Money is a Four-letter Word

Skip Thomsen
23 Min Read

To many homesteaders and would-be homesteaders, “money” is a four-letter word.  After all, money is all about materialism, and that’s the antithesis of homesteading, right?

Among other things, homesteading is about independence.  It’s difficult to separate a discussion on independence from the one on money; as reluctant as we are to admit it, money and independence are closely related.

It’s not impossible to live entirely without money; there are no doubt those who manage to pull it off.  They might live somewhere where they can exchange some work for the rent, or even move from place to place while house-sitting.  They might be lucky enough never to be presented a tax bill, and might also be able to swap their home-grown chickens or eggs for whatever they can’t provide for themselves.  And they might not need a car or insurance, and they might never get sick and need a doctor or some meds.  That’s a lot of “mights.”

It takes a pretty sharp barterer to wheel-and-deal for doctor bills, insurance, auto or truck purchases, tires and repairs, fuel, and the other expenses we all seem to be faced with from time to time.  It is possible.  It’s just not likely for most of us.

Bartering, the IRS, and Freedom

On the most basic level, there’s not much difference working for your landlord for thirty hours per month in direct exchange for rent, or working for someone else for thirty hours for cash which you then give to the landlord for rent.

What distinguishes these two approaches is that you don’t have to deal with the tax man in the direct exchange (bartering) and you get that good feeling from sidestepping the system.  (Disclaimer:  What we mean by “you don’t have to deal with the tax man . . .” is that you might usually get away without dealing with the tax man.  Technically, we are all responsible for declaring the value received in any barter and then paying income tax on that value.  There.  I said it.)

But what if you could earn twice as much money in that thirty hours as the rent would cost you?  Would you then be “selling out” to take the job?  If the job involved something that you felt good about doing, you’d likely be more willing to go for it.

Bartering with neighbors is a good thing, supportive of a community, and can enhance camaraderie.  If there are kids in your family, getting them involved in bartering will teach them some valuable skills and concepts.  But bartering will only take you so far, and then you’ll still need some real money.

Homeownership and Money

How about homeownership?  To some folks, the freedom associated with not carrying the burden of homeownership is euphoria.  Others of us want to own our home, however humble it might be.  Living in your own home not only allows us to change the house to our own liking, but it allows for plans for the future not often associated with a rental that we could be asked to vacate at any time for any number of reasons.

But when we come to comparing the costs of a rental against homeownership, there are a few more factors beyond the obvious.  Even with a home that you built on your own land with your own money, there are still those nasty property taxes that just won’t go away.  This is no longer the America in which one can stake a claim somewhere in the middle of nowhere, build a log cabin, start a garden, and live happily forever after.  Maybe in some arm-chair-homesteading virtual reality, but not in the real world.

In the current reality, it’s hard to find a place remote enough to still build a cabin—let alone a house—without the esteemed permission of the county, and then you’ll get to register that cabin and whatever value the county places on it so that you will be eligible to pay property taxes from that day forward.

Some Realities

There really are folks around who still believe that, armed with a dozen or two chickens and an old Chevy pickup, they can “go back to the land” and thrive.  We’ve read articles in various magazines that even support this fantasy.  Of course, the folks who believe it have never tried it.

It’s not all bad, though.  There are lots and lots of ecstatic homesteaders out there who started with precious little and are making it just fine.  But they are the ones—the self-starters—who supported their dreams with reality and a lot of hard work.

Realities: Taxes will always be with you.  Even if you own your house and land, there will be county property taxes.  If you are making payments on your homestead (to a bank or mortgage company), you will have to buy at least fire and hazard insurance.  If you are earning an income, unless it is really humble, you’ll be paying income both federal and state income taxes.  State income taxes vary widely from one state to another, so that could be a factor in your where-to decision making.

Realities:  Will you be hunting and fishing to provide food for your family?  Hunting and fishing licenses are getting more expensive and restrictive each year.  Getting busted fishing or hunting illegally will make you wish you had just bought the license.

Realities: And what if the kids get sick?  Who will pay the doctor bill?  Or buy gas for the pickup—not to mention tires and repair parts?  There will be things you have forgotten and events you haven’t anticipated.  In short, you have to have some income, no matter how self-sufficient your homestead is.

Medical insurance?  That’s a tough one.  The reason we all seem to roll over and sign up for their extortion is that we are scared of one of those $250,000 hospital bills for a major calamity.  Or even a minor calamity.

These are things you need to evaluate for yourselves, of course.  Once you no longer have a straight job, if you want medical insurance, you’ll need to buy your own.  One good option is a “major medical” policy.  If you find one with fairly high deductible, say $10,000, it will be cheap.  $5000, a bit more expensive, but still small change compared to your normal policy that pays for every little headache or itch.  With a major medical policy, you take care of your own day-to-day issues, but if you encounter one of those over-the-top medical bills that would otherwise bankrupt your family, you’re covered.

A caveat is in order here.  We are, at the moment I’m writing this, in the middle of a bitter contest between our two feuding parties as to where we’re going with our country’s medical insurance.  So all of the above may change somewhat in the very near future, but the basics will always remain:  The medical corporatocracy is in it for maximum profit at all times and we-the-people are their cash cow.

Getting back to that income, the good part is that it can be generated from the homestead itself in many different ways, and from our observations, earning your keep at home is the best way by far.

Cash Reserves

An essential part of your pre-move year—or better yet, years—should be spent methodically stashing the cash reserves that will make all the difference to your survival.  This is serious business.  More often than not, when we talked to would-be homesteaders who tossed it in and headed back to the city, it was because they had used up their savings, had no source of income, and were broke.  They had not anticipated just how much money they would need to get—or keep—their homestead going.  They had no clue as to how one earns an income on the homestead, either.  They really had bought into the “living off the land” dream without giving much thought to how this would actually happen.

There are solutions.

So how are you going to stash cash when you’re just getting by right now?  Well, here’s a good years-before exercise that will serve you well once you’re on the homestead.  It’s about money-management and frugal living. One way we’ve managed to stash cash goes like this:  Every time you take in any money, from any source, before you do anything else, take 10% off the top and stash it.  I know, at first that sounds undoable.  But it really isn’t.  Here’s the deal.  Once that 10% is gone, as in not there anymore, you’ll get by just fine on the rest.  If you start paying bills, buying this and that, first before taking out your stash funds, those funds will never be there.  Everything else just becomes more important.

Try it for a month and see what happens.  I think you’ll be so surprised at how well it works that you might even be excited enough about your success to go for 15% next month.  It’s always worked for us.  It’s one of those old-school tricks that really does still work.  But remember that to make it work, you have to take that 10% off the top right away, the instant you have the cash in your hand.  Not tomorrow, but now.

If you have an automatic-deposit paycheck, then write yourself a check the instant you get your paycheck deposit notice.  Deposit that check in your new savings account.  If you sell that old dresser on Craigslist, take 10% off the top and deposit it.  Every dollar that crosses your palm gets tapped for 10%.  After a while, it’ll start to be fun!  Once you get started doing it, it becomes a habit and it starts to feel really good.  Especially when you see how fast your savings accumulate and how little you really miss that 10% off the top.  It’s one of those wonderful win/win opportunities we get now and then.

How much you will need in the way of reserves will depend a lot on whether you’re moving into an existing, operating, out-in-the-boonies homestead or starting from scratch on bare land.  Moving onto an existing homestead might not be much different from moving anywhere else.

Starting from scratch, on the other hand, means that you will be busy for as long as it takes to build your shelter and get your place into some sort of livable condition.  During that time, wouldn’t it be nice not to have to worry about generating income just to stay alive?  And wouldn’t it just suck to have to quit working on your half-built house because you ran out of money?

A Sustainable Income

Homestead self-sufficiency and independence require that you eventually have a dependable source of income.  Or several.  There doesn’t need to be a great deal of money, either, but it has to be realistically aligned with your lifestyle.  We’ve had neighbors who derived their income from all sorts of enterprises.  Some did work at straight jobs in town (a thirty-mile round-trip); several were artisans who did their craft at home and participated in country fairs and other venues to sell their products.  A neighbor hired out to do dozer work for neighboring farmers and ranchers, as well as homesteading neighbors.  And we operated our desktop-publishing and auto-repair businesses.  There is always a demand for anyone who can fix things.  Appliances, computers, audio equipment, farm equipment, sewing machines, cars, tools, whatever.  Tour your new environs and ask people what kind of help is needed in the area.  What kind of work or assistance is hard to find?  Find a need and fill it!  Create a need and fill it!  Opportunities abound for anyone with a skill to sell.

Homesteaders, by their nature, seem to be most content when they earn their living at home.  Maintaining a straight job in town means being away from the household every day, all day, and although some folks are able to deal with it just fine, that separation can take its toll.  It’s especially difficult when there are kids involved.  Again, it’s a personal matter, dictated sometimes by necessity and sometimes by choice.

Many of us like being around people.  Some of us thrive on it.  Creating your home business around something that takes you into town frequently to market your product can give you the best of both worlds. Volunteering for occasional, worthwhile ventures in town can serve the same purpose.  So, actually, can a straight job in town.  Living on a fairly remote homestead need not mean living in isolation.

Having a job in town with a finite end-date is easier to deal with, especially when the ultimate goal is self-sufficiency at home.  For example, a job that you’ll need to keep for a year or two until you get your home-business off the ground, can be gone to daily with a growing sense of accomplishment.

A quick note on working-from-home “opportunities.”  There are many websites that offer you lots of ways to “earn thousands from home.”  It is safe to say that the folks who are selling you their “information” could be earning thousands from home, but you will not likely be so fortunate. Most of these gigs are scams.  The ones that might actually work to some extent work only for a small percentage of people who somehow fit the personality profile for the particular opportunity.  And most of those opportunities are to perpetuate the scam.  You pay your fee, sign up with them, and then your work-from-home job will be to get others to sign up just like you did, and you get a commission on everyone you sign up.  If you happen to come across any work-from-home opp that appears to be viable, please Google the name of the website along with the word “scam.”

How Much is Enough?

So how do you determine a reasonable amount of money to set aside?  How much does homesteading cost? Unless you know that you have some dependable money coming in on a regular basis, you will do well to assume that you will have little income for your first year.  What will be your cost of living for the year?  Don’t skip anything here: house or land payments; property taxes; auto insurance; home insurance (which you will be required to carry if you are making payments on your property); the groceries you won’t be growing yourself; school clothes and supplies if there are kids with you; medical insurance premiums if you are so inclined; gas and car expenses.  All this, of course, added to the amount of money it will take to accomplish your first-year goals on the homestead.

Will you need to build, remodel, or finish your home or any other structures in your plans?  If you haven’t already accumulated most of your materials and equipment before your move, what will it cost to buy them?  And if you’re building a house, don’t forget those things that you will have to hire out, like road-building, grading, well-drilling, et cetera.

If you’re one of the lucky ones who has a home-with-equity to sell before making your move, that money could possibly build your new house and give you a good start.

After you carefully compile your list of anticipated expenses, add it up and then—you’re gonna love this—double it.  This may seem a little extreme, but it isn’t.  Unless you are the Big Exception, you will need twice as much money as you thought you would.  In addition to higher prices there will always be unanticipated expenses, so to rely simply on the list of expenses you’re already sure of is unrealistic, at best.  We can’t stress it enough:  Having to pack it in because you ran out of money is the worst kind of bummer.  That could well be a year-before mantra.  It’s that important.

If it turns out that you are, in fact, the Big Exception, then you’ll have a good start toward your retirement fund!

What worked for us was to get most of the expenses out of the way during the planning year, while we still had a reliable income and while we were in a better position to shop for the best prices on the stuff we knew we would be needing.

It takes money to live, even on a self-sufficient homestead.  If your goal of self-sufficiency includes providing for your every need on the premises, you’ll need money to get to that position.  Preparing land, building necessary outbuildings, drilling a well, putting up fencing… it all costs money.  If you’re lucky enough to already have a home-business or shop that you need only to move into existing buildings, you’re that far ahead.

Plan your move very carefully, and allow yourself a cushion for the unexpected.  One of our big survival skills was—and still is—keeping lists of everything!  Starting right now, begin some lists.  Every time you think of something you feel you’ll be needing, write it down.  Lists somehow make things more real.  They’re so much more tangible than just carrying around a lot of fantasies and random thoughts in your head.

After the first year on the homestead, you will have a pretty good feel for what kind of income you will need to keep your place going smoothly.  If you have built your homestead around the concept of maximum independence, you might need very little.  If you are going to be dependent on the outside world for a sizable portion of your needs, you will likely need much more.  You will have to decide how to balance the trade-off.

To conclude, we cannot stress too much:  Money does matter.  Finances and togetherness are the cornerstones of a successful homestead adventure.  With both intact, success is virtually assured.


This article was partly excerpted from The Modern Homestead Manual, Revisited by Skip Thomsen


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