The numbers

Every aspect of our lives can be illuminated by numbers. How many years we’ve walked this Earth. How many kids we have. How many acres we farm or how many cows we milk. I’ve often lamented that as dairy farmers, we shouldn’t allow ourselves to be defined by our numbers. I believe who we are and why we farm are much more important factors.

But numbers are important. They allow us to measure. Measuring allows us to set goals. And reaching for goals is how we improve.

When it comes to our children, we again find numbers – GPAs, season statistics and hours of sleep last night. And, again, we must not let numbers define our children. Becoming compassionate, capable adults is far more important than any number.

There’s one area, though, where we would do well to lean into our numbers – discussing personal and business finances with our children. When I look back at my early years, I wish I had asked more questions about the business aspects of owning and operating a dairy farm. More questions about family finances and taxation. So when questions have come up in our household, I’ve never shied away from being honest about our numbers. Curiosity is emboldened when we do our best to explain.

I will pause here for a hat tip to our school’s social studies teachers. Often when we’re discussing finances or economics, I’ll hear, “Yeah, we talked about that in class.” Sometimes a discussion in the classroom leads to a question about our farm or our industry. True understanding happens when kids can make connections between what they learn in school and what happens in real life.

One of the topics that started in the classroom and migrated to our kitchen table is saving for retirement. Last year, Dan’s social studies teacher introduced his class to IRAs. After some off-and-on discussion over the past couple months, Dan made an appointment with a financial advisor and opened an IRA. He determined how much he needs to keep in savings and set clear goals about how much he’d like to contribute to each year.

Glen and I should follow his lead and reevaluate our retirement goals. It’s been several years since we’ve contributed to our IRAs. Somehow, the balance between reinvesting earnings in improvements versus setting funds aside for retirement always seems to tip towards improving our business.

An offhand comment from me to Monika about the milk price a couple days ago led to a full discussion about everything from our farm income and expenses to self-employment taxes, fueled by Monika’s intuitive questions.

We talked about the current milk price and how market prices fluctuate. She had an economics unit last year, so she has a good understanding of supply and demand.

We talked about our farm’s basis — the spread between market price and our pay price. I pulled up our production and payment information in our co-op’s producer portal to show her our basis chart. The numbers illustrate how our decisions to focus on breeding and feeding for milk components provide us with a premium that will help cushion against low milk prices. Those same decisions have helped us significantly improve herd health and reproduction, which in turn help our profitability.

The profitability comment led to me pulling our 2024 financial analysis out of the filing cabinet. I explained that we’ll be doing our 2025 analysis in a couple weeks. We talked about the business management software we use and why I spend so much time in front of the computer in January fine-tuning our numbers. Our first farm business management instructor always told us that our analysis would only be as accurate as the numbers we put in.

I showed Monika our sources of income and our expenses. She asked about the financial implications of milk price fluctuation and what management adjustments we make when we don’t have as much income. We talked about the benefit of high calf prices and high cull cow prices. I believe being able to see our numbers on paper helped immensely.

We wrapped up with a discussion of taxes. We talked about self-employment tax and why it’s necessary. I pulled out one of Monika’s paystubs and explained income taxes. I realized I’ve always just filed the kids’ paystubs and never explained them.

I think we could have kept talking for several hours, but there were chores and homework to do. But I made a mental note to show our kids our 2025 financial analysis once we finalize it. My hope is that they develop a better understanding of the numbers than I had at their age.