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Frequent Contributor

Budgeting

I am helping my son work out a budget today and it got me thinking about budgeting on the farm. We don't really have a steady budget for the farm right now and I don't know how to even begin one with the erratic spending that goes with farming. My son's will be pretty cut and dried as he is young and has few expenses. So I am wondering if some of you have a budget in place or not?

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Contributor

Re: Budgeting

tongue in cheek answer:  If there is any money left, the farm still gets it.  The farm has unending needs.

 

housing              nothing  if it breaks learn how to do without it

clothing               only if worn only on the farm

entertainment    too tired, and no time left any way

food                      if you can't grow it you don't eat it

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Frequent Contributor

Re: Budgeting

Our neighbor used to say his wife worked in town so he could farm. She was a nurse and her paycheck kept the place going some years for sure.

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Senior Contributor

Re: Budgeting

We do have one in place for the farm.  Our lender requires it and I am glad he does.  It really helps us with our marketing efforts. 

 

As far as a household budget, we are at a stage in life where we have both off-farm incomes (Ed's retirement and my employment) and no dependents.  For the first time in either of our lives we do not have to pinch pennies and live on a strict budget.  It feels good.  So we don't keep a household budget but we do take major expenses into account against our income before we commit to them.  That would be things like vehicles, trips, or renovations.  But it was not always that way and if we had not been disciplined in our younger years by careful budgeting we would not be able to approach our finances the way we do.

 

I think all younger people should make a budget and track expenses if for no other reason than to know where their money is going.  Quicken software is good for basic household budgeting.  You can customize QuickBooks for farm use.  Maybe others have a better suggestion for agricultural finanical accounting software.

 

 

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Senior Contributor

Re: Budgeting

Always had one for the farm not so much for the house.

Farm has been done on a spreadsheet so actual can be 'laid in' as the year progresses and therefore you could see if you were ahead or behind projections.

Marketing is not easy to budget for so usually spread it out as a best guess and then waited to see what happened but having it all down on paper allowed you to see the need for cash and so plan sales to meet needs.

1 thing I always did was to be conservative in estimates of income and not in expenses and then kept a list of items that needed to be purchased IF funds were available later in the year.

Banker liked that.

Easiest way to do budget was from actual #'s from previous year and then just adapt them as you guessed how things were different.

Spreadsheet started out as a copy of the large sheet of paper that bank asked me to fill out BC (before computers). The paper version was always done in pencil with a good eraser handy and when I got numbers I thought were close and the banker would like I quit and was never looked at again.

Spreadsheet allowed 3 budgets. Once a best case was in place it was easy to say "what if" and create a worst case and a very optimistic version just to see what might have to be dealt with.

Used to spend several days working on that each winter, fewer as the spreadsheet improved and was based on actual #'s from previous year. 


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Frequent Contributor

Re: Budgeting

We do have the farm on quicken but just for the ease of taxes and looking up expenditures. We sold our cows last year and raise baby calves and bred heifers now so still keep busy but the regular paycheck is missing.

i have heard Suzy Orman mentioned here and I  wonder how her advice converts over to farming. 

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Honored Advisor

Re: Budgeting

Big Suze Orman fan here, and I would say that the answer is that some translates and some does not. Her advice does revolve a lot around managing 401( k) accounts and mortgages, neither of which either of us has ever had, so there are limits to utility of her advice.

I have actually always wondered how our " How am I doing?" would average out. We have done the legal documents like the trusts she recommends, and carry quite a bit of life insurance, almost all of it level term, which I learned from her long ago.

Like many farmers, I suppose, I figure we are heavier into non- liquid assets like land. We are past funding children through college, I hope! Will probably try to fund 529 plans for grands...fund Roths fully when we qualify for them...have told investment guy to dollar average those funds into certain types of funds. Wish I had known about her sooner, But might not have taken advice until I was ready for it anyway.

Budget: yes and no. Certain costs are fairly predictable and fixed or change predictably with season and certain factors like weather. Do I plot them out formally in advance? No. I know what they are going to be, and I guess the tallies run in the back of my conscious mind.

It is sort of like when I get to the register at the supermarket...I just know within a dollar what my total will be,even though I could
not tell you the individual price of any item in the cart,whether there are two or 102 in there. I have always had this ability, and it was not because I had a limit for the shopping trip. I just know. I cannot explain how.

I do pay attention to costs and consciously look for proactive ways to address them. In almost forty years of making decisions for a household and farm. I have found that if I do my research, study and consider ways to use things we already have on hand, and organize workflow so that everyone is efficient, we can control a lot of uncertainties, and thus not end up overspending in reaction to a problem that has sneaked up on us.

I sometimes wonder if we would be better off financially if I had better financial management training. Probably so. Then again, we might have more money, but have had a less enjoyable life.

I have truly wondered if I would have been happier in a " career" instead of farming with Mike. I am sure that teaching would have left us a lot less net worth balance. When we had public jobs, I put a flat amount in checking from our checks, and everything else went to savings. Almost any plan will work, if you are consistent with it.

Money can only buy a measure of security, and provide the means for activity. Most of us pick some point along the spectrum
between doing and saving, that is our comfort zone...and that target tends to move as life goes on.
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Senior Contributor

Re: Budgeting

Yes, the off-farm check does give some security if the farm expenses are greater than income for the year. However, in this current economy, there is no security other than depending on yourself to get by from month to month.

Are you buying the calves and bred heifers and then selling  them when they are ready (certain weight or gestation time) or raising them for someone else? Can make a whole lot of difference in how you budget. The input and output prices can change dramatically. The basics of buying animals and inputs and then selling is pretty straightforward. Only the marketing can make or break that plan. Do you have access to local prices? Write them down over a year's time and you should get an idea what the cycle is. Extension or university websites may have similar price graphs too. Good Luck.

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