thinking from you, a doctor in Chicago, about what it means to have a $10 million asset and usually these assets are free and clear, there's no debt, very low annual yield and usually you're going to have siblings, the next generation, in disagreement about one how to manage that asset, what to do with that wealth. If it's $10 million, chances are that the basis in it was less than $1 million when the family started on that ranch. So you have all this generational wealth that has been.
Colter DeVries:It's been observed, but I can't say it's been created. It's never really created until you capitalize on that or it hasn't been realized I should say unrealized wealth, and we're at this tough point where I think there's going to be more of that. Land values skyrocketed over the last three years. It's been a many decades, hundreds of years. Fewer people are on the land, more people are becoming urbanized for lack of a better term. It's just simple way to put it, myself included. You talked about having purpose and when these 10 million dollar ranches end up being fought over between siblings and they have attorneys and the attorneys are making a hell of a lot of money, is it? Maybe this is too simplistic, but is it? Is that a case where the actual owners kind of left without identifying what the purpose of that asset?
Jordan Grumet:was. I think that's a really important point. So, really, assets serve a few different purposes and we should be really clear about what that is. If your asset is a ranch and it's worth 10 million dollars, but you love that ranch and you work that ranch and the day-to-day activities involved in that ranch really bring you a sense of joy and you love the process of doing those things you're doing associated with it, then that asset is actually doing what it's supposed to do, regardless of you sell it or not. It's creating a sense of purpose and identity for you and it's fulfilling your needs, not only monetarily but otherwise.
Jordan Grumet:That's one way in which we can use an asset Often the one we use the term asset. What we're really talking about is something we're using to make money or create wealth with. Now, the purpose of that type of asset especially if you don't enjoy dealing with it, if it's not giving you any sense of purpose and identity unto itself, the real idea here is that we want to then use that to live a life that is more purposeful, that we can do things we really want to do. So the question is how to use that pent-up wealth to do the things we want to do with our lives. For the older generation, the ones who owned it, the ones who may be getting close to seeing a doctor like me, a hospice doctor they've hopefully already done that, built purposeful lives and they've happened to build wealth. However, when they pass along, that asset could have great meaning to their family. So the question then is what to do with that for the next generation. Maybe those next generation are city goers or they're not ranchers themselves. Again, I'm not an expert in ranch taxes, but, like many things, at least you forgo some capital gains, etc. After a person dies and there's a step up of the basis. Therefore, at some point, these families who are coming into these ranches and they have no interest in the asset itself, they have no interest in ranching. It'd be a really good time to probably liquidate those assets and put them into something much easier either a business that they're interested in, that they love and they want to pursue, or literally taking that money and putting it in the stock market and letting it do its thing. I guess there's a third possibility which you could tell me more about is monetizing that asset so that maybe you rent it out to other people or use it for other things that brings you in money, but really the goal then for that next generation, why your progenitors worked so hard and built so much wealth. Ideally, you want to use that wealth to live a good life, to do the things you want to do, to create some safety and some margin in the lives of your family so that you can pursue what you want to pursue. So that's my take on it.
Jordan Grumet:I also have some just other general thoughts about this idea of generational wealth. We all know this. There's a saying shirt sleeves to shirt sleeves in three generations. What that means is the first generation works really hard and ends up owning these hugely valueless assets, things like big ranches and then the next generation uses it all up and blows it all on. By the third generation you're back to shirt sleeves. That's the worker again. So I think we have to be really thoughtful.
Jordan Grumet:I think each generation also someone has to make their own way, which means even if you are coming into a lot of money or your child is coming into a lot of money from a grandparent, I think it's still worthwhile to pursue a career, to pursue building some of your own wealth too, because I think that's the only way it actually feels good and gives you a sense of purpose and identity is doing some of that work on your own. But hey, if the money's there and if that asset now belongs to you, let's use that to live a good life. And especially if you're not interested in working the land and there are new, younger people who do want to work that land, why not sell it to them? Take that money, put it into something else and kind of live your ideal life?
Colter DeVries:Is this an issue of? It should be. It ought to be more top down, that grandma and grandpa, who are 78, maybe in their 80s, even sell the owner of the asset that. It should be their intentions, their wishes. They made it, that's their asset. No one else should have an opinion or input what they do with it after death or even pre-death. Is it? Should it be a top down issue, or should even the grandkids get involved in this discussion?
Jordan Grumet:You know it really depends. So when we're talking about that situation right, we talk about the matriarch and the patriarch right. The grandkids are usually the grandparents who built the extensive wealth and then the next generations are left kind of to deal with it while they're still alive as well as after they die. It really depends on the matriarch and patriarch right Ultimately, until they die, these are their assets and through careful conversations with their children and their grandchildren, they can let it be known what they would like done with these assets and they can actually make the legal structures to make sure that happens, if that's really important to them. So it can be a multi-generational conversation and often, hopefully, it is, because usually when you're talking about a matriarch or patriarch, a grandparent, grandmother, grandfather, they really want to leave a legacy down to those kids. So it's really important to tell the kids hopefully while they're still alive, what that legacy means to them. Why is this ranch important or not important? Is it important because our family has owned this land forever and we wanted to stay in the family? Or is it important because this is the way we became financially independent and we want you to live with the boon of these assets? So go, sell them because you're not interested in them, and live your life.
Jordan Grumet:That really depends on the person, the matriarch and patriarch who's creating this wealth. So I think having those conversations can be really good because ultimately, we want them to leave the legacy they want to leave right, they're going to leave this earth at some point and the only thing that's going to exist is their legacy. Their wealth is part of that legacy. It's not the whole legacy, but why not start having those conversations now, especially if they're open to them and as opposed to saying, hey, what are we going to do with your money when you die, what you're really saying is what would you like your legacy to be, these things that you held dear and you built? How would you like them to look after you're gone? Who would you like to own those things? How would you like to have them remind us of you? It's really this open-ended conversation where we start getting down to you know what is this person's life story and how is it going to go on after they're gone.
Colter DeVries:That is a extremely difficult discussion to approach. And so if you've got dad, who's 50 years old, and his kid, who's 30, and grandpa and grandma who are the matriarch, patriarch owners of the asset they are 80, how do you approach them and say look, your sunset is just around the corner and there's huge financial implications about that. But we're gonna talk about legacy, we're gonna talk about these soft, novel, philosophical subjects. We're not gonna get to the double bottom line of who's getting what.
Jordan Grumet:I think there's three good ways to have this conversation right.
Jordan Grumet:So the first one is if you are the 50 year old, you go to your parents and say I'm starting to set up my own estate, I'm worried about what things are gonna look for, look like to my wife and kids if I were to die, or what's gonna happen.
Jordan Grumet:What is your advice? And the truth is you're not really looking for their advice, but what you're doing is you're giving them an option to give you advice, and elder generations love doing that. But once they start giving you advice, they're gonna tell you what they did. They're gonna start saying well, this is how we think about it for you and so it's a really nice bridge is ask their advice for what you can do with your family, and that's a great bridge for you to start talking about what their values are, what they think they should do for you. So it's a really nice way of beginning the conversation without saying you know brass tacks, what am I getting, what is so-and-so getting, et cetera. So that's a really nice way to start. Another good way is to look at people. You know where it didn't go right. So hey, grandma and grandpa, did you notice your neighbors? They passed away recently and no one knew what to do with their ranch, and so they sold it. But then they eventually found a copy of a will written that no one knew was there, that said that it was deeply important for them to keep the ranch and the family, and so if you can bring up a situation that didn't work well, it's a great way to start that conversation. Like, boy, I wanna make sure that doesn't happen to us. Like I wanna make sure we don't make the mistakes that so-and-so made, because God forbid that would be horrible if, after you died, we ended up doing the wrong thing with your ranch or your stuff.
Jordan Grumet:So I think that's the second one. And then the last one is the one we started with is legacy. Let's talk about what would you like your legacy to be once you're gone. And that means everything. That's your story, that's your beliefs, that's all those things you wanna hand down to the kids and grandkids, plus the money is part of it, but it's a small part of it, right? So we're not just talking about your things, but we're talking about how do you want your grandchildren to speak about you when you're gone. What stories do you want them to tell their children about you? And so legacy building is the third way. So to review, ask their advice about your needs and have that help that you bring up their needs. Two is bring up a situation where it didn't go right and people they know and see if that can spur the conversation. And lastly, concentrate on legacy and not on monetary value of things.
Colter DeVries:Now Junior, who's 50, might be listening to this podcast, Grandma and grandpa, who are 80 or not, and definitely grandkids who are 30 or are listening.
Colter DeVries:How do you approach this so that grandma and grandpa don't feel cornered and it doesn't feel abrasive? Is it ever recommended that you say let's bring in a third party, let's bring in a mediator right off the bat, because I know that this is gonna get ugly and we're gonna have strong passions from other family members who moved to Seattle and you're gonna get red faced, mom's gonna cry, dad's gonna scream, you guys are gonna. You're gonna wanna end up just shit canning the whole thing, stick your head in the sand, hope the problem goes away or solves itself on its own, and I can just see that this is gonna be an issue and it's gonna maybe cause a fist fight with my brother that I haven't talked to in 13 years, and my sister's gonna lawyer up right away. And I'm the one on the ranch. I'm the one making a living off this asset currently not a good one, but I'm okay. Do you bring in a mediator or how do you?
Jordan Grumet:approach this. I think it's really tough to bring in a mediator out of the blue right, because otherwise that's gonna really feel like you're fighting, which is going to shut everyone down immediately. I think you have to learn how to try to meet people where they are right, so as opposed to try to bring them to where you are. So you, as a 50 year old, might be very much like I need to figure out how we're gonna make this work for the family. I gotta figure out what to do once you're gone. You might be very detail oriented, but that might not be where that older generation is and that's why, again, I think you really need these round about ways of having the conversation. So first start the conversation again where you're not talking about them you're talking about a friend, a family member, someone who went through something horrendous, having to do with the state planning and see if you can broaden the conversation and say, gee, I'd hate for that to happen to us Again, taking it off of them. Say, hey, I need advice on my financial plan. What would you do? Not I wanna talk about your financial plan.
Jordan Grumet:So, again, I think the most ginger way to approach these things is those backdoor approaches where you're really maybe even tricking them a little bit and not realizing that that's what you're trying to do, but starting the conversation opening the doors, cause if you don't, you can't slam the doors open cause someone's gonna slam them back shut. You gotta gently open the doors and try to begin having those conversations. Are there exceptions? Yes, if you have a family attorney who's worked with your family forever and knows all three generations certainly going to talk to that family attorney and say, hey, you're close to mom and dad. I'm really worried about this. Do you have any ideas how to start the conversation? So maybe there's someone who's really trusted, who has some expertise in this field, that's worked with the family forever. Certainly that may not be a bad time for actually a third party to begin the conversation, but you gotta just be really thoughtful about it.
Colter DeVries:Well, jordan, your bedside manners must be excellent. Your empathy seems incredible and that you talk about meeting people where they are. I was a banker for a few years and some of my clients were surgeons, and the more they made, the more they spent, the more they leveraged, and they would come in with huge annual incomes on their P&L, but with their balance sheet they were ill-liquid Negative yep.
Colter DeVries:And very very common story, very common story and these surgeons when you decline their loan request, when they get denied, boy, would that trip their ego, that would set them off and piss them off so bad. So I appreciate that You're not like having a financial conversation with you, isn't it quite like some of the financial conversations I've had with doctors and surgeons in the past?
Jordan Grumet:Yeah, you know there's this rumor that doctors are poor business people. The truth of the matter is it's not necessarily so. There are lots of doctors who have extremely successful practices, but doctors are just like everyone else. Just because you make a lot of money doesn't mean you're wealthy. In fact, a lot of people make a huge amount of money, spend a huge amount of money and they're really broke. In a sense they're poor. They're just poor with lots of things and, as you and I both know, all you need is one misstep or one problem and it can all go down the drain. And that's what tends to happen. Right, if something unexpected comes up. They get a disability, can't work for a short period of time, some unexpected costs, some reason they can't work and all of a sudden they're in dire straits. Not a great way to live. I've known lots of people like that. Most of them are not particularly happy.
Colter DeVries:Right, yeah, that stress there, that debt eats at you, it creates the stress and then you project that onto everyone around you your nurses, your wife, your kids, and so, yeah, let's get into that with farm and ranch. Farm and ranch is so highly levered as well. I didn't think the surgeons needed to be. They would lever their commercial real estate. If they started the private practice and brought in some partners, they'd try to lever that as much as possible. But farm ranch very high input costs. How do you?
Colter DeVries:How do families you talk about the personal finance aspect of it and I think right now, looking forward, with high interest rates, when people go to get their new operating line of credit this year it's going to be higher than they've they've seen in many, many years. How do people manage? Especially again, farm and ranch is all risk, very low yield. So the asset I'm talking about Jordan the annual yield is one and a half percent and you know you can stick your cash into a CD today at five and a half. So it's very small incremental improvements in equity, very small cash flow relative to the amount of assets and risk you're working with. How do how have you seen people work their way out of stress, all that debt, small cash flow.
Jordan Grumet:I mean leverage is so common. We see it in real estate, like non farm and ranch real estate. We see it all the time, and a great way to get yourself in trouble is to over lever and then have the market turned down and find that you're underwater on most of your properties. I suspect with farm and ranch it's the same idea, right? You really really have to lever and in the long term it probably does pay off if you can keep the ranch and the price of the property goes up, etc, etc. You end up doing well, but in the meantime you're stuck in a very vulnerable position, right? That position of if something goes wrong, you have almost no margin. So the key there is you really have to try to build up equity as best as you can. Again, I'm not in farm and ranch. Some of the way, obviously, is to spend less than you earn and try to put little bits of that towards the mortgage or towards the property itself. Another way might be to sell some of the property or rent off some of the property, whatever you can do. Again, I don't know your market as well, but let's say you have a certain size property and you could sell a third of it and that would actually provide you with some cash and you could pay off some of the loan on the rest of the piece of land. That decreases your leverage, which again decreases your risk. I don't know the specifics because I'm not in your field, but again, the idea is how can you start paying down on some of that leverage? Because as you get more and more equity into the property, your risk goes down.
Jordan Grumet:There are other things you can do. The question is how much does your life allow and adapt to these things? You can have side hustles. You can do other things to make money. You could be traditionally invested to create some wealth in other ways, like in the stock market, etc.
Jordan Grumet:But it depends really on your personal situation, how leveraged you are, how much your expenses are every year right and how much you bring in. Because the truth of the matter is, even on people who are living like so, in doctors and surgeons the ones you're talking about it's really easy to say well, if you cut the spending, cut that spending, cut that spending, your quality of life will be fine and you're going to save a lot of money. When you're talking about someone who's living on 1 or 1% of their asset. They obviously might not have nearly as much cash flow, but there's still places where you can look and say can I save here? Am I spending needlessly? Can I take some of this money that I was spending and it isn't making me any more happy and then start using it to pay off some of that debt right, building equity such that your leverage is not so extreme that you're at high risk in case something goes wrong?
Colter DeVries:Well, we talk about it a lot. The first step is cutting the deadwood, is reducing your costs, reducing your input costs, cutting expenses the challenge there. I mean, how do you approach that when, especially now, that millennials are so accustomed to a high lifestyle quality?
Colter DeVries:of living and if we do see some challenges in the economy going forward, it might take several years to climb out of stagnation or deflation or recession, whatever it might be. It's going to be very trying. People are going to have to change behaviors and habits. And then you also have the issue of vanity and ego. So people like new pickups, they want the King Ranch Ford Edition, and to the detriment of their entire business and self and family and peace of mind. How do you approach that? Hey, it's time to tighten our belt. Things are going to be tough. We've got to cut costs. No more new pickups, no more eating out. I mean, that's painful to think about.
Jordan Grumet:Well, I think it's twofold. One is this is not easy. Right, life has never been easy. This is not going to be easy. That is what it is. You're stuck in the situation you're stuck in, no matter how much you don't like it. That's still where we are, first of all. Second of all, you know, studies over and over studies show that a lot of these things we think brings us happiness probably don't.
Jordan Grumet:So there's this concept of Hedonic adaption and the hedonic treadmill, this idea, for instance, when it comes to buying things. We buy things and they initially make us happy, but we have a basic happiness set and pretty much we buy something and we're happy for short, brief periods of time and then we fall back to our happiness set. So, starting to cut away this idea that spending money is what makes life livable, happy or great, probably a good way to start. Now, that doesn't mean that we don't need a certain amount of money to pay for heat and food and all the basics. But, above and beyond that, buying that beautiful truck may feel really good in the short term, but probably doesn't make you much of a happier person. But you know what does make you a happier person? Feeling in control of your life. And so when you forego some of those purchases and build up an emergency fund and build up some safety, you will feel much more in control in your life. You'll be able to take the tosses and the turns and the bumps more, and guess what? That actually is associated with truly being happier.
Jordan Grumet:Not the happiness you get from buying something that briefly fades away, but this idea of life taught, lifeline contentment and being safe and secure.
Jordan Grumet:Those things are built by control and independence, and the only way to build that is to make some of those tough decisions, to realize that short term happiness is not the same as long term happiness, to realize that just because everyone next door to you or in your town has a beautiful truck doesn't mean you also have to have a beautiful truck, and to realize that maybe what really causes happiness is much more deep down and internal, and probably less external in things, and so I think, if you start looking at it that way, you can work on it Now.
Jordan Grumet:Granted, majority of people don't want to do the work, to think that way, so there's always going to be people who don't have enough money, there's always people who don't have an emergency fund and their car is going to break down and all of a sudden they're going to be flat broken in trouble. Only a certain percentage of the population really is willing to work on these things, but that percentage of the population is going to find themselves happier and safer and more able to deal with the ups and downs of whatever market they're involved in.
Colter DeVries:Quick tangent how much should be in an emergency fund?
Jordan Grumet:That's a good question and it just depends who you are and what you're involved in. So if you're like me, right, you're a doctor. In all the time I've ever known, there's never a shortage of doctor jobs. Doctors always can make money. So if you have a really, really stable job and the right kinds of things like disability insurance etc.
Jordan Grumet:Your emergency fund doesn't have to be nearly as big because you know that you can go and work and most likely you're not going to get fired and have your, your salary taken away. So we often talk about somewhere between three and six months of at least paying for essentials. But again, people in special situations might not even need that much. On the other hand, if you're nearing retirement or if a lot of your assets are illiquid, you might want to have a year or two. Right, let's say, you're coming close to retirement, stock market is doing horribly and all of your money is stuck in your ranch. You're going to need a lot more cash available just in case something goes wrong, in case your expected income disappears, whatever it may be. So really depends who you are, but I think a great goal for anyone to start with is three to six months of at least minimally covering what you have to pay money for.
Colter DeVries:Okay, so now? So now we get into an emergency savings fund paying down debt, increasing equity, reducing leverage and diversification investments. So ranches and owner operator ranch families are largely single asset wealth when it comes to paying down the debt. Diversifying, creating an emergency savings fund how do you balance those three goals and objectives?
Jordan Grumet:So, very simple emergency fund always comes first, right? Because if you don't build up your emergency fund, you're going to have trouble with the rest of them. So before you go paying off tons of debt, before you diversify, before you invest, you get an emergency fund. Once you have an emergency fund, it's time to look at manageable debt, right? So credit card debt, these kinds of things that are very high interest you want to try to get rid of first. Obviously, a mortgage debt might be something you're not getting rid of. That's more of a long term plan, right? So first emergency fund, then really high interest debt. After that you could start looking at the difference between investing versus low interest or long term debt, right? So, if you're starting, if you covered your emergency fund and you've covered most of your debt, now you're looking at your ranch debt versus investing in the stock market and your ranch debt. Maybe I don't know what type interest rates are pretty normal for ranch debt, but let's say it's not too amazingly high.
Jordan Grumet:It might make sense for you to also diversify and put some money in the stock market and say, well, I'm not going to pay off all of my debt yet, I'm not going to do the fast payoff, because if you look at diversification right, you have your ranch. That's an asset that covers entrepreneurship. It also covers real estate. As opposed to doubling down and putting all your extra money into paying off that ranch, you might say, well, let me diversify into the stock market. It's completely different asset, it's not necessarily as correlated, and so maybe I'm going to put some money into an index fund, and so that's how I think you really want to deal with it.
Jordan Grumet:Again, we'll repeat it a third time emergency fund first, high interest debt second, and then you start looking at investing versus long term low interest debt, and I think that's a really great start. We can go further, like. You can then start saying well, invest, you invest in tax protected versus taxable right. So if you work for a company, you might have a 401k. If you have your own business, you may create your own 401k or pension. We can start breaking into those things too. But now you're at the third or fourth level of differentiation.
Colter DeVries:So now you bring up an issue in my mind that when we were younger, we got sent home with homework, right, and it was just fill in the blank. You either fill in the blank or chose from the word box and it was all laid out in a program for you. It was already in order, organized. All you had to do is just check the box, fill in the blank. Is there one? Is there help out there, resources for people who don't want to like? I don't want to create this. I've got a blank page in front of me. I, you know, give me check the box, fill in the blank here and I'll go through and start working on this. Or else, is there a coach? Is there someone who can look at the benefits of Roth IRA versus traditional IRA?
Jordan Grumet:There's a few different ways about this, right. So one is you can hire it out. What are the downsides of hiring it out? Well, you've got to hire it out to the right person. So you have to do your due diligence and find either a coach or financial advisor. There are a million of coaches and financial advisors in our virtual world. You don't even have to live in the same city or town. There are a million of them, and so you have to start separating out and saying you know, do they have the right classifications? Are they trusted? Do I know anyone else's use them? So you got to do your due diligence. But if you want to, you can pay a fee and you can have someone pretty much set it out all for you, so that they put the boxes in order and all you have to do is check them. That's one way.
Jordan Grumet:The other way is, if you're more of a self motivated, self driver, you can learn the basics of personal finance Really, spend a few hours a month doing it. There are a few books, a few blogs, a few podcasts there's a million of them out there but if you can find a few good ones, you can learn most of what you need to know, and so it all depends on just what your style is. But you've got to do the work, and that's where people get stuck. It's not that understanding personal finance is particularly difficult. It's that you have to put in those few hours a month, maybe for a full year. Right, we're not done about a huge amount of time, but let's say, five hours a month for a full year, that's 60 hours in total. If you're willing to listen to podcasts, read and read books, read blogs, read books, those kind of things, you'll probably be able to figure out 80% of what you need to know, and in the investing world, 80% is good enough.
Jordan Grumet:Now that doesn't again mean you might not want to hire someone for that last 20%, or you might want to invest a lot more time. So, instead of those 60 hours a year, maybe you want to put in an extra 20 to get that last 20%. Right, that's up to you, but you can build a strong financial framework for yourself Either way. It's just a matter of what works best for you. Some people they'll never do the studying themselves, they just need to hire someone. So all they have to do is make sure they hire someone reasonable. Some people are consummate. Do it yourself, or so they can go and do their own work. The only problem is this when you're talking about money, it tends to be highly emotional. So if you're going to be the kind of person who the stock market drops and you sell because you're scared the complete worst time to sell, then you probably should hire someone to help you manage your money so that they can dissuade you from doing those stupid things that we all do when we get emotional.
Colter DeVries:Well, what would be some basic goals that would be worth thinking about considering for these generational families? Single asset wealth. What are some, maybe some benchmarks? Does it take six years for this to come together? Is this a five year plan, or should I be? Should my equity be 80%? What are some basic goals to get started thinking about?
Jordan Grumet:So I think, first and foremost, the goal is that you live a good life, and so let's not miss the bigger picture.
Jordan Grumet:The whole point of money, of assets, of all of this is so that you live the life you want to live. So, first and foremost, you have to really define what you want that life to look like. Who are you spending your time with? What are you spending your time doing? What kind of projects fill you up? How are you affecting the people in your community and around you? So if you're not having that thought process going on and I think it should actually be first then you don't even really know how to work with those assets or how to build a financial framework. So that's, first and foremost, right. We need to figure out the why of why we're doing all this. Once we do that then becomes the question of how can we risk mitigate, especially people like you and your community, because you're really talking about single asset. We have all our eggs in one basket. So there's going to be a lot of concentration on things like risk mitigation. What happens if something goes wrong with my land? What happens if the unthinkable occurs? So you've got to think about what insurances you need. What happens if you get hurt on the job? So, do you have your disability insurance? What if you died? You have your life insurance. What if you need nursing home care? Is there some type of long term care plan? All of those things come next.
Jordan Grumet:So again, first purpose, next risk mitigation, and then I think we can really start looking at these assets. And, of course, your goal is always to diversify. So people in your community are going to be a little bit behind the game because they are so single asset focused. So the question becomes then how do you diversify? And what does that mean? Getting involved in the stock market? Does that mean developing other skills so that you have some income coming from somewhere other than the ranch? Does that mean buying properties elsewhere? Does that mean owning a little piece of each ranch as opposed to owning one big ranch? The possibilities are myriad. But you have to start spreading that risk so that when again, unfortunately, bad things happen or the unthinkable happens, if you're, one asset gets taken out, you don't want to be left with nothing. So I think that's the next goal.
Jordan Grumet:Now the bigger and harder question is well, how long is that going to take? You know it's hard to know that it's a lifelong plan, it never ends. But the question is, how can you risk, mitigate and get yourself to a safe place sooner than later? And I think it really has to do with all those steps we were talking about. It's about, you know, getting the emergency fund. It's about paying off equity when you can. It's about diversifying so you have income possibilities from multiple different places. I think all of that, but it's hard to know unless you get a specific person and do a deep dive in their specific finances to give more concrete impressions, more concrete suggestions of what they should do.
Colter DeVries:Well, that I mean that if it starts with the philosophical, intangible, non financial metrics, that seems very subjective and it seems like it can be time specific. Because what happens for the, for the doctor in the midlife crisis at 55 who buys the second house in Malibu, a younger girlfriend the Porsche? Or what happens with grandma and grandpa when they surprise everyone in their 60s and separate, and then all of a sudden the picture changes in values, philosophy, vision. All of that changes with with a decade, with life circumstances. How do you stay on top of that?
Jordan Grumet:So we can't know the future. There's no way we can know the future. The best thing you can do is make a strong financial framework and risk mitigate. So the doctor was the midlife crisis and wants the new house and the girlfriend in Malibu. You don't know if that's going to happen, but that doctor certainly can build a strong financial framework and not overspend today so that God forbid, that midlife crisis happens. They actually have some money in their coffers to do those things that then have become important for them. That's all you can do. We don't know what's going to happen.
Jordan Grumet:You don't know if you're going to get divorced, but building a strong financial framework with access is going to help. When you cleave those assets in half, there's going to be more assets to cleave. You can plan a little bit. I mean, you know, for people who get married older, you get prenuptes, right. You actually start planning out, but there's something called the post-nup. People who are already married can actually create a post-nup, which is a plan. If God forbid they were ever to separate, how they would separate their assets.
Jordan Grumet:So a lot of that is risk mitigation, because you don't know the future. But you can build a strong financial framework and risk mitigate against the obvious stuff, and that's what insurance is for, that's what having a diversified portfolio is for, that's what having an emergency fund is for. All of those things are to help protect you from the unknown, because, god knows, the people we are in our 20s are not the people we are in our 50s and probably not the people we are in our 70s. But that doesn't mean your financial framework can't support that. You just have to be thoughtful about it. It takes work. This is not easy.
Colter DeVries:Yeah, absolutely, and the reason I wanted to bring you on Jordan is I think we get so centrifugal, we get so narrow in our focus on ranches. Right now, it's October. We're shipping calves. You get paid once a year. This huge paycheck is coming in and it's going to be a good year. There's really good margins out there, there's good moisture, the calves are fat, it's prices high. Things are really good right now and people are thinking what the hell do doctors do with their money when they grab that this October paycheck and it's for $750,000 and they're like well, what do doctors in Chicago do with their money? I think this helps. That's why I wanted to bring you on is diversity of thought and exposure. Network is important to that as well, To not get so centered in the way it's always been. I thought it was important to bring you on Jordan.
Jordan Grumet:Yeah, just remember, for every market there are cycles and they tend to be feast or famine. We see this in the stock market, we see this in real estate. I'm sure we see it in ranches. They're going to be good years and bad years. The people who survive long term are the ones who are smart in the good years not necessarily in the bad years, because we all get hosed in the bad years. But the people who are smart in the good years and take their money and diversify and save and are careful tend to do better. And so in the ranching world, I think you are in a difficult position because you are so one asset focused, you're at higher risk. So, even more important for your community, take advantage of those good years. Pay down equity, pay down your loans, build equity, pay down your loans. Think about investing elsewhere a little bit. Build that emergency fund up. Do all those things you need to do because God knows when the next bear market is coming. You want to be ready and that's fine.
Jordan Grumet:Generally, we know lots of like the stock market always goes up. Well, it doesn't always go up. It goes down and then up and then down, and then up and down and then up, but when you look at it long term, it generally continues going up. Even if ranches are incredibly stable and they create a huge amount of value as an asset over long term, you're still going to have peaks and valleys, and so the key is to be as smart as you can during those peaks and valleys to ultimately benefit from that long time risk, right when that ranch is now worth 10, 20, 50 million dollars because it's been held in the family so long. You don't get that benefit. If you had to sell out or go into foreclosure because you ran out all your money, because you weren't prepared, you didn't save enough for those peaks and valleys.
Colter DeVries:Well, jordan, this has been excellent One more time. Your podcast is what.
Jordan Grumet:So the podcast is Earn and Invest and the book is called Taking Stock a Hospice Doctor's Advice on Financial Independence, Building Wealth and Living a Regret-Free Life. You can find Earn and Invest at EarnandInvestcom, and the book you can find wherever books are sold. It's easy to find it on Amazon.
Colter DeVries:Well, any final words of wisdom and motivation. Thanks for coming on. I appreciate this and I think the audience will very much appreciate this.
Jordan Grumet:Yeah, just to remember, your money, your assets, they're all tools. They're not a goal, they're tools to living a better life. So make sure that you're using those assets to live the life you want to live.
Colter DeVries:Jordan Grummit, chicago Illinois, coming on the Ranch Investor podcast. Thanks for your time today, Jordan. Thanks for having me. It was a blast. We wanted to take a quick break to mention that we have a Discord channel, ranch Investor, where we are going to be posting some behind-the-scenes content as well as some upcoming blog posts. As always, if you have any recommendations or feedback, please let us know. Thanks for tuning in.