Farming on a Budget

Most people dislike the word “budget,” but really it gives you permission to spend. A budget doesn’t have to be restrictive, rather a tool that tells your income where it goes. For young farmers operating on a budget is essential. Here are three tips to implement budgeting.

1. Written annual budget for the farm and monthly budgets for the home

Farm income can be irregular and expenses are seasonal. It is important to prepare at least an annual farm budget as you plan for next year. This gives you guidance on what you can spend when you are busy. You can also prepare a farm capital budget for equipment purchases and upgrades for times of higher farm profitability. Managing family living expenses is particularly important for young farmers. Household budgets need to be completed every month based on the income you expect to receive and expenses anticipated.

2. Separate checking and savings accounts for home and farm

Keeping track of your spending and ensuring you stay on budget is easier when you have separate accounts. For the home, you should have a checking account for household expenses and at least one savings account for your emergency fund. For the farm, you should have a checking account, savings account for your estimated taxes, and savings account for your retained earnings to fund business goals.

3. Set money goals that matter to your farm and your family

Goals define what you are working towards. This may be a land purchase, new tractor or retirement. Write down your goals and develop a savings plan to know how much to include in your farm or home budget to achieve them.

We hope this basic advice helps you use budgeting to improve your farm business, as it has helped us.

Written by Brad and Amanda Durow, MFBF YF&R Committee members from Hastings in Dakota County