A movie explores a young teenage girl, Amber Appleton, living in a school bus and riding her bike to her three jobs while attending high school. I notice she is very careful to count her cash and write down all her expenses as she works toward saving to have a real apartment to call home.
When I first moved to Boissevain 43 years ago, fresh out of university and happy for my extension job with Manitoba Agriculture, I spent $25 a month on groceries, $100 a month for rent and bought a chest freezer with my first paycheque. It’s OK, you can call me weird. I tracked my expenses and saved heaps of money driving a government-issued car. It took only $100 to get all the basics of living for my apartment. Interest on my savings account in 1981 was 19%. That was then, and this is now.
Family living costs are very different in 2022. Many farm families looking for family harmony are not happy with the shortfall of compensation to cover their family living costs – and with no wiggle room for emergencies. There is no cash to be set aside to service farm debt, let alone personal debt.
I challenge you to write a love letter to your spouse asking for a promise to get more clarity on what you are spending as a family. In farm families, this can be tricky when many expenses are covered by the farm and you are not sure about where all the money goes – because some people don’t like to keep track and just don’t think it is a big deal.
I am a home economist by degree. This means I care about your quality of life and your attitudes about money. Keeping track of where your money goes helps you gain clarity and understanding. What you track gets measured, and what gets measured can be adapted.
I found a great podcast from the U.S. about the economics of family living on farms. Do an internet search for “Two Economists and a Lender Podcast Farm Credit Services.” The quote that caught my attention was the call to make tracking living expense a “top-drawer” activity, not something that gets stashed into the box and forgotten.
Here are some steps to simplify the tracking of family living expenses.
1. Look at all of your personal bank/credit union statements from 2021. This should give a good look at where money went and what came in.
2. Look at your personal credit card statements and learn from them. People who use credit cards tend to spend 34% more than those who use cash or debit. Don’t ask me where this stat comes from; it has just stuck over the years. I am trying to get rid of recurring subscription expenses. If you have payments that don’t make sense, get rid of pre-authorized payments.
3. Go to the FCC site and download their new tool, the cost-of-living calculator (FCC - Cost of Living Calculator). I buy our food with a credit card but make sure to pay off the monthly balance in full. Farm families need food, clothing, childcare, medical (dental, prescriptions, glasses), possibly child support. If you are only making $30,000 per year from your farm wage, then things are tight. I expect a family of four with school-age kids to need about $74,000 per year. You’ll hear all kinds of ranges on the Farm Credit podcast mentioned above. The University of Minnesota says $84,000 U.S. per year. For our family of two, our number is $75,000, not counting charity, and it’s less this year with little travel. I pay for my gas.
4. Wiggle room happens with gifts, entertainment, memberships, hobbies, sports and education. These are flexible costs, but for some hockey is non-negotiable. This may be a $3,000 expense hidden in credit card slips stashed in the pickup’s console.
5. Debt. Do you understand the difference between good debt (that makes you money) and bad debt? I am curious if you are maxing out your tax-free savings account (TFSA). Many young farmers don’t have any ability to save because they are not being compensated fairly on the farm, working for low wages with a “promise” for things to be better in the future or a reduced asset buyout rate when the farm transitions. You need debt to be able to finance equity. You do want equity, don’t you? Personal credit cards that are not zeroed every month attract huge interest, and the debt hole gets bigger and the stress looms. What is your plan to zero your personal debt or line of credit? Dave Ramsey offers a plan to eliminate debt through Financial Peace University.
6. Insurance. You need this for your life to protect your spouse and young children, your house, health and disability. Use a trusted insurance broker who understands your unique situation.
7. The truck. Ah, the $54,000 pickup, fully loaded, that you really “deserve.” You might notice a tone here that makes you feel judged. I am not judging; I am just curious how a fancy half-ton makes you money. Would you be better off letting someone else walk away with all that vehicle depreciation by starting out with a used vehicle? I know SUVs are great on snow – I own one – but what about three car seats in the back of a truck that is fully paid for? Trucks and cars need insurance, fuel, loan payments and repairs. Maybe part of your compensation is free access to the farm gas tank and a farm truck. Contact me through my website (Elaine Froese) to request Dick Wittman’s compensation worksheets. This tool will help you get a better handle on the value of “farm perks” you are getting.
8. Legal fees. Getting divorced is expensive. I am asked for financial referrals to navigate the end of a marriage. Many families are fighting about unfairness, poor wages, lack of planning for the future. Start with a budget to pay a lawyer for a well-written will to protect you and your family, and name guardians for your children. Make sure you have an enduring power of attorney that is activated while you are living. I do not give legal advice; I send farm couples to lawyers. Please don’t use “do-it-yourself” legal documents; book an appointment with a lawyer today.
Elaine Froese recommends Bruce Sellery’s book Why Smart People do Dumb Things with Their Money. She is glad to refer you to a financial planner. You can reach her at Elaine Froese.
