FINANCIAL STRATEGIES FOR FARM FAMILIES

COLLEGE STATION — Farm and ranch families may have to live with less income as a result of the drought, said Nancy Granovsky, family economics specialist with the Texas Agricultural Extension Service and certified financial planner.

According to Granovsky, the key to surviving stressful financial pressure is communication. Families suffering economic hardship need to communicate within the family and with creditors.

Consumer credit is an extremely important concern during financial crisis, she said.

“We all live with credit whether we are a rural family, a farm family, a ranch family or an urban family,” Granovsky said. “We tend to use credit cards; we have personal loans; we have home mortgages.”

When families begin to feel pressured financially on the consumer side, they need to contact their creditors and explain what is happening, she said. This is especially true of credit card accounts and personal loans, she said.

Credit card companies often have their origins in states far removed from Texas and therefore may not be aware of what is happening here, she said.

Another important area is insurance. Often families, when trying to make ends meet, are tempted to cancel life insurance policies or skip a payment, she said. This is not a good idea, she said, since it raises questions about whether or not, if you cancel a policy to save money, you can be re-insured later.

“It may be a good idea to talk with your insurance advisor and to obtain information to what alternatives there may be if it’s difficult to make the payment on any insurance that may be due, particularly life insurance, at a time of diminished income,” Granovsky said.

Tim McBroom, a State Farm Insurance field consultant, agreed.

“The exact wrong time to do without insurance is when things are tight,” he said. There is less money available then for a family to deal with major catastrophes should one occur, he said.

According to McBroom, the best thing for farm and ranch families to do is contact their insurance advisor and explain what is going on.

Insurance agents will be able to give many options for families facing financial hardship during this time. Insured persons can raise their deductibles, take off fringe coverages and concentrate on catastrophic coverage or assume a higher copayment on health insurance policies, he said.

Also, some life insurance policies, depending how long they have existed, may have built up value inside the policy that can be tapped in terms of policy loans, he said. These loans could be used in hard times, perhaps to pay premiums, and then replaced when times are better, he said.

“Get with your insurance agent and let him or her help,” McBroom said. “There are a lot of options, and the only way you are going to know about those options is to talk with your insurance advisor.”

In addition to financial pressure, living through stressful times can have all kinds of consequences for relationships, Granovsky said. It is important to recognize that each member of a farm or ranch family is feeling the consequences of this drought and financial pressure.

Many farm and ranch families depend, in part, on off-farm income, she said. The earner of that income is sometimes the farmer or rancher who holds a second job; often, however, it is the working woman holding a job to try to bring cash into the family, she said.

“I think that stress can impact her significantly too because she feels an extra burden of responsibility during harsher times,” Granovsky said. “And so she is as prone to suffering as her spouse who is hoping for rain and hoping to be able to make whatever payments are due on the farm enterprise.”

Times when less money is available for families require that families look for creative ways to make ends meet, she said. It may mean that older children look for other sources of employment, she said.

Whatever decisions are made, Granovsky said, they need to be made as a family.

“We still advise people to get around that dining room table, hold a family meeting, discuss what their mutual family goals are and see how they can best make ends meet by planning together. I think that’s an important way to alleviate stress, she said.

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