What Women in Agriculture
Need to Know About
Personal Finance
Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension
A Great Quote That Says It All
No matter how much women prefer
to lean, to be protected and supported,
nor how much men prefer to have them do so,
they must make the voyage of life alone,
and for safety in an emergency
they must know something
of the laws of navigation.
Elizabeth Cady Stanton, 1892
A Financial Resource For Women
Second edition
published in 2009
Updated and made
available for FREE
online in 2013:
http://njaes.rutgers.edu/money/
Print copies available
for $20 from author
or from the publisher:
http://palspublishing.cals.cornell.edu/
nra_order.taf?_function=detail&pr_id=
19&_UserReference=51382EE440EC2
CE852DE8CE4
Women Have Unique Financial Needs
• We live longer, on average
• We earn less, on average
• We may have gaps in employment that impact future
retirement benefits (e.g., Social Security)
• We are impacted more severely than most men by events
like divorce and widowhood
• Many women lack financial experience
Approximately 14% of U.S. farm operators are women
and the percentage is growing (29% increase from 20022007 Census of Ag!!)… there were 306,209 female U.S.
principal farm operators in 2007
Reasons Why Women (and Men)
Fail to Achieve Financial Security
• Procrastination
• Failure to establish specific goals
• Ignorance of the time value of money
• Inadequate insurance (e.g., disability, liability)
• Failure to understand and apply tax laws
• Failure to develop a positive mental attitude
5 Key Financial Planning Topics
• Irregular income cash flow management
• Income taxes
• Insurance (health, disability, LTC)
• Retirement savings
• Estate planning and farm succession
1. Irregular Income Cash Flow
• Can’t do a “typical” spending plan (budget)
– Need to adapt http://njaes.rutgers.edu/money/pdfs/fs421worksheet.pdf
• Estimate baseline monthly expenses
– Include 1/12 of annual cost of periodic expenses
• Project farm business income
• Identify “peak” and “lean” months (if applicable)
– If so, save money from peak months for lean months
• Build a substantial emergency fund (6 to 12 months
expenses) to tide yourself over during lean months
– Also consider getting a bank line of credit
Managing Household Cash Flow
• Relationship between income and expenses
– Positive cash flow
– Negative cash flow
• Three ways to improve cash flow
– Increase household income
– Decrease household expenses
– Do both
Ways to Increase Income
•
•
•
•
•
•
•
•
•
•
Adjust tax withholding/tax benefits (EITC)
Add a second job or work overtime
Start a small business
Increase/collect child support/alimony
Access public benefits
Sell assets
Upgrade job skills
Charge adult children room & board
Bartering
Other?
Ways to Reduce Expenses
• Housing
• Food
• Transportation
• Clothing
• Utilities
• Other expenses
http://pubs.ext.vt.edu/354/354-155/354-155.html
http://njaes.rutgers.edu/sshw/message/message.asp?p=Finance
&m=110
http://edis.ifas.ufl.edu/he153
“Pay Yourself First”
(Automated Savings)
• 401(k)s, 403(b)s, Section 457 tax-deferred
retirement plans (through off-farm employment)
• Automatic checking to savings deposits
• Mutual fund automatic savings programs that
regularly debit a bank account for deposits
• DRIP accounts for stock purchases
• Savings deposits from a large lump sum earned
during crop season
Try to give savings the same “respect” as major
household bills (e.g., car payment)
2. Income Taxes
• Schedule F (Profit or Loss From Farming):
http://www.irs.gov/pub/irs-pdf/f1040sf.pdf
• Schedule SE (Self-Employment Tax); > $400 earned
– Get tax deduction for one-half of SE tax
• Quarterly Estimated Tax Payments
– 4/15, 6/15, 9/15, and 1/15 of following year
– Set aside at least 30% of self-employment income for taxes
– Another option: over-withholding on “day job” taxes
– Safe harbor for withholding: Amount of tax (100%) paid the
previous year; 110% with an AGI > $150,000
Tax-Avoidance Strategies
• Legal tax-reduction strategies
– Not the same as “tax evasion” (a crime)
• Off-farm tax-deferred savings plans
• Small business tax-deferred savings plans
• IRAs
• Tax-exempt securities (e.g., municipal bonds and
tax-free bond mutual funds)
– Know your marginal tax bracket and compare taxable and
tax-free investments
– http://njaes.rutgers.edu/money/taxinfo/
13
3. Insurance
• Pay attention to Affordable Care Act implementation
– http://www.healthcare.gov
• Resource for employers: What Health Care Reform Means
For Your Business
http://www.newkirk.com/healthcare_hrb.htm
• Purchase disability insurance: farming is a dangerous
occupation:
http://disability.about.com/od/DisabilitiesInTheWorkpl
ace/a/Disabled-Agriculture-Workers.htm
• Consider LTC insurance; have adult children pay
premiums?
Other Farm Business
Insurance
• Umbrella liability coverage
• Worker’s compensation if you hire workers
• Key person life insurance for partnerships
• Business interruption insurance
• Crop insurance
Cover risks with largest potential losses (e.g., liability,
disability, crop damage, death of farm operator)
4. Retirement Savings Plans
• Simplified Employee Pension (SEP): Easiest plan to
set up; can contribute up to 20% of net selfemployment income by 4/15 of following year
• IRAs: Up to $5,500 ($6,500 catch-up) in 2014
– Roth and/or Traditional IRAs
• SIMPLE Plan (Savings Incentive Match Plan for
Employees): Up to $12,000 ($15,500 catch-up) in 2014
• Keogh Plan: Must set up by 12/31 of tax year;
maximum contribution limit of $52,000 in 2014
5. Estate and Farm
Succession Planning
• Calculate your net worth to measure your financial progress:
http://njaes.rutgers.edu/money/pdfs/networthcalcworksheet.pdf
– Calculate the % of your net worth in farm-related assets
• Review your beneficiary and personal representative
designations:
http://njaes.rutgers.edu/money/pdfs/beneficiarydesignations.pdf
• Get professional advice with will, trusts, PoA, gifts, etc.
• Don’t “decide by not deciding”; See Who Will Get Grandpa’s Farm?
https://ag.purdue.edu/programs/areyouprepared/grandpafarm/Pages/Def
ault.aspx
Work on Your “Bucket List”
Personal Finance
Resources for
Farm Families
Later Life Farming Home
Study Course
http://laterlifefarming.rutgers.edu
21
Investing for Farm
Families Online Course
http://www.extension.org/pages/Investing_for_Farm_Families
Free and available 24/7/365 through eXtension
NH Take Charge of Family Farm
Finances Web Site
www.familyfarmfinances.org
Questions? Comments?
Experiences?
Best wishes on your financial “voyages”
Got Financial Questions?
E-mail: oneill@aesop.rutgers.edu
eXtension Ask an Expert:
http://www.extension.org/personal_finance
Twitter: @moneytalk1