First Person: If We Managed Our Finances Like the Federal Government, We’d Be Bankrupt

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COMMENTARY | I recently finished reading a CNN Money article entitled, "How realistic is a balanced budget in 10 years?" So how realistic is our nation's chances of hitting this benchmark? Well, according to the article, ""Technically it's plausible. ... But politically it may be too much," said Rudolph Penner, a former director of the Congressional Budget Office."

Personally, I find it amazing that our nation can function this way financially. Talk about considering itself too big to fail. If we managed our family finances this way, we'd have been bankrupt long ago.

A Balanced Budget in 10 Years?

At first it might not sound that silly -- a balanced budget in 10 years. But step back from the statement. 10 years just to balance the budget, not start paying down the national debt, just to get to a point where we're not paying more than we're bringing in! And according to the CNN Money article, "(Paul) Ryan's budget last year was savaged by Democrats for its spending cuts, among other things. But even that budget, which would have slashed deficits significantly, would not have resulted in a balanced budget until close to 2040."

Had my own family taken this stance, it would have meant that from the time my wife and I graduated college until the time we sold our first home, we would have not only have been living in debt, but continuing to build upon that debt. The $50,000 in student loans we took on for our schooling wouldn't have been paid off in three years. The home we live in now wouldn't have been purchased outright with the equity from our first home. We wouldn't be free from credit card debt, and we would likely have paid tens of thousands of dollars or more in interest on debt.

Instead, we began doing things like developing a budget, tracking income and expenses, and ensuring that we understood our finances in an effort to not only create a balanced budget, but stay debt free and make a little financial headway in the process.

Increased Debt Ceiling

Rather than dealing with the reality of our nation's financial situation, our government seems content to simply increase the amount of debt we can take on by pushing the debt ceiling higher. It would be akin to our family, once we hit our max spending limit, simply throwing our hands up and taking on another credit card to keep on living the way we have been. But instead, our family does just the opposite

When the gap between income and expenses begins to narrow, we don't think of ways to continue spending. Instead, we do one of two things. First off, we might look for ways to earn more money through new or improved sources of revenue. We might do this by way of my wife working more hours or picking up a part-time job during the summer (since she works for a school district), making some extra cash through downsizing (i.e. having a garage sale or selling stuff at consignment or resale shops), or through my picking up extra money through my freelance work.

Otherwise, we tend to consider our expenses and start finding ways to cut. In the past, doing things like downsizing to a one vehicle family, downsizing from a larger single-family home to a small condo, cutting utility costs, and reducing our food and entertainment budget haven't been fun, but they've helped us continue to live within and even below our means.

Supporting the Unemployed

Much like our federal government, we do our part to support the unemployed…otherwise known as our children. However, unlike our government, we don't let them stay on the support system for nothing (well, our newborn does, but not our five-year-old), they have to (or will have to) work for their support and pull their weight around the house.

Their allowances -- unlike unemployment or food stamps -- are provided for them doing work of some sort in return. Even if it's relatively simple things like clearing the table for dinner or helping to take out the trash, some sort of productive activity is expected from them in return for this weekly allotment. If they don't perform, there is no allowance. This way they are kept motivated, doing work of some sort, and feeling productive, not just doled out money because they feel they are entitled to it.

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Disclaimer:

The author is not a licensed financial professional. This article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Sources:

Sahadi, Jeanne. CNN Money. "How realistic is a balanced budget in 10 years". January 25, 2013. http://money.cnn.com/2013/01/25/news/economy/republicans-balanced-budget/index.html?iid=HP_River. January 28, 2013.

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