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May 20, 2004 Records Indicate Increased Spending by N.D. Farm Households in 2003 The average living expenditures of 291 farm families enrolled in the North Dakota Farm Business Management Education Program was $40,517 in 2003, an increase of $2,378, or 6.2 percent compared to 2002. This average does not include income taxes or self-employment taxes, says an agricultural economist at North Dakota State University. "Family living expenditures can increase because more purchases are made, a shift to purchasing a more expensive mix of goods and services, or an increase in prices," says Andrew Swenson, farm management specialist with the NDSU Extension Service. Prices increased in
2003 but at a fairly modest rate. The general level of prices as measured
by the U.S. Consumer Price Index (CPI) for all urban households increased
2.3 percent, and the CPI for households in cities of less than 50,000
population located in the Swenson believes that farm households purchased more goods and services in 2003. “Total spending increased faster than the price inflation of items typically purchased by households. The likely cause was a strong North Dakota net farm income that increased by nearly 50 percent in 2003 because of good small grain yields, strong crop prices and improved livestock production profitability.” Farm income can be highly variable from year-to-year because it is impacted by the uncertainty of commodity prices and yields (weather). The largest increase in expenditures was for vehicle operation and purchases which increased from $3,785 in 2002 to $4,915 in 2003. Utilities increased about 15 percent to $2,052. The amount spent on education, $1,118, was $185 higher than 2002. Surprisingly, the outlay for personal expenses and recreation of $5,354 and contributions and gifts of $2,139 were nearly unchanged from the previous year. The largest expense category was medical care and health insurance, which increased nearly 9 percent in 2003 to $7,040 per family. That category exceeded the necessities of food at $5,973, shelter (which includes household supplies, repairs, furnishings and appliances) at $6,275 or clothing at $1,888. The combined increase in spending on food, shelter and clothing was only 2.4 percent. Medical care and health insurance accounted for 17 percent of total family living expenses (excluding self-employment and income taxes), followed by 16 percent for shelter, supplies and furnishings, 15 percent for food, 13 percent for personal expenses and recreation and 12 percent for vehicle operation and purchase. Budgeting and monitoring family living expenses are important and need not be an overwhelming task,” Swenson says. “Family living expenses may seem small compared to the total cash inflow and outflow of the farm operation. However, on most farms, family living expenses still represent a larger cash outflow than any single farm expense item such as land, fertilizer or repairs. Many inexpensive single-entry cash accounting software programs are available to track family living expenses. However, one must install the software, set up family living income and expense categories and resolve to enter transactions on a regular basis.” ### Source:
Andrew Swenson, (701) 231-7379, aswenson@ndsuext.nodak.edu
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