In yesterday’s blog, we talked about creating a family mission statement or reminding yourself and your family members for the reasons “why” you’re working so hard in your cattle business and what you are hoping to achieve by sticking to your goals.
In this pandemic, one thing I’ve realized is the shutdown, and not being free to travel or speak or attend events in our community, has given me margin to reevaluate certain things in our business and zero in on what we can improve.
Because you know as well as I do that even if the world has seemingly stopped, farmers and ranchers don’t slow down enough to let the grass grow under their feet.
Despite the changing dynamics of the outside world, at home on the ranch, the world keeps spinning and we keep busy feeding steers, breeding cows, moving and working pairs, fixing fence, putting up hay, checking waterers or doing a laundry-list of items that need to get done to keep our businesses humming.
Yet, even with all of the day-to-day tasks we must check off our to-do lists, perhaps one of the most important things we need to focus on in our ranching enterprises is the managerial tasks in the office.
But, Amanda, the days are long now with the summer sun. Why would I waste time in the office when there’s daylight burning outside?
Listen, I get it. The last thing we want to do is sit down in our office with pen and paper and look at our finances. Yet, continually keeping an eye on our finances and setting realistic goals can pay off huge, so avoiding this task is not the best plan. This is even more critical now as our nation faces record unemployment and hints of an ongoing recession that could negatively impact our businesses in agriculture.
Lora Saboe-Wounded Head is an Extension family resource management field specialist at South Dakota State University. She recently offered steps to reviewing your income and better handling your finances during a crisis.
Her tips include:
1. Review spending
She writes, “Studies have shown that it takes individuals up to six months to adjust to a reduction in income. The effect of one less or a smaller paycheck may not occur for a few weeks.
“If you are not in the habit of tracking spending, review your statements for the past month, both bank and credit card. Identify which expenses are a priority; bills that meet your basic needs (food, shelter, transportation, insurance, etc.) to pay regularly.
“Next, identify expenses or spending to reduce or eliminate for now. Some examples are expenses related to entertainment, dining out, clothing (unless essential), home décor. Also, make a note of expenses that can be reduce or eliminated in the future, beyond three to six months, in case the situation does not improve.”
2. Save cash
“What does your emergency fund look like?” she asked. “Financial planners recommend having 3-6 months of non-discretionary (bills that have to be paid) expenses in an accessible account. If you have a surplus in income after assessing your prioritized expenses, contribute the surplus to an emergency fund. If you don’t’ have an emergency fund, start one now.”
3. Continue paying down loans
“If you have installment loan debt (mortgage, auto, etc.), continue paying the loans, but do not make extra payments in order to reserve your cash,” she advised. “If you have credit card debt, look for a low interest or zero balance offer. This will help to reduce the monthly payment, consolidate the debt, reduce interest rates and possibly free up cash for emergency savings.
“Contact creditors if you think you may not be able to continue with regular payments. Also, continue automatic savings for long-term goals (i.e. retirement). This is a good buying opportunity for investors because prices are lower. Current contributions are buying more now than when prices are higher.”
4. Insurance and medical expenses
“Review your medical insurance so you know which tests are covered, deductible/co-pay costs, and other out-of-pocket expenses,” she said. “Make a plan for how you will pay medical expense.”
5. Considerations for long-term
“Do not make long-term decisions based on short-term events,” she advised. “Keep investment funds where they are unless money is need within less than a year. If you do need to withdraw the funds, put in short-term CDs, money market accounts or cash. Remember that your investments are savings for long-term goals. Review investments to ensure diversification.
“During a health crisis, the most important thing to do now is to take care of your health and your family. Now is the time to increase savings, pay off debt and reduce interest rates to deal with or prepare for an interrupted or reduced income. Anticipate any problems you may have to meet [such as] monthly obligations and address immediately. Work to create financial wiggle room to manage unexpected expenses. Focus on making decisions about things where you have control.”
For additional tips on living resourcefully with reduced income, click here.
If this seems elementary to you, perhaps it is, or maybe you were thinking this stuff doesn’t apply to how my ranch business operates. I understand every person’s financial situation is unique. However, in times of crisis, I think we can all get a little sharper with the pen and paper to reduce expenses, increase savings and provide a greater level of security for our business and our family.
And if these simplistic reminders are too basic for you, why not try walking through some of the expenses of the farm with your kids? This is a great way to take the rose-colored glasses off our kids and show them the realities of production agriculture. Give them some ownership in the business and allow them to learn through your mistakes and see how your business has responded to certain factors in the market.
The opinions of Amanda Radke are not necessarily those of beefmagazine.com or Farm Progress.