Finance
SERIES: “Fix The Economy” – Require A Balanced Budget
Welcome to the latest series at the wildly popular JosephSangl.com: “5 Things That Will Help Fix The Economy” In this series, I will be sharing some principles I believe will help fix the economy long term.
The economy has been stuck for some time. The words “Great Recession,” “Fiscal Cliff,” “Sequestration,” “Stagnant,” and “Jobless Recovery” have become common everyday language.
Number 2: Require a balanced budget.
In all of my personal finance books, events, and teaching, I share a fundamental and foundational financial truth that the following formula applies to one and all if we truly want to prosper:
INCOME – OUTGO = EXACTLY ZERO
If “Outgo” continually exceeds “Income”, then the formula won’t equal “Exactly Zero” (EZ tm!) Instead, it will be a negative number. This can go on for awhile through the use of debt and creditors, but eventually the game will come to an end and the creditor will shut off future funding.
Balancing a nation’s budget requires the same process you and I put into place at our kitchen table. When faced with a negative number instead of “Exactly Zero,” there are two ways to balance the budget:
- Increase INCOME
- Decrease OUTGO
1. Increase INCOME
How does a government increase income? Generate more tax revenue! This can be achieved two ways: (i) Increase taxes or (ii) Economic improvement (which will yield more taxes as profits and payrolls increase). While most of us are not terribly excited about paying taxes, I am more than happy to pay them to enjoy the good benefits that government provides. I would be even happier to pay taxes if I knew that the government was required to have a balanced budget!
There’s actually a third way to increase income, and it’s my least favorite: (iii) Borrow money. Borrowed money generates money for now, but creates a future liability that adds to future “OUTGO.” A good way to comprehend this is a credit card. You could use your credit card right now to generate income. You could purchase items and “stimulate your economy” right now because it would add to the “INCOME” side of the equation. However, the bill would come due soon and cause the “OUTGO” side to increase. Seems very counter-productive to me! I’ve yet to meet anyone who told me that borrowing a ton of money on their credit card was a great decision that helped them prosper!
2. Decrease OUTGO
This is the unpopular and unsavory part of budgeting. No one wants to reduce spending because that’s our favorite part! We all want to be able to shop, subscribe to cable and Internet service, drive a great car, and have the best of everything, but decisions must be made when faced with substantial budget issues. Using the credit card to fund these items during a slump in income will only work for awhile and then the bill will come due – larger now because of failing to make key decisions and using the credit card instead.
Sometimes in our personal budgets, we must even reduce and potentially eliminate good things and fun activities. We don’t WANT to, but we MUST if we really want to position ourselves to prosper long term. The same is true for governments. When faced with tremendous INCOME challenges, we must reduce and eliminate OUTGO – even for great programs and organizations! It is awful and no fun, but it is NECESSARY if there is to be any fundamental financial and economic improvement!
Let’s look at the United States Budget (see it all HERE). According to the non-partisan Congressional Budget Office, the U.S. collected $886 billion in INCOME during the first four months of Fiscal Year 2013 (FY2013). However, the country spent $1,181 billion in OUTGO during the same period. Our key equation “INCOME – OUTGO” definitely is not EZ! Instead, there is a deficit of $295 billion. Put simply, for every $1.00 the country collected, the government spent $1.33.
To better comprehend these huge numbers, let’s put this in terms of your personal household income. Suppose you earned $4,000 this month. To match the deficit achieved in the first four months by the government, you would need to have spent $5,331 or $1,331 more than you earned. How long could YOU sustain that type of deficit spending?!?!
A vigorous debate must be done with the vision of a great economic future as the main goal – instead of a “I need to win this argument at all costs” posturing and positioning. There will be tough decisions that will impact people, services, and the global economy. It is a huge and complicated task (so is balancing our own budget!), but it must be done to fix the economy long-term.
Your thoughts?
Read the entire series (available after 3/14/2013)
SERIES: “Fix The Economy” – Establish a Clear Vision
Welcome to the latest series at the wildly popular JosephSangl.com: “5 Things That Will Help Fix The Economy” In this series, I will be sharing some principles I believe will help fix the economy long term.
The economy has been stuck for some time. The words “Great Recession,” “Fiscal Cliff,” “Sequestration,” “Stagnant,” and “Jobless Recovery” have become common everyday language.
Number 1: Establish a clear vision of what we want our economy to look like
“Without vision, the people perish” is absolutely true. This applies for each of individually as well as for all of us corporately. If we don’t have a crisp, clear, and compelling vision for the future that is fully bought into by leadership as well as all citizens, the economy will waver and wander.
- President Obama has been sharing his vision for the United States HERE.
- Canada’s prime minister, Stephen Harper, shares vision HERE.
- Mexico’s president, Enrique Pena Nieto, wrote a book about his vision for Mexico HERE.
Here is what I know to be true:
If it always one party completely FOR something and the opposing party completely AGAINST something, progress can hardly be made. Relationships become toxic and non-productive and every issue becomes a “WE versus THEY” battle. Economic progress and stability happens when vision is vigorously debated, everyone has their moment to hear it and have their questions answered, and buy-in from all representatives is achieved. Impossible, you say? It has happened many times in the past – usually in the face of tremendous adversity. What if we viewed our collective global economy as a moment of tremendous adversity?
Maybe this would be a good start to a global vision statement:
“Help people accomplish far more than they ever thought possible.”
Read the entire series (available after 3/14/2013)
SERIES: 5 Key Things That Will Help Fix The Economy
Welcome to the latest series at the wildly popular JosephSangl.com: “5 Things That Will Help Fix The Economy” In this series, I will be sharing some principles I believe will help fix the economy long term.
The economy has been stuck for some time. The words “Great Recession,” “Fiscal Cliff,” “Sequestration,” “Stagnant,” and “Jobless Recovery” have become common everyday language.
In this post, I will share my 5 Key Things That Will Help Fix The Economy, and then we will dive into each one to understand why it is important to long-term recovery.
- Establish a clear vision of what we want our economy to look like
- Require a balanced budget
- Build substantial financial margin
- Incentivize innovation, job creation, and education (especially money education)
- Make rip-off loans illegal
These are 5 key things I believe will position the economy for long-term health and sustainable growth. I look forward to having a conversation with you over the next several days regarding each of these items. TOGETHER -WE can make a difference for the world.
Read the entire series (available after 3/14/2013)
MONEY LIE: I Can’t Give Money Away and Still Make It Financially
Welcome to the “Money Lies” series here on the wildly popular JosephSangl.com. In this series, I will be sharing many common money lies that people believe.
MONEY LIE #6: I can’t give money away and still make it financially.
Yes. You. Can. I’m convinced that my giving keeps me from becoming greedy and a “Me. Me. Me!” person. When my bride and I prepare our monthly budget, we put giving in our budget first. We give far more than 10% of our gross income away. It is our passion to invest in our church and in others. We love helping fund the dreams of others and investing in life change. There was a time when we were broke that we didn’t give much away. Since we weren’t giving and we were broke, we decided to do something different: we began giving – even though we were broke.
It completely transformed our life.
Giving connected us to the fact that we could partner with others to accomplish great things and to fund causes we fiercely believed in. It allowed us to be part of something much greater than ourselves. It made us keenly aware of the need to manage the remainder of our money in a trustworthy manner – or else we couldn’t continue giving!
If you’ve never given, I urge you to begin right away (like NOW!). Here are some practical ways to GIVE and still prosper:
- Prepare a written monthly budget and put giving in FIRST (not last). If you wait to see if something will be left, there never will be anything remaining. It must be a priority.
- Determine WHY you are giving. If you are giving because someone made you feel guilty, your commitment to giving won’t last. You have to KNOW why you are giving – and BELIEVE in what you are giving toward.
- Put Giving FIRST and Saving/Investing SECOND. This is how Jenn and I manage our budget. It ensures that our priorities are always funded before anything else. By the way, we view our saving/investing as a means to give BIG-TIME in the future.
Read the entire series (available after 2/20/2013)
MONEY LIE: I Can’t Budget
Welcome to the “Money Lies” series here on the wildly popular JosephSangl.com. In this series, I will be sharing many common money lies that people believe.
MONEY LIE #5: I can’t budget.
This is so common. People are busy. They hate math. Their spouse is impatient about money. They have “seasonal, cyclical, or irregular income” and that makes it more difficult to budget.
Here’s the deal. I KNOW it is difficult to prepare a budget. I’ve been told that by many people. They share that it is difficult expecting that to make it okay to not prepare a spending plan. My question is this: “Difficult compared to what? Not budgeting?”
I don’t know all of the reasons that people choose not to budget (and it is a choice), but here’s one thing I will fight about: A BUDGET SET ME FREE!!!!!
- A budget allowed me to know exactly where every single dollar was going BEFORE I was ever paid.
- A budget provided choices to me – because I was planning it before I received it.
- A budget brought my bride and I together and put us on the same financial page.
- A budget allowed me to pay off all of my non-house debt in 14 months.
- A budget allowed me to pay off my house in 10 years and 1 month.
- A budget has allowed me to launch two businesses and purchase another.
In case you can’t tell, I am more than a little passionate about this topic. To put it all into a simple sentence: “You need a budget!”
Here are some practical ways you can make a budget work well for you:
- Use a budget tool. This allows the math to be done automatically for you, and that means you can focus on the financial decisions instead of a facing a terrible math quiz. Use our FREE BUDGET TOOLS – they do all of the math for you!
- Build an emergency fund equal to a full month of EXPENSES. This is EXPENSES – not INCOME! Once you’ve saved enough for an entire month of expenses, you can ignore multiple paychecks each month, and use the Monthly Budgeting Tool instead. And you will rid yourself of a level of stress you didn’t even know you were dealing with!
- Be realistic. If you are just beginning to prepare a monthly budget, it is important to be very realistic on your expenses. Do not tell yourself that you will spend $2.81 on groceries in the next month. That’s not possible, and it sets you up to fail. If you have a household of kids that are involved in 83 activities, don’t put $0 in your “dining out” part of the budget.
- Read the “How Do I Budget SERIES”. You can read that HERE. It will really help you as you launch into the wonderful world of budgeting!
Read the entire series (available after 2/20/2013)