In business the goal is to spend less than revenue and create a profit. Profits allow debt repayments, add to the inventory, and expand marketing. But the federal government is not profit-oriented yet it still needs to create a surplus in order to repay debts, improve roads, maintain the military, etc.
A quick look at the government’s 2009 budget shows that every federal dollar that would come into the IRS that year had already been legislated, or mandated by Congress for programs already set in stone, leaving our government leaders without any surplus at all. Worse, there is no surplus to be available forever! Maybe the Congress can make changes, for sure they can, but they haven’t so far and now we are in year 2016 and still, there is no surplus in sight.
My point is that we the people should not allow ourselves to get trapped like this in our own personal finances. The technique to insuring a surplus, thus the ability to pay down debt and expand inventory or pay for college educations and so forth is as follows:
- Build a spending plan using your income minus any withholdings. Spend all of this money into categories and see how much extra you have left; what’s left must also be “spent” in the form of paying yourself in a savings account.
- Now place every expense into a fixed payment column or a variable. If you have $5,000 to spend and $4,895 is in the fixed column, you only have $105 of freedom to choose — there’s not a lot of wiggle room here, so if an emergency strikes, you’re bound to get into more debt. This is not the way to create a surplus.
- So, your next step it to take the fixed expenses and start cutting, selling and changing these expenses so you go from $105 in the variable column to $1,240. Now you have room to pay for an emergency. Now you can breathe financially. Now you can make better decisions and not be running around like a chicken with its head cut off. Stop overspending madness by examining your fixed vs. variable expenditures.
Our government is having a hard time managing its finances by “large committee” (or Congress) if you will. This has always been the case with committees, and that is why our Founding Fathers added the executive branch of government. When blame is being dished out to the Congress about fiscally unsound policies, the president is every bit to blame for this kind of spending problem, since he is not examining so-called “fixed” spending programs and working with Congress to change more of these to variables (or eliminating them altogether).
In terms of your own personal finances, I point to you as being the president of your situation. You are in control. Look at variable and fixed expenses, and work to get fixed expenses like debt eliminated from your Spending Plan. Don’t complain about our government’s overspending if you are not creating a cash surplus yourself by getting your own finances under control.