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Monday, September 30, 2013

If We Managed Our Finances Like the Government Manages Its Finances . . . .

Here we go.  The government finds itself in the precarious position of needing to raise the debt ceiling.  Is this deja vu all over again?

We don't know about you, but we can't raise our personal "debt ceiling" anytime we're at risk of not being able to pay our bills.  On the rare (thankfully) occasions when we were at risk of not being able to pay our bills, we cut back our expenses and tried to generate more income.  That meant not dining out as much, canceling cable, cutting back on grocery expenses, clipping coupons and finding additional sources of income, etc.

If we can't pay our bills, we can't just come to an agreement between ourselves and take on more debt.  We do have the option of calling our credit card company and asking for a debt limit increase.  They may or may not oblige.  Regardless, this isn't financially prudent.

We understand the value of a balanced debt to income ratio.  We know that an imbalance of this ratio negatively impacts our credit scores.  Poor credit scores mean higher interest loans or denials for loans.  A poor credit score these days can, also, mean not getting a job in a market in which it's already hard enough to get a job.

If we managed our personal finances as the government manages its finances, we would be in financial ruin.  Truth be told, the U.S. Government isn't in good health financially.  Don't let politicians deny it.  Countries such as Greece, Venezuela and Argentina are proof that debts do, in fact, catch up with governments.  We can't continue to print money out of thin air, artificially suppress interest rates and take on more and more debt without it catching up with us.

Both sides will blame the other and it won't be long until we're hearing the same talking points again.  Our country needs people who are able to strategically cut spending, while raising taxes.  Just as we manage both sides of our balance sheet, so must the government.

The reason our politicians don't do this is because they aren't held accountable.  If they were held at least as accountable with the government's finances as we are with our personal finances, this tired story wouldn't be playing itself out yet again.

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