Government Budget Mess: Lessons For Us

by | Oct 6, 2023 | Videos

Government Budget Mess: Lessons For Us

Last week (September 30, 2023) , we endured another government budget mess, and we narrowly avoided another US Government shutdown.
We’ve lost count: how many shutdowns have we narrowly avoided now?

But there ARE some takeaways and good lessons for all of us:
1.  We won’t be around very long if we personally run a deficit like these folks in Washington, DC.
2.  No matter what, you MUST know your numbers!

Here’s how the Washington budget breaks down, in “super-simplified” terms:
67 cents of every dollar goes toward Government programs like Social Security, Medicare and Medicaid.
14 cents of every dollar goes toward defense
10 cents (roughly) of every dollar goes toward interest on the massive $33 trillion debt
These are amounts that will not change – or go down.

That leaves only about 9-10 cents (or 9-10% of the budget) where we can actually make changes that will bring us toward a break-even, a deficit or a surplus.
That’s it!  There is not a lot of wiggle room.  And this is how this Government Budget mess can be a lesson for us all.

There’s much that has been written (in our industry) about “cutting that $5 latte can save you a million dollars!”
By the way, the math on that “latte story” tells a different tale:  eliminating a $5 latte  x  365 days/year  x  40 years = $73,000.
Even if you were to invest that money, it will not compound into a million dollars.

The problem with the $5 latte theory ties in with something Steve Jobs said: You can’t connect the dots looking forward; you can only connect them looking backwards.”  By the time you realize you could save $5 per day by eliminating that drink, you are too far down the road for it to amount to anything meaningful.

An $800 car lease payment?  Yes, THAT could really dent your budget!

The biggest problems we see – whether in a government budget mess, or in a personal budget mess, is forgetting to pay yourself first.
In “government terms” notice that there are NO provisions for improving ourselves.  Hard to increase our productivity (increase our output, our gross domestic product, GDP) when every dollar (and more) is already accounted for, in spending terms.

In personal terms, we find most folks forget (or omit) to pay themselves first.  If you want to save money, break that goal down to a monthly amount and write that check to yourself.
Just as you would pay a mortgage or rent check, you MUST pay yourself first.  It is, as mentioned on the video, the ONLY way out of a budget mess.

By the way, you can watch ALL our videos on our Mullooly Asset website, right here.
Government Budget Mess: Lessons For Us

Transcript for “Government Budget Mess: Lessons For Us”

We’re going to talk about budgeting lessons We can pick up from the government shutdown, stick around!

So, we had an almost government shut down recently.
We have some “interesting math” we can share with you. And it applies to everyone’s own budget. Hopefully it won’t wind up with a shutdown – for you.
I heard a congressmen explain it this way and I thought this made great sense. And you should try this at home too.

When you look at the budget in terms of percentages – or just use a dollar:
67 cents of the government dollar goes to programs like social security, Medicare, Medicaid. Programs like that.
14 cents out of every dollar goes to defense. We’re not going to mess with that.
Somewhere between nine and 10 cents of the dollar goes to interest on, oh I don’t know, $33 trillion of our national debt.

That leaves us about 9 cents on every dollar that we can make cuts, or wiggle around and find a way to do it.

It’s very clear that Congress isn’t doing such a hot job – because they bring in $5 trillion a year but they’re spending $7 trillion.
I’m not going to make this about politics!

I want to bring it home to me and you.
Let’s talk about what your budget at home looks like.

You’ve got two sides to your budget, two sides to your ledger.
You’ve got income. If you can increase your income, — fantastic, That’s going to make all the numbers work!

On the expense side of the ledger, let’s talk about this.

If you’re applying for a mortgage, they’re going to tell you your primary residence should take up about 28%
That’s usually the max — 28% of your gross pay can go towards housing expense.

You know depending on the banks they can go up to 30%. But they also tell you somewhere between 36% and 40% should be the max for ALL of your debt payments.

And so you’ve got things like car lease, you’ve got credit cards. Now you have to pay student loans again! You’ve got all of these things that get factored in.

You need to take a long look at where your major expenses are.
What are the big buckets?
On your budget, on your balance sheet, on your ledger.

It’s really very important. Because when you go through this people are like “gee I don’t know if I should give up that $5 a day Latte habit at Starbucks.”
That may not even move the needle for you! But an $800 car lease? Yeah, that might actually make a difference for you.

What most people forget when they’re putting together the budget is: the first expense should be you.
The guy watching this video – or the gal watching this video. You have to pay yourself first.

Now for some folks that might mean maxing out your contribution to your retirement plan at work. For other people it might be, “Hey I’ve gotten that taken care of at work – but I want to put $500 away every month, or $1000 a month. Don’t skip that!

Don’t wait until the end of the month. Or pay yourself last. Pay yourself first.
It’s the only way out of a budget mess.

That is the message for episode 355, the Government Budget Mess – Lessons for us.
Thanks for tuning in!

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