 |
|
|
|||||
|
|
May 11, 2006 N.D. Farm Family Living Expenses Increased in 2005 Farm families spent an average of $45,411 for living expenses in 2005. The number is from 274 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 3.2 people. Medical care and health insurance had the largest increase, going from $7,291 to $8,015 in 2005. “This has been the largest expense category since 2001,” Swenson says. “In the ’90s, food was the largest expense. Food now is third at $6,597. The second largest expense is shelter, supplies and furnishings at $6,924.” The fourth largest expense category, personal purchases and recreation, is $6,360. Another large expense is vehicle operation and purchase for the household, not farm business purposes. It was $5,071. The smaller expenses, such as utilities, education, gifts, contributions and other items, had large increases in 2005. Education expenses greatly varied among households, depending on the number and age of the children and if parents were helping with college expenses. Nearly all of the personal insurance expense was for life insurance, but the increase was mainly because of an outlay for long-term insurance. Overall, North Dakota farm family living expenses increased 5.4 percent from 2004 to 2005, although the U.S. Consumer Price Index (CPI) increased 3.4 percent. “There are several reasons for this difference,” Swenson says. “Family living expenses are a function of price and quantity purchased, whereas the CPI only deals 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.” Inflation and its impact on family living expenditures may be a concern in 2006, Swenson believes. The 3.4 percent increase of the CPI in 2005 matched that of 2000 as the highest rate of increase since 1991. The latest index numbers can be found at www.bls.gov/cpi. Keeping family expense records takes time and most people would rather be doing something else. However, Swenson says, 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 publications from county offices of the NDSU Extension Service: “Farm Family Living Trends in North Dakota” (HE-453), “Taking Charge of Family Finances: How Much Should We Spend” (HE-440) and “Taking Charge of Family Finances: Managing Farm Family Finances” (FE-452). 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
Click
here for an EPS version of this graphic. (116 Kb b&w graphic) |
Market Advisor: |
|
North Dakota State University |
