Is your balance sheet lazy?

For many farm owners we meet, the answer is “yes”.

And that’s a huge problem…

Because a lazy balance sheet is a clear sign that you’re leaving money on the table.

Money that could be used to:

…Or the million and one other things that make life fun, fulfilling, and meaningful.

So today, let’s agree to kill the lazy balance sheet once and for all, shall we?

Because life’s too short not to enjoy the money you’ve worked so hard for.

In this week’s blog post, we’ll talk through what a lazy balance sheet is, how to tell if you’ve got one, and the antidote to make your money work for you so you can grow your wealth…

…Instead of it sitting around doing nothing inside a lazy balance sheet.

First up: what exactly is a Lazy Balance Sheet?

This is what we at Farm Owners Academy call a balance sheet that’s not leveraging your money very well.

Basically, if you’ve got a business that’s really profitable, but you’ve got very high or 100% equity (so little to no debt), that’s a lazy balance sheet.

Why “lazy”?

Because your money’s just sitting there…when it could be PUT TO WORK.

Something rich entrepreneurs do well (and most farm owners don’t) is turn their existing money into more money. They reinvest profits into the business or in outside investment opportunities.

Why? Because at the moment, debt is cheap.

As recently as the 1980s, we were seeing 23.5% interest rates…which is nuts! But today? Rates from the bank are more like 3%. That’s nothing!

Considering you can make 7, 8, 10% returns elsewhere, it’s often smarter to put your profits into a high-yield investment today, rather than pay down debts.

RELATED POST: The Best Ways to Grow Your Wealth…Safely

Let’s play a quick game…

Pretend you’ve made $500K in profit this year. You can…

Option A: Put it all in a savings account or FMD.

Option B: Use it all to pay down your loans, which have a 3% interest rate.

Option C: Invest it in the share market, that’s currently giving about 8% returns.

(NOTE: Of course, that 8% return isn’t guaranteed and there’s risk in the share market…but there’s also risk in the property market — which is what farming land is! Most of the risk in the share market is if your investment horizon is short-term. If you invest your money long-term, the risk is low and returns more dependable.)

Which option would you choose?

Let’s look at what each option would give you…

Option A: Put it in an FMD at 0.45% interest: makes you $2,250 p.a. Basically no benefit — that’s what we call “lazy” (note you will need to pay tax on this at some point).

Option B: Pay tax (assume 30% tax rate), pay down your loans (3% interest rate): paying $150K tax, paying off $350K of your loan saves you $10.5K. There’s a small benefit there, but still — pretty lazy.

Option C: Pay tax and invest it in the share market (yielding 8% returns): you pay $150K tax, earn $28K off that $350K investment. What could you use the extra $28K for? Just think about it!.

(Even if you don’t make 8% returns, you can invest in the share market in a way that will give you a stable dividend yield. Irrespective of what happens with the capital value of the shares, you still get the dividend and are still better off).

^^ Ding ding ding! We have a winner!

Do you see how in Option C, your money works for you?

That’s why we call it a “hardworking” strategy, rather than a “lazy” one.

3 investments to grow your wealth

If you’re running a Lazy Balance Sheet — with high profitability and low or no debt — your money could be better spent building your wealth in other ways.

When it comes to investments, we always advise our farm owners to start with these 3:

1. Expand your farming enterprise 

If you have a profitable farm enterprise, it could be a great idea to reinvest your profits back in the business in order to grow it (and see higher profits as a result). 

You could:

  • Hire employees to do the $25/jobs for you
  • Buy the farm next door
  • Invest in capital improvements that increase efficiency or production
  • Purchase more land, livestock, or machinery
  • Enrol in business education that will expand your skills and help you make more money (might we suggest Farm Financial Framework? 😉)

2. Invest in the share market 

Another great way to grow your wealth is to invest in the share market, which currently returns about 8%.

We love this option because it provides relatively stable returns. Plus, it’s easy to sell your shares if you ever need to access that capital quickly, like if interest rates increase.

RELATED POST: Investing is Just Like Planting…and There are Lots of Opportunities Right Now

3. Invest in (off-farm) property

A third option is to buy residential or commercial property. Many wealthy businesspeople grow their fortunes through property investing, because the property market tends to grow over the long-term.

There may be ups and downs (as we saw in the 2008 financial crisis). But if you’re willing to play the long game, property will pretty much always increase in value — often quite significantly.

You can also rent out your properties and use the rental income to make mortgage payments. This allows you to essentially own your investment for free!

RELATED POST: Covid-19 and the Property Market

2 clear benchmarks to take on debt SAFELY

How much debt is too much debt?

That’s a big question people have when they start thinking about investing.

Because yes, debt is cheap. But even at cheap rates, too much debt can still sink a business. So let’s talk about how to make sure you’re taking on debt in a safe, low-risk way.

Quick Disclaimer: What we’re about to share is for educational purposes only. It’s not personal professional advice; you should always consult a financial advisor for your specific situation. 

But for the purposes of learning, here are two benchmarks that help you take on debt safely…

1. 80% equity (or greater)

The benchmark we like to use in the farming industry is to aim for an equity level of more than 80%.

That means you need to own 80% of your assets.

Having most of your assets owned gives you a certain level of security. But it also gives you some room to play, by leveraging that extra 20% to put into higher-yield investment opportunities to grow your wealth.

2. Finance Cover Ratio of (at least) 3

Your Finance Cover Ratio is a measure of how easily you’re able to cover your debts.

If, for example, the interest on your debts cost you $100k per year, we want to see your Net Profit covering those interest costs by at least 3x — meaning you’d need to see a Net Profit of at least $300K that year.

Net Profit = Total Revenue – Total Costs

As long as you’re making a Net Profit of at least $300K, you could take on debt that costs you $100K each year without much risk.

So before you use any profits on a new investment, always make sure:

  1. You have a sustainable equity level
  2. You can cover your interest payments by at least 3x each year

…Then you can invest in a safe way, giving you security and peace of mind.

How to turn your Lazy Balance Sheet into a Hardworking Balance Sheet


Now you’ve seen how the right kind of (safe) debt can actually be a good thing…and an incredible way to grow your wealth.

What do you do if you’re currently running a Lazy Balance Sheet, and have too high an equity level?

Enter: The Hardworking Balance Sheet.

On a Hardworking Balance Sheet, every dollar is being put TO WORK — either to keep your farming operation running and/or grow your wealth. No dollar sits unused.

Here are 3 things a Hardworking Balance Sheet will include:

  • Equity hovering around 80%
  • Net Profits that are 3x the amount of any interest payments on your debts/loans
  • Investment(s) that return a higher % than your loans cost you (see section above for our top 3 investment picks)

If your equity is higher than 80% and you’re ready to take on a bit of debt to grow your wealth, the next step is to have a chat with your bank and financial advisor.

As long as you’ve been paying off your loans, they’ll likely be able to offer you more money that you can start investing with. Just make sure you don’t go much below 80% equity across all your debts and that your Finance Cover Ratio stays above 3!


I hope today’s post helped you get out of the matrix of “always pay down debt first”…because that’s not necessarily the right default mode to have.

You don’t want to just be working hard for your money. You want your money working hard for you.

If you find that you’re storing all your money in savings accounts, FMDs, or under your mattress, you’re missing out on massive opportunities to grow your wealth.

Luckily, there are heaps of ways you can invest your money to create more money in a safe, low-risk way.

But the longer you wait, the longer you allow your balance sheet to be lazy, the less time you have to accumulate wealth. So take a look at your balance sheet today and brainstorm some ways you could turn it into a Hardworking Balance Sheet instead.

As always, we’re here to help! If this blog post piqued your interest and you want to learn more about building long-term wealth, let’s have a chat. Just send us an email at and we’ll get it sorted.

Want to learn more about finance? Join our free training.

If you’re loving what you’re reading and want to learn even more about how to apply pro finance lessons to increase profits on your farm, join us for our upcoming free training.

We’ll simplify farm finance and give you plenty more ideas for how you can make more money (ie: reduce your inputs and increase your outputs) without working more hours.

Click here to register for our free finance webinar.


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