KNUTSON: Tough but necessary: cutting family spending
GRAND FORKS, N.D. -- If you talk with agricultural bankers, economists and accountants, as I often do, you keep hearing the same thing: farm family living expenses need to come down.
GRAND FORKS, N.D. - If you talk with agricultural bankers, economists and accountants, as I often do, you keep hearing the same thing: farm family living expenses need to come down.
The experts are right. Many, perhaps most, farm families need to spend less on themselves.
No, don’t write nasty emails. I’m not suggesting farmers live extravagantly or spend foolishly. I’m not drawing any moral conclusions or saying their spending is good or bad, right or wrong.
What I’m saying is this: When times are good economically and people make more money, their spending increases. Farm families earned more during the 2008 to ’12 ag boom, and they spent more on themselves. That’s simply human nature.
Now, they’re making less money - or even losing money; many farming operations will finish in the red this year - and they need to cut family spending. That’s simply economic reality.
Cutting spending is easier said than done, of course. Once we get something that makes life easier or more pleasant, we hate to give it up. Again, that’s simply human nature.
Years ago, when I was starting out on my own, I saved a few bucks every month by having an apartment without a garage. Leaving my car outside in North Dakota winters was no fun, but the savings helped me get ahead a bit on my next car purchase. Then a job switch took me to a new apartment, which had a garage. I’ve had a garage ever since. Once I had one, there was no going back.
That’s the way it is with, well, let’s call them lifestyle upgrades. Once we get them, former luxuries seem to become necessities.
To their credit - or perhaps at their lender’s insistence - some farmers already have cut back on family spending. Farms participating in the North Dakota Farm Business Management Education Program spent less on family living expenses in 2015 than in the previous three years. Clothing, vehicles and personal purchases and recreation accounted for most of the decline, according to program records.
Whether those reductions are adequate remains to be seen.
Just don’t get sick By this point, I’m sure, some loyal Agweek readers are muttering through clenched teeth, “Yeah, sure, it’s one thing to cut back on stuff we control. But what about the big problem, the thing we can’t control?”
They’re talking about health care costs, and they raise a valid point. By all accounts, health care is increasingly expensive for farmers and their families. One example: Farms in the North Dakota farm management program reported spending an average of $11,613 on medical care and health insurance in 2012. That figure has increased steadily to $13,753 in 2015, and anecdotal evidence suggests it will be even higher this year.
When farmers say, “Hey, the only way we can reduce living expenses is not to get sick,” they’re being only partly facetious.
How to curb healthcare costs? I have no good or easy answers. I wonder if anyone does.
Because the issue of farm family spending is so important, I’ll cover the topic in an Agweek story, possibly a longer one for the magazine’s cover package, this winter. I plan to talk with various experts about it.
But I’d also appreciate input from readers. Please, no grumbling about what you view as unwise or excessive spending by neighbors. I’m looking for constructive suggestions. If you have any, drop me a line.
Agriculture is cyclical. Farm income rises and falls. Family farm income, which rises when times are good, needs to come back down when times turn tough. It’s simple, really.
That’s simple as in obvious and clear-cut, not simple as in easy to accomplish. Reducing family living expenses will be difficult at best and virtually impossible when costly medical needs arise.
But the job, no matter how painful, is high on Upper Midwest agriculture’s to-do - no, make that must-do - list.