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What Women in Agriculture Need to Know About Personal Finance

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What Women in Agriculture Need to Know About Personal Finance Barbara O Neill, Ph.D., CFP Extension Specialist in Financial Resource Management – PowerPoint PPT presentation

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Title: What Women in Agriculture Need to Know About Personal Finance


1
What Women in Agriculture Need to Know About
Personal Finance
  • Barbara ONeill, Ph.D., CFP
  • Extension Specialist in Financial Resource
    Management
  • Rutgers Cooperative Extension

2
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

3
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?_functiondetailpr_id19_UserRefer
ence51382EE440EC2CE852DE8CE4
4
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 2002-2007 Census of Ag!!) there were
    306,209 female U.S. principal farm operators in
    2007

5
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

6
5 Key Financial Planning Topics
  • Irregular income cash flow management
  • Income taxes
  • Insurance (health, disability, LTC)
  • Retirement savings
  • Estate planning and farm succession

7
1. Irregular Income Cash Flow
  • Cant 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

8
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

9
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?

10
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?
    pFinancem110
  • http//edis.ifas.ufl.edu/he153

11
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)

12
2. Income Taxes
  • Schedule F (Profit or Loss From Farming)
    http//www.irs.gov/pub/irs-pdf/f1040sf.pdf
  • Schedule SE (Self-Employment Tax) gt 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 gt
    150,000

13
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/

14
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/DisabilitiesInTheWorkplace/a/Disabled-Agricultu
    re-Workers.htm
  • Consider LTC insurance have adult children pay
    premiums?

15
Other Farm Business Insurance
  • Umbrella liability coverage
  • Workers 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)

16
4. Retirement Savings Plans
  • Simplified Employee Pension (SEP) Easiest plan
    to set up can contribute up to 20 of net
    self-employment 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

17
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/beneficiary-designations.pdf
  • Get professional advice with will, trusts, PoA,
    gifts, etc.
  • Dont decide by not deciding See Who Will Get
    Grandpas Farm? https//ag.purdue.edu/programs/are
    youprepared/grandpafarm/Pages/Default.aspx

18
Work on Your Bucket List
19
Personal Finance Resources for Farm Families
20
Later Life Farming Home Study Course
  • http//laterlifefarming.rutgers.edu

21
(No Transcript)
22
Investing for Farm Families Online Course
  • http//www.extension.org/pages/Investing_for_Farm_
    Families

Free and available 24/7/365 through eXtension
23
NH Take Charge of Family Farm Finances Web Site
  • www.familyfarmfinances.org

24
Questions? Comments? Experiences?
  • Best wishes on your financial voyages
  • Got Financial Questions?
  • E-mail oneill_at_aesop.rutgers.edu
  • eXtension Ask an Expert http//www.extension.org/
    personal_finance
  • Twitter _at_moneytalk1
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