- Income: $21,700
- Expenses: $38,200
- New Credit Card Debt from 2011: $16,500
- Total Credit Card Debt: $142,710
What do you think about that? Do you think they are pretty bad shape? I’d say so! What should they do? Should they stop taking care of their friends? Should they stop supporting their grandparents? Should they increase their income? Should they look into cutting those medical expenses?
What about their debt? How on earth are they ever going to pay that off? It sure doesn’t seem like they are taking the situation very seriously does it?
Stop and take a moment to think about what you would do if this were your budget. Seriously… take a minute. I’ll wait.
What would I tell them to do? I’m glad you asked. Well… I’d want them to start looking into ways to make more money, stat. Their income is too low, barely half of their current expenses. They also need to stop taking care of the neighbors for the time being. Their neighbors need to start taking care of themselves. What about grandpa? Tough one. One set of grandparents could survive without their assistance, one could not. I’d say stop supporting the set that can survive without the extra money. That’s a tough call to make but I think it has to be done. The medical expenses are also a large expense that they could possibly cut. They would have to look closer at exactly where that money is going. Cut out non-essentials and shop around for cheaper insurance and care. And of course, take a detailed look at all the rest of their spending too, line by line. Dollar by dollar. What can be cut?
No matter what though, they need to start spending less than they earn! It’s a sinking ship.
Ok, now what if I told you the above family isn’t a family but our federal government? Does that change things? Put 8 zeros on the end of all those numbers and you have the federal budget. (Some numbers are from 2010, some are from 2011, and some are probably 2012 projections. I’ll freely admit it’s not a perfect representation but it gets my point across without me having to read 400 pages of confusing and boring pdfs.)
Does it change what your proposed solution would be? It sure does mine. Off the cuff, I think “whoa whoa, don’t increase your income! That means higher taxes and I’ll fight higher taxes all day long. I also pause at cutting off well-to-do grandma. She paid into Social Security, why shouldn’t she get her payments? I still stand by reducing the care of our neighbors (military spending) and the medical expenses (medicare). Those are both large expenses that I think have room for cuts.
Should our answers change just because it’s the government and not a family? I don’t know. Isn’t the way to wealth the same no matter what? Spend less than you earn. Live debt free. Save. Invest. That’s not what our government is doing. Quite the opposite. I don’t expect you to change your political stance based on one random article, but it’s certainly something to think about. If we really want to fix our nation’s financial situation we are all going to have to make some tough choices and compromises. Even me.