Building wealth beyond the farm: a conversation with Mike Finley

Paul

Neiffer: Welcome everyone, this is the Ag View Pitch and I'm here today with Mike Finley. We're actually at the 2025 Executive Business Conference down here in Florida. So Mike, how are things going?

Mike

Finley: Ah, it's going great. I'm really enjoying myself and getting a chance to meet people and understanding their different perspectives when it comes to this issue of money and farming and life.

Paul

Neiffer: Other than the fact that it's about 60 degrees outside and not sunny and so on, it's actually compared— I don't know about you, but I left about 10 degrees, and 3 days before that it was -14, so I think you might be similar.

Mike

Finley: Yes, I can relate to that. I left Iowa and it was mighty cold.

Paul

Neiffer: Yeah, well, actually you spoke earlier this morning again, sort of as you said, dealing with money and farming and life and trying to understand how farming maybe necessarily shouldn't be all your life. So why don't you go, what are some of the key takeaways from this morning's session that you want to at least let everybody know?

Mike

Finley: So I appreciate the life of a farmer and I appreciate what they do. The issue sometimes is that we want to buy more and more land. We want to keep building on the farm. And my message is to diversify, to own other assets beyond the farm, you know, owning stocks, owning bonds if necessary, but having money set aside in retirement accounts, in a brokerage that provides you money, liquid money that you can use to exit the farm one day. And it just gives you more leeway and more flexibility with your money as you try to set up a portfolio that goes beyond just owning land and equipment.

Paul

Neiffer: And one of the key things with that type of portfolio, I think there's a couple key things. One is cost can affect that return. The time involved can affect that return. And I think more importantly, I think people need to understand they don't necessarily have to invest a lot of money as long as they keep it keep it invested, keep reinvesting, and keep putting more money in on an annual basis. If you can set aside $5,000 or $10,000 a year for 30 years, it can add up to be a fairly decent sum. And you ran some of those numbers. So do you remember sort of about, depending on the type of returns, what somebody might be able to get after maybe a 30 or 50 year period?

Mike

Finley: Sure. So it is time in the market that counts, not the timing of markets, but time in the market. And so getting started as young as possible Buying into low-cost index funds or ETFs that charge you very minimal in fees can maximize your return over time. So one example, if you were to put in $10,000 into a small-cap value index fund at a place like Vanguard, you would have turned that into a very large number after 52 years. So that $10,000 with no new money would have turned into almost $9 million. And that's simply the compounding over time. And so the goal is to get started as early in life as possible. And so I kind of preach this idea to get started on day one, like right when a child is born, get a brokerage account open in your name earmarked for that child, get something invested there, get it started, and then keep feeding it over time. It could be $100 a month.

It doesn't have to be a lot. Just keep feeding it. And what you'll see over time, that compounding effect is just amazing. And the key there is keeping your fees low and keep feeding that fund and feed that fund. And before you know it, you got yourself a nice little pot of money that can be used for anything in the future. And one of the messages is getting that pot of money going. So when that 18-year-old is ready to head out into the world, they've got a chunk of money that gives them the freedom to do some of the things they really want to do versus what they're forced to do.

Paul

Neiffer: And I think I'll add in one of the deductions I see missed way too often with farm families is their kids doing chores or they're driving a combine in the summer, driving a tractor, mowing the waterways, whatever it might be. And the parents end up paying them, but they never run it through the business. That is a legitimate deduction. And the nice thing about paying a wage to a child under age 18, there's no payroll taxes. That child can make up to $15,000 now tax-free, at least at the federal level. And by having that wage income of, let's say, $7,000, $8,000, one of the benefits is potentially doing a Roth IRA. Can you touch on that for the, for the audience here?

Mike

Finley: Yeah, so a custodial Roth IRA. So if that child is under age 18 and they're working, they have earned income, you could max it out this year at $7,000 if they made $7,000. So Starting that custodial Roth IRA as young as possible. As soon as that child is working for the business, I'd get that thing started. You could do it at Vanguard, you could do it at Fidelity, Schwab, but get it started as soon as they're working because that money can start compounding over time. And then as they get older, between 18 and 21, it can be converted to their own personal Roth IRA.

Paul

Neiffer: Yeah. And the key too is when we're talking about earnings, we want to make sure they're legitimate. Just because a child is doing some chores around the house, typically that's not what we're talking about. We're, as, as Mike had mentioned, you're working in the business, you're being paid a reasonable wage for doing that work. Just like myself, you know, I was driving combine, I think, full-time at age 14. So I, now whether the child labor laws back then, they're a little looser, just don't know. What are some of the key things when people are looking doing these investments? What, what are the key things that they really need to watch out for?

Mike

Finley: So one, you can do it yourself. You can keep it simple by going to a place like Vanguard and owning an index fund, and that's basically a mutual fund that owns thousands of stocks at a very, very low cost. And so the idea is to buy into that fund and keep buying at the low cost and, and don't worry so much about the markets going up or down. As a matter of fact, If they go down, all the better. You're going to be buying cheaper shares for that young person who has a very long time horizon ahead of them. So get them started young. And, and an important piece to this is if you can get a child to where they have a decent chunk of money by the time they hit 18, that's great, but you have to provide them a financial education so they know how to manage that money over time.

Because if you don't, well, that money could be frittered away real easy for somebody who doesn't know how to manage it. So critically important. Get them started investing, keep the fees low, feed the account, and then educate them all along the way.

Paul

Neiffer: Yeah, giving a lot of money to a 19-year-old boy may not be the best thing if you haven't educated them. So I would definitely echo that. How do fees enter into this? Does that really affect your return?

Mike

Finley: So a lot of people, they think of like 1%, I'm only paying 1%. Well, that 1% over time versus let's say 0.07% or 0.04%, which is what a cost of an index fund is, an index fund might run you. That difference can be dramatic, not just a few hundred, not just a few thousand, but hundreds of thousands of dollars over time. So yes, that fee has a major impact, especially when you start taking it out over decades. So getting that fee as low as possible, as early as possible, is very important.

Paul

Neiffer: Now, as a farm business, you're allowed to set up like a 401 plan, maybe a SEP, maybe a SIMPLE plan, and so on. What is some of the key benefits to setting up a 401 plan for a farm business?

Mike

Finley: Oh, well, they're big. You can put money away pre-tax, so it's going to save you state federal tax based on what state you live in. And it's going into a 401 that you hopefully can invest in index funds. So maxing that out, right? Putting in $23,500, $30,500 based on your age. That's going to not only save you in taxes, but it's going to be buying appreciating assets. So you're getting a tax benefit and now you're investing in something that's going to go up in value over time. And it's going to provide you that exit strategy, that money that you can access early in retirement at some stage when you're ready to leave the farm. So you're not having to pull money out of the farm or sell equipment to try to fund your retirement. Yeah.

Paul

Neiffer: And, and for those people out there that happen to be turning age 60 through 63 this year, you actually have a larger— it's $11,500 this year for, again, it's sort of weird. Why did they only pick on 60 to 63-year-olds? I know a lot of 64-year-olds have reached out to me and they're complaining, why can't I do this? Well, and again, it's only an extra $4,000 essentially, or $3,500, whatever it might be. But it adds up, you know, it's over a 4-year period, it's an extra $15,000, I think. So it's not too bad of a deal, so.

Mike

Finley: No. And it's an opportunity to just keep adding to that as you prepare for that next phase of your life.

Paul

Neiffer: Now, Mike, you say that it's— you can do it yourself. You don't need somebody else to manage and charge a fee on this. But if somebody says, I'm not comfortable right now, is there some help resources available for those type of people that just need a little help to maybe get them started?

Mike

Finley: Yes, sir. So I created the Giving Solution. It's a nonprofit to help people with their finances at zero cost. So, we will help you roll money over. Sometimes that's one of the more challenging features, which is getting money out of high-fee accounts into the low-fee index funds at Vanguard or Fidelity, for example. So, we'll help you with that. We'll help you with financial planning. So, when you're moving that money over, getting it invested, okay, let's talk about Social Security. Let's talk about your taxes. Let's talk about Medicare, talk about all these things that make up your financial life. And we will help you at no cost. It's just a matter of seeking the help, and then we'll reach out either in person or Zoom and help you get your financial life in order.

Paul

Neiffer: I assume there's a website for that. Is that correct? Yep. And so what is that for the listeners here?

Mike

Finley: They can go to thegivingsolution.org, thegivingsolution.org. And just hit on the contact link and reach out, send us an email and we'll respond back quickly.

Paul

Neiffer: And one of the questions that was brought up earlier today is dealing with a lot of times these farmers, they may have some investments, but maybe the person that's helping them might be a family member. It could be a good friend. It could be somebody they went to with college because rural areas, you know, we tend to have smaller, tighter relationships than you would in a big city. What's your thoughts on helping in that situation?

Mike

Finley: Well, I understand that it can be a little uncomfortable. What I would say is educate yourself, and you'll see that cutting your fees will have a dramatic difference in your returns. So when you're ready, you, yeah, you break away. You thank them for their help in the past, and you make it clear this is business, it's not personal, but you're ready to start managing your own money. And then once you get it rolled over to Vanguard or Fidelity, uh, get it properly invested, properly allocated. It takes almost no time during the year. I spend less than 5 minutes a year in my portfolio, and so can you.

Paul

Neiffer: Okay, now I know that you listed maybe 8 or 10 books that might be good help for people. Can you maybe mention who— what you think maybe 2 or 3 of the best books for people to read and get started on this?

Mike

Finley: Yep. So, The Little Book of Common Sense Investing by John Bogle, that would be a great starter book. That book will help you understand clearly how this industry works and how you can do it better. Uh, if you wanna understand how the system works as far as how Wall Street works, you can read A Random Walk Down Wall Street by Burton Maciel. It's a wonderful book. And then my personal favorite investment book, and it's not for beginners, so you'd want to read some books prior to this, but it's called The Four Pillars of Investing, Second Edition, by William Bernstein. He's, uh, he's an amazing author. He's a former neurosurgeon, and he will provide you insight into how to become a great investor.

Paul

Neiffer: But also, to become a great investor can be, as you say, simply just being in the investment structure at a long enough time. You don't have to be a genius. Matter of fact, most of the geniuses that charge 1% to manage your money are gonna do worse than simply putting it into an index fund. Can you maybe explain that a little bit for the audience?

Mike

Finley: Sure, it counts. It runs counterintuitive a little bit, right? We think I should give it my money to some smart guy or woman who's going to beat the market. And while that may make sense in your brain, It doesn't make sense in real life. When you do that, your fees go up and those smart people who run managed mutual funds fail consistently to beat the market. And a lot of it has to do with the fees. And so once we understand that, we realize, okay, I should just cut my fees, stick with the index funds, and over time, the chances of me beating those managers is very, very high. And so keep it simple and invest in those index funds and keep investing. Time in the market, that's your friend.

Paul

Neiffer: So for somebody that's starting out, let's say they have $10,000 that they'd like to get started with, what type of investment vehicle would you probably be recommending for them?

Mike

Finley: So you can keep it simple. You could go with the Total Stock Market Index Fund at Vanguard, which is VTSAX. You could maybe put a portion of that, let's say 20% or so, into small-cap value index fund, which is VSIAX. Those two funds would be a good place to start. You're going to own the entire, the incredible entire US economy. And then you're going to own small-cap value, which has averaged 13.6% over the last 52 years. So, starting with those two funds, building on those two funds, building it inside a Roth IRA, inside a brokerage, inside your 401, 401, it's going to make a big difference for your future.

Paul

Neiffer: And then let's say you're a little bit farther down, you're, you're maybe approaching your 50s and, and you have a fair amount invested. How would you diversify for, for that type of a couple?

Mike

Finley: So by that time, you probably have added some large and small international stocks, so that's going to help. You've probably added some stock in commercial real estate, and then it might be time to be adding bond index funds. So high-quality bonds, not junk bonds, They go by the name of high-yield bonds, so be careful of that. But high-yield bonds that own corporate and government bonds that pay a decent yield, and they tend to go in a different direction than stocks. So it will modify or reduce the volatility of a portfolio. So when the stocks are going down, your bonds may be going up. So maybe you're heavy in stocks in the working years, maybe 80 to 90%, But then you fall back to maybe a 70% or a 60% allocation to stocks as you increase your bond allocation and increase your cash allocation in, let's say, a money market fund at Vanguard paying 4.27% currently.

Paul

Neiffer: Yeah, and I think the way I look at it sometimes too, a lot of our farmers when they're in retirement, I sort of view their farmland as almost a bond holding. I mean, it's just generating a rate of return. Now it's variable, it goes up and down, typically not too much down if they're doing cash rent. So I'm still comfortable and, you know, and I just turned 65. I'll be the first to admit I just turned 65 and I'm still fairly aggressively in stocks because I think over the long haul, you know, my farmland is going to provide that cushion, so to speak. But I still want to have that stock holding to beat inflation, to return the market. Just curious what your thoughts on that are.

Mike

Finley: Yeah, well, I'm with you. I'm 61 and I'm about 87% stocks right now. Right now. So when I, I thought as I aged, I might go less in stocks. I just haven't been able to do it. I like making money. And I know that those stocks are my best hedge against inflation over time. And I see inflation as the real enemy. And so ultimately, each person has to decide what is the right allocation for them. And of course, talk to the spouse to make sure that's so, because you're going to have to manage your emotions in retirement. If you don't have as much— if you have income coming in, that's great, but if you don't, that's when you might consider reducing that stock allocation because you're going to need money from the portfolio. You might need to be pulling cash, and so just by withdrawals, your allocation to stocks will gradually go up. So each situation is unique.

Make sure you understand yours and do the right allocation that fits your needs and your future needs, because some of this money in your mind might be earmarked for your heirs. You might be investing for them. And if you are, that money should probably be in stocks.

Paul

Neiffer: Yeah. And then I think also, like in my relationship with my spouse, with my wife, she has no interest in investing, no interest in looking at a statement. She's just, hey, is the money coming in? So if something were to happen to me, you know, I think at that point, whether it's a family member like my son, he would probably step in and help her. But I think at that point, perhaps having an outside third party help out. What would you want that person to be looking for in an outside third party to do some help?

Mike

Finley: So when you look at someone to help you, one, I would start with it being a fee-only advisor, somebody who helps you, uh, and they, they don't sell any products. You pay them a specific fee upfront and that's it. Uh, personally, if it was me, I would want to pay an hourly fee. I'm not really big on AUM, which is assets under management. I don't want to pay somebody 1% to 1.5% a year just to watch my investments. Now, am I willing to pay an hourly fee to get another set of eyes on the situation, give me some financial planning? Yes, that I'm open to. And so I would look at The Giving Solution. You can also look at Vanguard for an advisor cost that's pretty low. And you could look at Fidelity. And you're trying to figure out, you know, the right match to fit your situation.

Paul

Neiffer: Yeah. So I think we're coming up to the close here. Is there anything you would like to maybe help the person get started, or what's, what's some of the key things just to help them get started?

Mike

Finley: I think the start is believing that you can do this. Sometimes we think this is too complicated or it's too time-consuming. And my message is it's not complicated. It's actually pretty simple once you start to understand how it works. And it's not time-consuming. I spend less than 5 minutes a year. So it's, it's whirling. It's time to put some effort into learning about money and investing so you can better understand it and you can teach your family and help them understand that this is a way to create wealth for generations to come. And we start with that, that idea that you know what, I can do this.

Paul

Neiffer: Yeah, remember, a giant pine tree starts with a little seed, so that's, that's the key, is to get started. So the sooner you start, the better. Well, again, Mike, thanks a lot for this, and this is Paul Niefer signing off for the Ag View Pitch.