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May 19, 2005 N.D. Farm Family Living Expenses Increased in 2004 Farm families spent an average of $43,104 for living expenses in 2004. The number is from 289 farm families who are enrolled in the North Dakota Farm Business Management Education Program and kept detailed living expense records throughout the year. The average does not include income taxes or self-employment taxes, says Andrew Swenson, North Dakota State University Extension Service farm management specialist. The number is from an average household size of 3.4 people. The largest expenditure was medical care and health insurance at $7,291. This has been the largest expense since 2001, Swenson notes. In the decade of the ‘90s, food was the largest expense. Food now is third at $6,307. The second largest expense is shelter, supplies and furnishings at $6,808. The fourth largest expense category, personal purchases and recreation, had the largest increase, going from $5,354 in 2003 to $6,124 in 2004. Another large expense is vehicle operation and purchase for the household, not farm business purposes. It was $5,024. Some smaller expense items had large relative increases in 2004. Education increased from $1,118 in 2003 to $1,423 in 2004, and personal insurance (life, disability and long-term care) increased from 1,384 to $1,544. Education expense varies greatly among households, depending on the number and age of the children and if parents are helping with college expenses. Nearly all of the personal insurance expense is for life insurance, but the increase was mainly because of an outlay for long-term insurance. Overall, North Dakota farm family living expenses increased 6 percent from 2003 to 2004, although the U.S. Consumer Price Index (CPI) increased less than 3 percent. “There are several reasons for this difference,” Swenson says. “Family living expenses are a function of price and quantity purchased, whereas the CPI deals only with price. The CPI measures price changes of a market basket of consumer goods and services that reflects the spending patterns of urban consumers. Rural households may have different spending patterns. Lastly, the CPI can include price adjustments for changes in quality. For example, the cost of purchasing a television may be the same as last year, but because of quality enhancements, the price, for CPI purposes, may be considered lower.” The latest index numbers can be found at www.bls.gov/cpi. On average, the North Dakota farm family living expenditure numbers compare favorably with national averages. The most recent results of the nationwide survey by the Bureau of Labor and Statistics are for 2003 and can be viewed at www.bls.gov/cex. The bureau surveyed more than 58,000 married households as part of a larger study. These households averaged 3.2 people and had living expenses of $47,922 (excluding pension contributions and income and self-employment taxes). Keeping family expense records takes time and most people would rather be doing something else. However, Swenson believes that many households can benefit from this effort. “Seeing the numbers, in black and white, solves the mystery of where the money is going and provides a benchmark to manage expenditures in the future,” Swenson says. “If a young household could cut expenses by 5 percent, it would save $2,000 per year on average. Saving $2,000 a year and investing either in or out of the farm at a 5 percent annual return after taxes would increase net worth by more than $250,000 in 40 years.” Farm families interested in information about planning and budgeting for their living expenses can request the following publication from county offices of the NDSU Extension Service: “Farm Family Living Trends in North Dakota” (HE453), “Taking Charge of Family Finances: How Much Should We Spend” (HE440) and “Taking Charge of Family Finances: Managing Farm Family Finances” (FE452). The publications also are available on the Web at www.ext.nodak.edu/extpubs/farmmgt.htm. ### Source:
Andrew Swenson, (701) 231-7379, aswenson@ndsuext.nodak.edu
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