ICFE eNEWS #13-13 - Oct 28th 2013

"Funny Finances"

Some days I sit back and marvel at the way our government's financial situation is presented to us by the media and the politicians. It seems to me that when applied to our Government, all rules of sensible financial management are abandoned. In their place is substituted a system of "Funny Finances."

An argument could be made that, because we are not politicians or media types, we simply cannot understand the financial principles that our Government uses.

I think the only thing we do not understand is why the same principles continue to be used when they obviously do not work.

Have you ever thought about trying to apply the financial principles our Government uses to your family's finances? Let see how it works.

Bill says to his wife, "Jean, it is near the end of the month, and it looks like we are going to run out of money again. But this month it is even worse - we are not going to able to borrow to pay our bills like we usually do!"

"Are you sure, Bill?" Jean asked. "How about a fourth mortgage on the house, or getting the credit cards to increase our credit limit?"

"No, I already tried that. None of them will play ball with us! I just don't know why they don't understand that we need to be able to borrow to pay our debts. I guess they just don't care that our credit score will drop if we default on our bills. This is really a problem for us this month!"

So, Bill and Jean sit at their kitchen table most of the evening trying to think of some way to solve their problem. They call every one they know to try to borrow money, their immediate family members, three cousins, four friends, two neighbors, and even a couple of churches. All to no avail!

This couple is going to spend a sleepless night - what will they do?

One does not need to be a financial genius to see that Bill and Jean are focusing on the wrong problem. They are focusing on their borrowing problem, when they should be focusing on their spending problem.

If they would spend less than they make, there would not be a need to constantly borrow. The borrowing problem would disappear if they would solve their spending problem.

But this is not one of the principles contained in the "funny finances" system. Therefore, Bill and Jean's financial problems will never be solved - even if they find a way to borrow more.

This "funny finances" set of principles will not work when applied to a family setting. In fact, they will not work when applied to any setting, especially a Government setting.

All the media can talk about are the disastrous results that will occur if our Government does not find some way to borrow more. Their focus is entirely on raising the "debt ceiling," which will never solve our country's problem.

The real culprit is a spending problem, not a borrowing problem, so why don't we hear anything about establishing a "Spending Ceiling?" After all, if our Government were to spend less than it made, the "Debt Ceiling" problem would take care of itself.

Isn't that what our families would do to fix the same type of problem - cut our spending until it was less than our income?

I can hear so many people responding, "But Jim, You don't understand how the Government works. It is just not that simple!"

My response? "It could be."

Ask Mr. G
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023

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Sent by:

Paul Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

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