People will do what they know, but once they know better,
they should do better. - Dr. Phil
I heard a news commentator say recently, "America's credit
card is maxed out at $16.4 trillion. Congress will soon be
voting to raise the debt ceiling so we can have the ability to
pay our bills."
Think about his statement: Do people actually believe that
the "ability to pay our bills" is based on how much
they can borrow? Is constantly going deeper into debt now the
accepted method to stay current on our financial obligations?
Well, I know a group of people who believe that. They go by
the name "politicians," and yes, they actually believe that it
is okay for our government to pay its bills by going deeper into
debt. "Paying our bills" used to mean paying down debt, but now
it means recklessly adding to it!
You and I can learn something from Washington - we can learn
how NOT to do it! We can learn from the school of hard knocks
without having to actually go to class ourselves!
Can I suggest to you that the principles of sound finance are
the same, whether applied to governments or to individuals. In
both situations, constantly having to borrow is a sign of
inability, not ability,
to pay the bills!
The practice is similar to digging a hole in our front yard
so we can get enough dirt to fill in the hole in our back yard!
The back yard is going to look nice, but the front yard is soon
going to look like a war zone.
But many are not learning from Washington's mistakes.
Borrowing to pay bills has become an accepted practice for many
American families: "About half of 3,000 Americans polled in a
recent survey said that they're spending more than they earn..."
Source: Survey by Rasmussen as
reported in the Huffington Post Money 1/23/13
This could explain why the average American family that does
not pay its credit card balance off each month, revolves almost
$16,000 of credit card debt each month! To pay that amount off
at minimum payments would take almost 18 years and would cost
over $11,000 in interest!
The "ability" to spend more than we earn comes about by using
credit to make up the shortfall between what we spend and what
we earn. It can be credit cards, bank loans, tapping into
retirement, payday loans, or securing a second mortgage can be
ways of going into debt to pay the bills.
Therefore, a good way to see if you are spending more than
you make is to totally discontinue the use of all credit for a
couple of months. Use only the cash you have available to pay
your bills. If you run out of cash before you get them all paid
- you are spending more than you earn!
How do you address that problem?
- Make a list of what you actually spend
in a month.
- Compare that to your "take home" pay.
- If the expenses are more than the
income - spend less or earn more.
The path to financial fitness is not achieved through
borrowing, and raising our personal "debt ceiling" does nothing
but enable us to continue our bad overspending habits.
The real fix to get our finances under control is to simply
spend less than we earn.
©Jim Garnett. The information
on this site should be understood to be a general discussion of
the subject matter and DOES NOT constitute a legal opinion about
the situation. For further information please consult a
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023