Record calf prices boost farm and ranch bottom line

BROOKINGS — Calf prices are setting records this year, in turn boosting the bottom line of many South Dakota farms or ranches and creating some unique financial decisions, explained Carrie Johnson, SDSU Extension Family Resource Management Specialist.

“A major decision that needs to be made is whether or not profits should be used for personal use or to reinvest that money back into your operation,” Johnson said.

If you choose personal use, one option Johnson said is to start or increase the family’s emergency savings. “When making this decision ask yourself, do I have enough money set aside in case of an emergency and I can’t work? Having enough money for three to six months of household fixed expenses is always a smart idea,” she said.

Another option, Johnson shared would be to pay off high interest debt. “Producers can use above average profits to pay off, or pay down on high-interest debt that they are carrying in loans or credit card balances,” Johnson said. “By paying off debt, they will have more money each month to put towards other debt, expenses, or savings.”

Pad your retirement account

If producers are not already contributing to a Traditional or Roth IRA, Johnson suggests they use additional income as an opportunity to contribute one lump sum to help make their retirement years more comfortable. “Not only are there tax benefits from making and adding IRA contributions, but they are doing a good thing by saving more money for their future,” she said.

In 2014, couples can contribute up to a combined amount of $5,500 ($6,500 if they are age 50 or older) in their IRA accounts. “If individuals want to put even more money away, they should look into a 401(k) where they will have more control over their investment,” Johnson said.

Purchase Life Insurance

A boost in income provides a good time to look at purchasing a life insurance policy to protect their spouse and/or children who depend on their income brought in from the farm or ranch, Johnson said.

When selecting the best policy for your situation, Johnson encouraged producers to work with a professional.

To learn more, visit iGrow.org.