Wednesday, July 29, 2015

The Replacement Fund

When I bought my 1965 International 656 tractor 12 years ago I started to save for my next tractor.

I call my savings "The Replacement Fund".

Here is why that is important...

When you have any large business expense that you need to save for "someday" it is important to put a little bit away all the way along so you are ready when thst expense occurs.

This expense could be a tractor for the farm or a roof on your business. This approach is called a sinking fund in the accounting world.

I figured the $1,000 a year for the cost of a tractor would give me something to work with 10-15 years down the road. I only paid $5500 for my 656 so I could get and even better tractor with my savings approach.

We the tractor finally broke and I had $15,000 to work with. Time to start shopping.

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