August 1, 2008 03:41 AM

Guess What's Not the Problem?

By John Phipps

As we sit down at our computers to frame the future, some of the dogma of prudent finance may bear re-examination. One dead horse in particular, I think, has been beaten enough: family living expense.

For my entire career I have heard stern warnings from ag economists about minimizing what we pay ourselves. To be fair, a $50/acre living expense was a sobering amount of money when gross income per acre seldom rose above $350.

However, look at your budget today. From 15% of gross income in 2007, living expenses at my place dropped to 8% this year and could be as low as 5% next year.

Oh sure, living expenses have not decreased. Education, medical care, and (ahem) food have jumped briskly, but nothing compared to rent, fertilizer, seed, fuel, and machinery. Suddenly a $70/acre family living "burden” is less noticeable as a problem when variable crop expenses are moving past $600 for corn.

Farm over home. I have long felt the emphasis on minimizing our "pay” was bogus. The same guy who bragged about living on a shoestring household budget did not bat an eye at spending an extra $2,000 for the deluxe cab on a combine. In fact, the whole moral attitude about "frivolous” living expenses compared to "serious, important farm” expenses strikes me as manipulation.

Business expenses have too long been equated with non-arguable necessities. The fact they were tax-deductible was proof enough of their superior claim on farm income. As a result, wives shuttled children in used K-cars while their husbands drove 7-miles-per-gallon testimonies to their testosterone.

I have heard too many pious lectures about scrimping on quality of life to invest in the farm. Meanwhile, I have seen too many marriages ravaged by inflexible rural values condemning a rise in standard of living.

A new day. Welcome to a bright new day of economic ranking. If you plan to raise profits by reducing expenditures, the first place to look is the big numbers—and today those don't include family living. In fact, by simply judiciously applying DAP, you could probably afford to add that second bathroom to your house.

Farmers who paid themselves—and at the same time, their families—with only the last few leftover dollars revealed their own self-respect. Too often, the idea was those tightly held funds would be used in the future for a better life, but in terms of most farmers' experiences, the better life was now. Great machines and outsourced services, from bookkeeping to spraying, made our lives comfortable. In the house, things were different.

Well, I don't see any reason not to tell your accountant that future day has come. If you want to notch up your standard of living, good on ya, mate. Some suggestions:

Start first with elements of your life that need to work well every day—soft water, septic systems, washing machines, ovens, garage door openers, furnace, etc. Similarly, your wife should drive a more dependable vehicle than you. After all, you're the kind of guy who can fix anything with a tarp strap and duct tape.

Bring in broadband, and make sure everyone has access. Look, I know the Internet is full of junk, but the ability to get answers now changes lives.
Invest in memories rather than stuff. Long after today's must-have electronics are piled in a basement cabinet, recalling your fiasco of a camping trip or the awe of a night shuttle launch will bring smiles and laughter to your family.

Any economist will quickly point out that scrimping to save a dollar in the household budget actually has the same effect as saving a dollar in the farm budget. But like robbing banks, finding savings is best done where the money is.

Our traditional resentment of spending after-tax dollars rather than plowing them back into the farm has left us with too many over-built and over-equipped farms and too few lives shared in modest comfort legitimately within our grasp. This pattern can and should change when families can add to their authentic happiness.

John Phipps,, is a sixth-generation farmer from Chrisman, Ill. He is the TV host of "U.S. Farm Report.” For local station listings, log on to

Top Producer, Summer 2008

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