Budgeting by dummies!

Believe it or not, it’s about the stupid Republicans and Democrats in Congress…yah, I know…you didn’t vote for them. I have a friend, nice family, 3 kids, a dog, nice house, RV trips, big spenders, know how to live high on the hog…why don’t they fight all the time about how to manage their income and expenses like the Democrats and Republics do in Congress?

Mary works as a bank teller supervisor. She makes $50,000 per year. Joe works as  senior plumber. He makes $40,000. Their old home is worth about $800,000.00. Their equity is $250,000 and mortgage is $3,000.00.  Educating the kids in the best universities is expensive, about  $30,000. Living expenses $30,000. Retraining to upgrade work related skills about $20,000. Insurances about $5,000. the Smith’s take out a $150,000 loan for home improvement, attached to the mortgage. They drive two nice cars they paid for in cash.  In short, Joe and Mary live with huge deficit spending, much like the US…but they don’t fight. Why?

1. They don’t waste money. They live well and get maximum value out of the bucks they spent. The US doesn’t.

2.  They spend a lot of money on education that will pay off when the time comes to pay off the extra bills. The US doesn’t

3. They maximise their borrowing power and borrow cheap (e.g., 2.5% per year). the US doesn’t.

4. They don’t give their money away to fraudulent charities and other lost causes. The US does.

5. They cut expenses without hurting services (e.g., Joe just switched to Northern Shield, saving $600 per year on home insurance. Mary just saved a bundle by changing phone companies, car insurance ,etc). The US doesn’t shop around for better products and services at the lowest costs.

6. I could go on and on (may be I will when I have more time), but you got the point. According to my lectures at Universities, Behavioral Economics, living on borrowed money is very sound financially if you are smart and responsible. According to Classical economics, the prevalent theory in Washington, you should balance your budget. You know how I know smarty people from the dummies? The stupid ones pay off their huge mortgage as fast as they can afford to so they can sleep at night! Have a smart day!


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