You currently have $140,000 in debt. You make $21,700 annually, yet you spend $38,200 resulting in an annual debt increase of $16,500 (remember, you only bring in $21k).
Waking up one day, you realize the dire situation that you have been trying to ignore is about to get worse. At your current rate of spending, you will max out all your credit cards in just under 2 weeks.
What to do?
Well, let’s think through the options. You could get a second job in an effort to raise your income. Or you could cut back on your expenses in an effort to stop the bleeding. Or both! Either way, it is abundantly clear that you need to radically change your way of life to get your financial life in order. But wait, there’s another solution…
Call your credit card company and ask them to raise your limit!!!
Why didn’t I think of that?
This is exactly the situation the Federal Government was in about one year ago (the dollars used in the example above are to scale) and we chose to simply increase the credit limit and keep on spending! (actually, to be fair: in addition to increasing the credit limit, we chose to cut the budget by the equivalent of $385 in the example above).
Our Current Conundrum
The current Secretary of the Treasury, Jack Lew, recently estimated that we are set to max out our credit limit again on October 18, just about two weeks from today. His solution is simple: increase the credit limit.
Over the next two weeks – in addition to the current government shutdown over the budget crisis – we’ll hear a lot of arguing from both sides of the aisle as we near the debt ceiling. We will hear how we should cut our spending or not cut our spending, but in the end all any of them are talking about is cutting another $385. In fact, in many of these arguments, they’re actually arguing about how much to cut from the annual increase, nobody is seriously talking about actually reducing the debt.
The solution? It’s really rather simple. Just like the family who is only making $21,700. First we have to figure out a way to spend less than we bring in. Its called balancing the budget.
Or we could implement Warren Buffet’s suggestion.
- The US Debt currently exceeds $16 trillion.
- If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now, yet US Debt is $16 trillion! (Source)
- Your share of the US Debt is $53,000. For a family of four, that would be $212,000.
What Can I Do?
First, get off the sidelines – Less than 6 in 10 adults voted in the last election. You can make a difference. Second, Call your congressman – let them know how you feel. They represent you. Finally, share this post and others like it.