Congratulations on considering purchasing a homestead! Owning a farm can be a rewarding and fulfilling experience, but it’s important to ensure you are financially and emotionally ready before making such a big commitment. So, how do you know if you’re ready to take the plunge and buy a homestead? Let’s go over the key financial factors you need to consider.
#1 – You are debt free
First and foremost, it’s essential to have your consumer debt paid off. This includes all debt from credit cards, medical bills, student loans, car payments, and any other outstanding loans outside your current home mortgage. It is so important to be debt-free before taking on any additional expenses associated with owning a farm. I know it can be discouraging to hear this, and if you have a large amount of debt this step can make you feel 1000 miles away from your dream. But if you are committed to the homesteading lifestyle I promise you the wait will be worth it! After all, you don’t want to be drowning in debt before you’ve even started. I don’t want you to be walking into a waking nightmare of late payments and unexpected expenses, I want you to be living your dream on your property!
#2 – You have an emergency fund in place
Next, make sure you have an emergency fund in place. This should be a separate savings account with at least 3-6 months worth of your expected expenses for both your personal and farm needs. Having an emergency fund can give you peace of mind knowing all the work you have done completing step 1 won’t be undone by one (or even a few) unexpected expenses. And believe me, a homestead is full of unexpected expenses! A sick animal, a septic system on the fritz, or a mangled fence line are all stressful enough without having to worry about where the money will come from to fix them. Give yourself the gift of knowing you can handle what comes your way BEFORE you invest in your property.
#3- You have a down payment
Once you have your consumer debt paid off and your emergency fund established, it’s time to consider your down payment and budget. This is money over and beyond your emergency fund! Ideally, you should have at least a 10% down payment saved for the homestead you’re considering. A 20% down payment is ideal, because you will not have to pay PMI (private mortgage insurance) in addition to your monthly mortgage. You should shoot for your budget to include payments for your farm, including taxes and insurance, and to stay within 25% of your take-home pay. If you are financing the property and the home separately, both of these payments together should still fit these criteria. Keeping your payments within this range allows you to still live life without the crushing weight of a too large mortgage keeping you strapped for cashflow. Afterall, you have new animals to buy and garden beds to build!
#4 – You are committed to building at the speed of cash
It’s important to be realistic about the cost of adding to and renovating your new space. Farms often come in varying states of disrepair, and may require certain improvements just to be livable. These would be things like having functional plumbing and safe electric, resolving any foundation or roofing issues, remediating mold, adding shelter for already owned animals, etc. If there are repairs or renovations that are essential in order for your property to function with you and your family, those costs need to be figured into your down payment expenses and considered during step 3. For all other improvements not absolutely essential for occupation, commit up front to making those improvements on a cash basis without dipping into your emergency fund. These things we homesteaders often consider high priority, but they are not required to live. These types of renovations include adding animal shelters for future livestock, renovating or adding in gardens, renovating a kitchen, changing out flooring, etc. These things are not essential. It is imperative you slow roll these additional renovations and commit to doing them only when you have the cash available. This will help you avoid getting into more debt and ensure that you’re financially stable in the long run.
#5 – You still have room for your future
It is so easy to get wrapped up in what we are doing in the next 5 years sometimes it is hard to remember that some day we will be dependent on the savings from our younger years. Even homesteaders will have to retire at some point. While we dream of being self sufficient and working the land on our own, the reality is that ideally some day we will have the privilege of being old! With age comes health related issues, limited mobility, and the potential need to have help around the farm. While we can plan for friends or family to help out, it is no ones joy to think about being an obligation or a burden to those we love. Therefore it is essential, even through a homesteading journey of independence, that we consider what will happen as we age. A great place to start is to save 15% of your income into a retirement focused account. Do not be afraid to engage with a professional to help you along the way!
#6 – Acknowledge coming change
Finally, you must be willing and able to prepare yourself for change. Be ready to handle the increased expenses that come with owning a homestead including expenses for animals, renovations, and changes to your lifestyle. You may need to hire a farmsitter if you leave town, for example, and you’ll need to ensure that you can afford these expenses without breaking your budget. You may have to spend more per trip to the grocery if you move out of town instead of shopping a little at a time weekly. Most of the changes in this category are just as much emotional as they are financial. Make sure you’ve factored in all of these additional expenses before committing to purchasing a homestead.
Owning a farm can be a great adventure, but it’s important to ensure that you’re financially and emotionally ready before making such a big commitment. Consider the key factors I’ve outlined here to determine if you’re ready to take the leap into farm ownership. And remember, owning a farm isn’t for everyone, so if you decide it’s not for you, that’s okay too! There are plenty of other ways to enjoy the benefits of farm life without taking on the full responsibilities of ownership.
So, are you ready to start your journey towards owning your dream homestead? With the right preparations, you can be well on your way to enjoying the benefits of this rewarding lifestyle. I would be honored to have the opportunity to walk along with you on your journey. Good luck, and happy homesteading!