Farm Progress

The Five C’s Of Personal Financial Management

David Kohl, Contributing Writer, Corn+Soybean Digest

April 14, 2009

1 Min Read

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 [email protected].

About the Author(s)

David Kohl

Contributing Writer, Corn+Soybean Digest

Dr. Dave Kohl is an academic Hall of Famer in the College of Agriculture at Virginia Tech, Blacksburg, Va. Dr. Kohl has keen insight into the agriculture industry gained through extensive travel, research, and involvement in ag businesses. He has traveled over 10 million miles; conducted more than 7,000 presentations; and published more than 2,500 articles in his career. Dr. Kohl’s wisdom and engagement with all levels of the industry provide a unique perspective into future trends.

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