Why the Government and Your Family Need a Budget

Representative Paul Ryan recently came out with his budget as he has done in the past, although it will likely be DOA in the Senate again.  President Obama is mandated by law to deliver a budget by the beginning of March, and he says he will deliver it sometime in April.  It probably won’t matter much since his last budget didn’t receive any votes from Republicans or even Democrats!  While they may not be reaching agreement yet, it is important to have a budget and the lack of one for the last four years is probably part of the reason our nation’s finances are so out of whack.

The right way to make a budget would be to first determine the likely income for the nation for the next year.  Each side would then develop a list of priorities.  There would be some priorities that both sides would agree upon.  For example, I’m sure their pay and health benefits would be high on both lists, as would maintenance and cleaning of the White House and the Congressional buildings.  On other priorities they could take turns.  $100 B for these defense programs.  $100 B for these welfare programs.

Eventually they would run out of money.  At that point they should see what remains and determine what they really can’t live without.  In those cases they could negotiate how much extra debt to take on, or perhaps ways they could raise revenue (hint – think about lowering taxes).  Hopefully they would find ways to trim programs slowly or at least hold their size for a few years until there was enough revenue to cover them, then they could start cutting the debt we’ve built up.

Unfortunately this has not been done.  The President has been going from campaign stop to campaign stop giving speeches to whoever would have him on the dire consequences if Congress won’t act.  Someone should tell him that he won the election and he doesn’t need to rally against the Man – he is the Man!  He doesn’t need to hold rallies to talk to Congress – he just needs to take a walk across the street or invite them over.  This would be a lot cheaper than flying in advance crews of Secret Service Agents to sweep the area and then all of the cars and guns and staff that go with the President when he travels.

The most important thing about a budget isn’t the number on the paper.  It is the lines of communications that it opens up.  The President can explain why Head Start and investing hundreds of millions in solar panel start-up companies are important to him.  The Republicans can explain why not paying for the maintenance on the Air Force fleets is a bad idea and why a new Navy cruiser is needed.  It is a channel that can lead them to common ground.  It is a way to list priorities and have a meaningful discussion away from the demagoguery.

A budget for a family is very similar.  Without a budget, one spouse may feel like the other is controlling or a spouse may feel like they are caring for a child instead of an adult.  This can lead to many fights (money fights are a leading cause of divorce) or spending as a way to lash out against the other person ( He/she can’t tell me what to do.  I’m going to buy that car/ that dress/ those golf clubs!).  Like the President discussing his issues with the Republicans with a group of shipyard workers in Virginia, a wife might tear her husband down in front of her friends for his avaricious ways or a husband might lash out at his wife for treating him like a child with his friends.  This is not helpful since the person you should be talking to is your spouse.

Creating a budget together opens up those lines of communication.  You might find that your wife really doesn’t value those home improvements you’re planning as much as she would value some nights out together.  A husband might realize his three golf outings a week are putting a strain on the budget and maybe cut back and do some fishing instead.  It leads to talk about children and their activities, plans for retirement, and hopes and dreams.

A budget is a powerful tool of which every family should take advantage.  Just because it doesn’t look like the nation will have one soon doesn’t mean your family shouldn’t develop one today.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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