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Boosting the cattle operation's bottom line

BROOKINGS, S.D. -- Calf prices are setting records this year, boosting the bottom line of many farms and ranches and creating some unique financial decisions, according to Carrie Johnson, South Dakota State University Extension family resource ma...

BROOKINGS, S.D. -- Calf prices are setting records this year, boosting the bottom line of many farms and ranches and creating some unique financial decisions, according to Carrie Johnson, South Dakota State University Extension family resource management specialist.

"A major decision that needs to be made is whether or not profits should be used for personal use or to reinvest that money back into your operation," Johnson says.

One personal use option Johnson mentions is to start or increase the family's emergency savings.

"When making this decision, ask yourself, 'Do I have enough money set aside in case of an emergency and I can't work?' Having enough money for three to six months of household fixed expenses is always a smart idea," she says.

Another option would be to pay off high interest debt.

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"Producers can use above-average profits to pay off, or pay down on high-interest debt that they are carrying in loans or credit card balances," Johnson says. "By paying off debt, they will have more money each month to put towards other debt, expenses or savings."

Pad retirement account

If producers are not already contributing to a Traditional or Roth IRA, Johnson suggests they use additional income as an opportunity to contribute one lump sum to help make their retirement years more comfortable.

"Not only are there tax benefits from making and adding IRA contributions, but they are doing a good thing by saving more money for their future," she says.

In 2014, couples can contribute up to a combined amount of $5,500 ($6,500 if they are age 50 or older) in their IRA accounts.

"If individuals want to put even more money away, they should look into a 401(k) where they will have more control over their investment," Johnson says.

Purchase life insurance

A boost in income provides a good time to look at purchasing a life insurance policy to protect their spouse or children who depend on their income brought in from the farm or ranch, Johnson says.

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When selecting the best policy for your situation, Johnson encouraged producers to work with a professional.

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