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When creating 2019 budgets, keep in mind family living costs

Contributed by Dwight Raab, Brandy Biros, Bradley Zwilling and Jenna Moore Published on 30 November 2018

In 2017, the average total noncapital living expenses of 1,219 farm families enrolled in the Illinois Farm Business Farm Management Association (FBFM) was $79,798 – or $6,650 a month for each family. This average was 3.7 percent higher than in 2016.

Another $5,744 was used to buy capital items such as the personal share of the family automobile, furniture and household equipment. Thus, the grand total for living expenses averaged $85,542 for 2017 compared with $82,260 for 2016, or a $3,282 increase per family.

Creating budgets figure 1

Income and social security tax payments increased about 11.5 percent in 2017 compared to the year before. The amount of income taxes paid in 2017 averaged $28,435 compared to $25,512 in 2016. Net non-farm income slightly decreased, averaging $40,032 in 2017. However, net non-farm income has increased $9,119, or 29.5 percent in the last 10 years.

In Figure 2, total family living expenses (expendables plus capital) are divided by tillable operator acres for 2008 to 2017. In 2008, all of the family living costs per acre averaged about $98 per acre. This increased to $109 per acre in 2017. The 10-year average is $108 of total family living expenses per acre. If we compare this to the 10-year average of net farm income per acre of $172, then 63 percent of the net farm income per acre is family living expenses.

 Creating budgets figure 2

If we look at the average year-over-year increase for the last 10 years for family living per acre, the annual increase was 1.2 percent per year. The five-year annual increase per year would average negative 2.5 percent. Therefore, as you work on your crop budgets, keep in mind that a 54-cent price change on 200 bushels per acre of corn is about equal to the average total family living expenses per acre.

When you take total family living expenses minus net non-farm income, this equals $58 per acre in 2017 and was $59 per acre for the five-year average. This would be the part of family living that is covered by the farm income. In addition, there is another $36 per acre in social security and income taxes to be covered by the farm in 2017. The five-year average for these taxes was $43 per acre. A 29-cent price change on 200 bushels of corn per acre is equal to the 2017 family living cost that would be covered by the farm.

More information about farm and family living income and expenditures can be found here.

The author would like to acknowledge that data used in this study comes from farms across the state of Illinois enrolled in Illinois Farm Business Farm Management (FBFM) Association. Without their cooperation, information as comprehensive and accurate as this would not be available for educational purposes. FBFM, which consists of 5,600-plus farmers and 60 professional field staff, is a not-for-profit organization available to all farm operators in Illinois.  end mark

References omitted but are available upon request. Click here to email an editor.

This originally appeared on the University of Illinios at Urbana-Champaign Farmdoc Daily website. View the original article here: “When Creating 2019 Budgets, Keep In Mind Family Living Costs.”