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Wealth Virtues Journal: August 2, 2011

Slowing Your Spending is Not the Same as Cutting Your Spending

Filed under: American Wealth — Tags: , , , , , , — James Ward @ 3:14 pm
© 2009 Poor Richard Web Press, LLC

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How about a nice big cup of freekin' National DEBT?In an August 2, 2011 Washington Post opinion letter titled, “Why I voted against the debt deal,” Republican Senator Tom Coburn of Oklahoma writes the following:

“Politicians on both sides are misleading the country by calling a slowdown in the growth rate of new spending a “cut.” Spending will increase at a time when real cuts are necessary to make us live within our means, repair our economy and preserve our credit rating.

It is true that next year there will be a genuine cut of $7 billion when discretionary spending drops from $1.05 trillion to $1.043 trillion. But with our government borrowing $4.5 billion a day, that $7 billion is enough to fund the government for about 36 hours. And after our day and a half of restraint, spending will increase $830 billion over 10 years.”

So what is the lesson for  individuals looking to save more and spend less. The answer is to not confuse “a slowdown in your spending” with “cutting your budget.” If you are deep in debt, you don’t cut going out to restaurants from ten times a month to five, but you completely eliminate it, then cut your budget for food by one-third allowing you to focus on necessary, less expensive, and more healthful selections that, oh gee, you have to prepare yourself. Plus you can use coupons.

I for one would rather see no raise in the debt limit, however, with all the unnecessary hand-wringing, predictions of unproven doom, and threats of a rating downgrade from rating companies that gave fave raves to toxic real estate securities a few years back, I can live with the fact that it happened one more time – but I hope it is the last. And what would really happen if the US of A was downgraded – the world would still buy our debt. However we need to be an America with NO debt…at all. And you should be thinking the same way about your own financial future.

The government is, once again, not setting the example for individuals to follow. I write more of this in my previous article, “Want a Secure Future? Do the Opposite of Government

You may disagree with the Tea Party who wants to bring disciplined financial responsibility and a balanced budget back to government spending, but I am not sure why. Would you manage your budget the same way the government does? Perhaps if you have an employer who agrees to give you a 10% raise every year until you die (even when you retire), you may get away with it. If you have that type of agreement, I would like to hear about it. If you are a business owner, would you run your finances as the government does its own? If you do, please comment and tell me how you made it work…legally.

By the way, on this day, August 2, 2011, the day that the Senate passed and the President signed the bill to which Senator Tom Coburn refers, the stock market plunged over 2% (Dow 2%, NASDAC 2.75%, and S&P 2.5%).  The lesson is that market fundamentals are more important than the smoke and mirror financial logic of socialist-minded politicians.

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