How to determine a level of spendable income

Moisture situation as of June 17

What level of spendable income do you want or need from your farm operation? Dean Dyck, farm business management specialist from the Alberta Ag-Info Centre, examines what to consider when determining it.

One of the least understood and measured cost in a farm operation’s cash flow is the amount the owners withdraw from net farm income for family living. “Many people remember a time when farm operations penciled in $30,000 to $40,000 annually,” says Dyck. “Today, farm families enjoy the same standard of living as their urban counterparts. Higher withdrawals for family living use “after tax” dollars can impact the farm operation’s ability to grow, pay down debt, and invest outside the farm.”

Statistics Canada data from 2016 shows the total expenditures for an average Alberta household of $106,514 with total current consumption of $74,044 before income taxes. Explains Dyck, “Statistics Canada does not break down urban versus rural expenditures. Generally, household expenses in rural Alberta are approximately 80 per cent of the Alberta household data. It works out to $59,235 per year, which may seem high for the average farm family. However, some expenditures such as shelter, household operation, and transportation blur between farm expenses and personal expenses.”

“Since family living expenses are paid with “after tax” dollars,” says Dyck, “It is necessary to calculate the amount of additional taxable income the farm must generate to pay for living. Using a combined federal and provincial tax rate of 25 per cent, an average farm must generate approximately $74,000 over and above income used to pay for farm expenses per year.”

Can an average farm in Alberta generate enough income to pay for these expenditures? Says Dyck, “In 2016, the average Alberta net farm income was $56,633. The deficit of approximately $17,000 shows a high reliance of farm families on off-farm income to provide a higher standard of living, to manage volatility in farm income, and to provide funds for investment back into the farm. In fact, a 2017 study found that off-farm jobs in Alberta contributed to 79 per cent of household incomes.”

Dyck adds that in a practical world, family living expenses vary widely from the so-called average. “A strategy for success is to use these numbers as a benchmark and develop a cash flow for personal and family expenses. There are many templates on the internet to help with the process.”

One tip, says Dyck, “Is to add 25 per cent to your family budget for unexpected expenditures. Also, give some thought to adding an expense line for off-farm investments for retirement. Farmers tend to view their equity in the farm operation as their source of retirement income. With people living longer, diversification to non-farm investments will provide flexibility with future income flows and flexibility in succession planning of the farm business.”

“It is important to know your personal needs and how you will generate enough income to fill those needs,” adds Dyck. “This knowledge will also manage your wants. Often, those wants get farm families into trouble. A family farm creates self-employment, so managing the income to meet the needs of the farm and the needs of the family is hard to separate. It is always important to consider and a challenge to manage.”

For more information, see Off-Farm Income in Alberta or Statistics Canada’s Survey of Household Spending.

Moisture situation as of June 17

Ralph Wright, manager of the agro-meteorological applications and modelling section with Alberta Agriculture and Forestry (AF) analyzes the data.

Over the past week, a major rainfall event occurred over the northern half of the province brought significant rain to many areas north of Edmonton.

Says Wright, “The storm was centered in the Slave Lake area with two stations reporting more than 150 mm. It was also wide spread, with more than 40 mm recorded across a large area – from Athabasca to Fort Vermillion. Upwards of 50 mm was recorded across the northern Peace Region. This area has generally been drier than normal since 2002.”

Submitted by Alberta Agriculture

Just Posted

Remembrance Day in Wetaskiwin

Pipers, buglers, veterans, soldiers and much more Nov. 11 in the Drill Hall

Rural crime task force results released at Agri-Trade luncheon

Report cites problems with police not being able to keep up with crime and justice system issues

JEDI AG Forum is fertile ground for Wetaskiwin region farmers

Canola production, farm transfer, grain elevator update and much more Nov. 23 in Wetaskiwin

Major traffic snarl on Hwy. #2 between Glen Park, #616

Motorists should plan for another route if possible, avoid area entirely

Chicken and dumplings sounds delish

Very Berry Cherry Cobbler for dessert

VIDEO: Marvel Comics’ Stan Lee dies

Marvel co-creator was well-known for making cameo appearances in superhero movies

VIDEO: Newcomer kids see first Canadian snowfall

Children arrived in Canada with their mother and two siblings last week from Eritrea

Calgary 2026 leader expects close vote in Winter Games plebiscite

Residents to choose in a non-binding vote on Tuesday whether they want city to bid on 2026 Olympics

Feds dropped ball with WWI anniversary tributes: historians

Wrote one historian: ‘Other than the Vimy Ridge celebration … I think they have done a very bad job’

Sides ‘far apart’ in Canada Post talks despite mediation, says union

The lack of a breakthrough means rotating strikes will resume Tuesday

Feds’ appeal of solitary confinement decision in B.C. to be heard

Judge ruled in January that indefinite such confinement is unconstitutional, causes permanent harm

Nunavut urges new plan to deal with too many polar bears

Territory recommends a proposal that contradicts much of conventional scientific thinking

Tentative deal reached in NHL concussion lawsuit

More than 100 former players accused the league of failing to better prevent head trauma

Grim search for more fire victims; 31 dead across California

More than 8,000 firefighters battled wildfires that scorched at least 1,040 square kilometres

Most Read