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Managing Living Costs

Holding a lid on family living costs makes it easier to ride out the bad weather in today’s farm economy. It’s easier said than done to change personal spending habits, though. It takes hard-nose decisions and tough-minded stick-to-itiveness.

“Everyone has to find his or her own way to balance the money going out with the money coming in,” says Tina Barrett, executive director of Nebraska Farm Business, Inc. (NFB).

Barrett works with 125 Nebraska farmers and ranchers enrolled in the NFB program. Drawing from participants’ input, the program provides clients with a detailed annual analysis of financial records for the farm or ranch operation as well as for family living costs. Clients’ operations run the gamut from corn and soybean farms to hogs, cow-calf, and feedlot enterprises.

A striking trend revealed by NFB data is the rapid average increase in family living costs over the last 10 years, relative to the previous 10-year period. From 1994 to 2004, average family living expenses held steady at about $34,000.

As the ensuing 10 years brought record-high net farm income, however, family living expenses shot up with income. Family living costs peaked at $100,000 per family in 2012. They’ve stayed stubbornly high, dropping only about 10% despite drastic decreases in farm income.

“In 2013, the average net farm income fell to the lowest point we’ve seen since 2005, and we expect average net farm income to fall even further,” says Barrett.

“Family living costs are going to have to come down in order for farms to avoid significant losses in net worth in the coming years,” she says. “Because families sometimes burn up so much money for family living, the spending can cut into the money needed to service farm cash flow needs and the farm’s working capital needs – the money needed to pay current debt. A farm can be profitable and still have a net worth loss if the nonfarm costs are higher than the combined farm and nonfarm income.”

The NFB records break down family living costs into multiple categories, such as food, clothing, education, child care, recreation, home utilities, and nonfarm vehicles. While spending has increased in every category, the largest increases are in money spent for recreation and miscellaneous items.

“It’s really an increase in every little expense that leads to a huge difference,” says Barrett. “Like farm costs, each nonfarm cost must be evaluated all year long.”

Deciding which costs can be cut is a process unique to each family. “The whole family has to get together and look at each cost category,” says Barrett. “Parents have to talk to their kids and help them understand the spending changes needed in order for the family to continue with their farming operation, if that’s what the family loves to do. They have to think about how they spend every dollar.”

Sticking to a family living budget is, of course, an effective way to keep costs at a manageable level. 

It’s a process Lynn and Scott Heins have followed since they started farming with Scott’s family near Rockwood, Illinois. Along with three other farm partners, Scott draws a wage from the farming operation. The amount of the wage has held steady, while the farm operation rides the ebbs and flows in net farm income.

“We use the Mint budgeting app to help us keep our personal finances on budget,” says Lynn. “Using Mint, it’s really easy to see where we are with our spending.”

After coming through a time of tight finances right after college, the Heinses began implementing the practical financial management tactics they each learned from their parents.

“Each month, we save or invest 30% to 40% of our combined incomes,” says Lynn, who works off the farm as a county program director for the University of Illinois Extension. “By doing that, we’ve been able to pay off debt and reach some of our financial goals.”

Living within their budget requires ongoing vigilance. Home remodeling projects and vacations, for instance, are scaled to fit within their predetermined financial means. “Rather than spending $10,000 on an elaborate vacation, we try to find simpler ways to make memories with our children,” says Lynn.

Influenced by the experiences of her mother, Ruth Hambleton, who founded Annie’s Project (see accompanying story), Lynn keeps an eye on the economic volatility and cyclical nature of agriculture.

“Overall, it’s a good time to be in farming,” she says. “It’s not unthinkable, however, that we could have a return of a financial crisis as severe as the one in the 1980s. Even when prices are good, we’ve tried to keep the cycles in mind and live like it’s not a good year.”

Learn more:  Tina Barrett | 402/464-6324 |


Annie’s Project provides educational training for farm and ranch women interested in learning more about business management and ag-related decision making. The program is offered by the Extension service and other organizations in 33 states.

Founded in 2003 by University of Illinois Extension educator Ruth Hambleton, the program’s goal is to empower farm and ranch women to play active roles in financial management.

“Because she watched her mother make her own farm-related decisions, she always had a heart for encouraging women to get involved in the operation,” says Hambleton’s daughter, Lynn Heins.

“Women are at the center of the family. Because of that, my mother wanted to help women bridge the communication gap about finances that often exists between husband and wife,” says Heins. “Working with farm families during the hardships of the 1980s, she often saw husbands unwilling to share financial information with their wives, and wives who were then spending money without an in-depth knowledge of the family’s true financial circumstances.”

Heins learned from her mother to enjoy record keeping and its rewards. “Putting together a balance sheet and interpreting it is one of my favorite things to do,” she says. “The Mint app makes it easy, and it’s rewarding when the numbers show that we’re reaching our goals. That’s my incentive to do the work.”

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