In part one of our series we introduced you to the Jon and Tracey Layden family, one of many farm families who are taking another look at budgets in light of lower expected net farm income.

Dale Nordquist, associate director at the University of Minnesota Center for Farm Financial Management, says a budget and cash-flow projection can help a farm family manage costs when farm income is down.

“These tools give you a place to start,” he says. “But you must be honest about what your costs have been.”

Mason (left), Jon, Tracey and Trey Layden of Hoopeston, Ill., are scrutinizing family living expenses as grain prices continue ebbing lower.

The Laydens, from Hoopeston, Ill., create a family budget each year. However, they say with an active family, unforeseen expenses often creep in. Son Mason is in his second year of college, with those expenses now factoring into the equation. Trey is a junior in high school, active in soccer and basketball — with many years playing on traveling teams, as well as those affiliated with the school.

Each expense must be evaluated. And although travel basketball can be expensive, Jon says, the returns could be worth it.

“That’s not something I’ll cut,” he says. “Trey has the potential for college scholarships, so $3,000 to $4,000 for a summer of travel basketball, when it could lead to a full-ride college scholarship, is definitely worth the expense.”

Talk it out

Nordquist says farming families must make time to truly discuss finances and plan for the future.

“Communication in every aspect of business management is vital,” he says. “And in a family-owned farm business, you must have actual family meetings, looking at numbers in front of you — not just discuss business around the dinner table.”

These could be tough discussions, as income from 2016 crops isn’t projected to cover expenses for many corn and soybean producers, Nordquist says. “It’s not going to be pretty for anybody.” And these situations can obviously lead to increased family tension. “However, the stress can be reduced when you step back and look at the numbers objectively — simply understanding what they are telling you. A lot of emotion comes from the unknown.”

Communication is also critical with lenders. “You need to communicate with your lenders early this year,” Nordquist says. “A lot has happened in the past year, and debt restructuring is happening quite often. If you haven’t looked into that yet, there might be some options available to help you stretch out payments.”

Above all, in good times and in bad, a farming family simply needs to remain rational in their spending, Jon says. “You just have to try to cut corners where you can, and don’t do much frivolous spending,” he says. “That’s the lifestyle we’re in, plain and simple. Sometimes it’s great, and sometimes it’s not.”

Couch Lee is a contributing editor from Wellington, Ill.

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