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Corn+Soybean Digest

The Five C’s Of Personal Financial Management

When a farmer or rancher needs a loan, the lender will frequently discuss the five C’s of credit: character, capital, capacity, collateral and conditions. However, there are also five C’s of personal financial management: careful budgeting, collaboration, compromise, communication and counseling.

When I taught agricultural finance at Virginia Tech, I required students to track their personal expenses for one week. In many cases, students thought this was a silly and elementary task for juniors and seniors at the university level; however, comments on final course evaluations showed that this exercises was very valuable.

Monthly household budgets are critical for farmers and ranchers. Living expenses are now ranging from $50,000 to $65,000 annually and increasing at a 7% annual rate. Couples who have different money-management styles will challenge this process just like my students. Planning throughout the year and comparing projected budgets to actual results will provide a good guide to where the money is going and which expense categories are the budget busters.

Budgets can be a prelude to collaboration and compromise. Discussing expense priorities and compromising on large purchases can bring about necessary diligence and communications. Speaking of communications, discuss financial problems with your lender up front. Lenders don’t like surprises. Sometimes bringing in an outside counselor can facilitate working through the obstacle course of returning finances to the positive side.

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at

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