checkbox facebook google-plus hamburger help linkedIn search twitter YouTube

Expect More From Your Crop Insurance Partner.

Learn More
Email Newsletter Signup
  • I want notifications on ...
Newsletter Signup

Family Living Budget as Part of Farm Financials

Date: 
Author: 
Dr. David Kohl
Educational Opportunities: 
Videos
Interests: 
Grain, Dairy, Swine, Beef, Timber, Young, Beginning Farmers, Women in Ag
Share:

        Hi I'm Dr. Dave Kohl, Professor Emeritus and academic hall of famer at Virginia Tech, Blacksburg, Virginia. Well today, it is classroom meets reality. I just finished up teaching a farm financial literacy course to about 30 agricultural producers and one of the things that we had them do was a family living budget. Now some of them kind of frowned. They thought that was kind of elementary, but helped the reality check kicked in.

        As a matter of fact, we asked them, what were some of the budget busters or what were some of the unusual findings that you found after you did your family living budget? A number of them commented, how many of the perks are taken through the farm business expenses. As a matter of fact, on average will find 25 to 30% of family living costs are run through the farm business and of course one of the things that they found was things such as insurance, fuels, and taxes are often times ran through the farm business.

        The other one that they found that was often times they were eating out at restaurants. Matter of fact, one of the agriculture producers said they were spending between 30 and 40 thousand dollars a year going to the convenience store, going to the restaurant, et cetera, et cetera. These all add up to the costs of production.

        It was real interesting, a number of the producers said the cost of insurance. That was all the way from the liability to the disability to the health insurance. All of these costs coming in and often times, they said these costs will run up to as much as 50 thousand dollars annually. And again, sometimes we need to kind of unravel those insurance costs to kind of see where some of our money is going and what types of coverage’s that we have.

        But, the real element and I just discussed it, where we've seen family living costs increase of course, has been in healthcare insurance. On average our producers found that their healthcare insurance in the past two years had increased anywhere from 30 to 50%, but we had two or three producers where it increased to 100 to 200%. We definitely are going to need some action in this area because the healthcare costs are really becoming a hindrance, not only to agriculture producers but small businesses as well.

        Well I suggest to each and every one of you as you come into renewal season, is that one of the things that you really need to take a look at your family living budget. Because one of the things that I'm finding is agricultural lenders are saying it's the number one reason for refinance of operating losses onto term debt. So carefully watching this critical factor in cash flow is going to be very important for your farm operation.

 
Comments
There are no comments.
 Security code