How I Would Balance The Budget

"If you would be wealthy, think of saving as well as getting." ~ Benjamin Franklin

I just read a snippet of Obama's state of the union address over at AOW's place this morning.

I didn't watch the speech. There is much more believable fiction on other channels.

As I've said countless times, I am not an economist. These billion and trillion dollar proposals, stimuli, tax increases and cuts boggle my mind. I don't understand how cutting this and raising that will reduce the national deficit very significantly.

I can only compare the national budget to my own personal finances. It is the only way I can relate.

I make far less money than I need with which to balance my budget. And, I can't manage my bank account by speculating that some future windfall is going to drop into my lap. I can only base my accounting on what I physically have in my possession.

I, unlike the government, cannot simply print more money. And, truthfully, because the government can print more money, this is where the comparison between my budgetary concerns diverge from the government's.

I could just stop here, and that would pretty much make my point.

But, I digress. Since I am not, in any way, some kind of economical genius, I devised a way, years ago, of balancing my budget. This is what I do:

When I receive my paycheck, after first depositing a small amount of it into my savings account (for emergencies), the first thing I do is determine what bills are most pressing. Then, I calculate how much of my money I can afford to pay on those bills. If I don't have enough to cover all the most immediate bills, I do one of two things:

1. I call my creditors and make payment arrangements. I negotiate (if they'll let me) a future time and amount that I feel reasonably (barring some unforeseen catastrophe)sure I can pay, and/or...

2. I sometimes have to let a bill or two slide until the next paycheck. This is undoubtedly the worst choice, because once in a while something gets turned off. Unfortunately, that can't be helped. If I don't have the money to pay it, it can't be paid.

Next, I pay the bills I have determined I can pay without going completely broke.

With the remaining money, I calculate how much I can spend per day until the next paycheck. Then I try to stay under my self imposed spending limit every day, thereby increasing the amount I can spend per day until the next paycheck. Hopefully, if I did my calculations correctly, and some unforeseen financial emergency doesn't come up, I will have something left before my next paycheck, which I can add to the paycheck, with which I pay the next round of bills.

I check my bank balance every day, religiously. (By the way, because I check my balance everyday, I have stopped attempts of identity fraud on more than one occasion. You see, what they do is invade your bank account and withdraw a very small amount of money at first to see if you discover it. If you don't catch it, they withdraw huge amounts.)

This system works for me, provided I don't overspend my daily allotment on whims. If I do overspend one day, I have to necessarily adjust my per diem spending limit.

This cycle will continue until I either start getting paid enough to pay my bills and have funds left over, or I receive an unexpected windfall such as win a lottery, or a rich uncle dies and leaves me his entire fortune.

Neither is likely to happen. I don't play the lottery and as far as I know, I have no rich uncle.

Now, the way I see balancing the federal budget is much the same, except on a much grander scale.

Just like myself, unless the Federal government has a trillionaire uncle somewhere who dies and leaves his entire fortune to the U.S. Government, or the federal government wins a trillion dollar plus lottery, the way it's currently budgeting it's money is not working.

The federal government has to first determine how much money it actually has.

Then, it has to pare down it's spending to the point where it can only spend what it has, and no more. If it has to be done daily, the way I do it, then do it that way. If something has to be cut off temporarily, let it be cut off.

Make some arrangements, if necessary. The government should always be aware of exactly how much money it can spend without going over the limit. In other words, the government should be checking it's bank balance every day and making adjustments.

It needs to stop printing up monopoly money. All that does is create a false sense of security that our children and grandchildren will have to pay dearly for later.

Then, don't go over the limit.

Too simple, you ask? Perhaps. But, as I say, I'm not an economist.

Cross posted at American Descent