Balancing the Budget
So, I filed my taxes for 2011. The federal government saw fit to return
about $2000 of my own money to me this year.
Oh, and since it’s all the rage to talk about this stuff lately, I paid
an effective tax rate of 0.8% and I’m just barely in the top 50% of income
earners. If you want to know where you
stack up check this out: http://www.kiplinger.com/tools/income_rank/index.php
Woo Hoo – I’m in the top half! Don’t sweat that 0.8% rate. I got to claim my kids this year. Last year I paid 4.7% and made less money (I
was just under the 50% mark last year).
Here’s my current situation.
I’ve got just over $5,000 in Credit Card debt. A lot of that was accumulated after my
divorce (it happens). I’ve got a $1650
loan against my 401K. $35,000 Student
Loan and a $110,000 mortgage. Plus about
$7,000 I owe family. So $2000 doesn’t
make a very big dent.
Let’s talk about interest.
I’m paying about $90 a month in interest on Credit Cards, another $167
on my student loan and about $400 interest on my mortgage. I’d also guess another $100 a month on that
money I owe relatives. That’s about $750
a month IN INTREST (I rounded down).
That is $9,000 a year I’m paying someone else for privilege of having borrowed
money from them. In-Freakin’-Sane!
Here’s how I spent that tax money. First, I paid off my 401k loan and took out a
new one at a higher amount. Now, a lot
of people will screech at that, but here’s my line of thinking. I took out enough money to pay off all my credit
cards. That alone saves me $90 a month
in interest. I don’t know about you, but
my 401k lost about 2.5% last year. So a
$90 a month savings means a $1000 return on that money this year. Plus, I have to pay interest (to myself) on
that loan. While my 401k lost 2.5% last
year, the money I had borrowed from it gained 5%. So I’d rather pay myself interest than
someone else.
Don’t worry, I also did my civic duty and spurred the
economy by buying a TV. I was against it
at first but the Super Bowl deals were pretty good. I got a 37” flat screen LCD for $289. (Shout out to Best Buy for that deal) Even at that great price, I still wouldn’t
have bought it except that my TV burned out about 6 months ago. I’ve been watching my roommates TV. I didn’t actually have one of my own. So I splurged. The last time I splurged was Christmas 2010
when I bought my kids a Wii. Before that
I think I bought a new mower and bed right after my divorce (see credit card
debt above to understand how I managed that).
Back to my point, paying off the credit cards will also free
up about $100 per week that I am currently making in payments. This is important because I have run out of
deferments on my Student Loans. I have
to start paying them back next month.
Please note: I did not crap on police cars, camp in a park or assault
authorities demanding my student loans be forgiven, I devised a responsible
budget and financial plan that would allow me to pay those loans back. I can now make extra payments on the
principle of my mortgage. I can make
extra payments on the principle of my student loans. Those extra payments will save me thousands
over the course of the next few years.
If congress extends the payroll tax cut, I can put that money into my
401k (and get more on my employer match).
If they don’t, then the government can use it to pay their Social
Security obligations to my mother. I can
also start to put some money into savings.
I haven’t been able to do that since my divorce. Based on current projections, I may be able
to pay one family member off by the end of the year as well. (I should mention, for those of you who hate
loaning money to family members, I make regular, consistent, weekly payments on
those loans.)
My point is; I have a budget. I have a plan. I’m digging my way out of a negative net
worth. You do that by paying your
debts. You pay your debts by spending
less than you make.
The Senate hasn’t passed a real budget in 3 years (since
2009). When asked about it Senate Harry
Reid said he didn’t think we needed a budget this year either. The Democratic leader of the House, Steny
Hoyer, agreed with him saying, “What does a budget do?” http://cnsnews.com/news/article/hoyer-fact-you-don-t-need-budget. Jay Carney says the White House “Has no
opinion” about whether or not the Senate passes a budget. http://www.youtube.com/watch?v=3spHkVua-ko&feature=player_embedded Obama has at least sent his budget proposal
to congress, but it still has a $901 BILLION deficit. http://www.usatoday.com/news/washington/story/2012-02-13/obama-budget-congress/53069082/1
That means we will BORROW another $901 BILLION this year. Yet that is being reported as “deficit
reduction.” Really? That’s not a reduction, that’s an
addition. In order to actually get a
reduction, you would have to spend less than you bring in. Our national debt is currently $15,375,000,000,000
(and counting). The interest on our debt is up to $3,760,000,000,000 (and counting). http://www.usdebtclock.org/
Let me help explain the shell game here. In my personal budget, if I told you I was
reducing my debt by $5000 by paying off my credit cards, I’d be lying to
you. It’d be easy to show you that $5000
reduction by omitting where I got the money to pay off the credit cards, but it
would not be accurate. You see, I
borrowed the money from my 401k to pay them off. I only actually reduced my debt by about
$2000 (the amount of my tax check).
Everything else was refinancing and restructuring to help me pay things
down faster in the future. You see the
government is saying, “We borrowed $1.3 TRILLION last year and we plan to only
borrow $901 BILLION this year, so we are saving $400 BILLION.” And they expect us to shower them with roses,
pat them on the back tell them how awesome they are. I don’t think so. Your shopping addiction is bankrupting us a
little slower than it was, but that doesn’t mean you don’t need professional
help.
The GOP candidates like to throw out the phrase “Balanced
Budget Amendment” like that’ll fix all our problems. That won’t solve anything anytime soon. I’m not saying it’s a bad idea, I’m saying it
doesn’t fix the problem fast enough.
Congress has to approve the amendment with a 2/3 majority in both the House
AND the Senate (not likely with our currently Incompetent Congress). After that, ¾ of the states have to ratify
it. I’m pretty sure that’ll take more
than a few months. To give some recent
examples: the 25th amendment took 2 years to ratify, the 26th
took 4 months and the 27th took 200 years. So, saying you will fix the problem with a
constitutional amendment is saying you will make the guy after you deal with it
(at best).
Besides, if you can pass something through the Incompetent
Congress at a 2/3 majority, why not just pass a Balanced Budget? The only GOP candidate talking about
balancing the budget in year 1 is Ron Paul.
How crazy are things getting when Ron Paul is the ONLY guy making any
sense? Newt is at least talking about a
serious plan to reduce spending and have a truly balanced budget within a
couple years. He’s probably just being
realistic, he has done it once before in the 90’s after all, but I’d rather it
be faster. When I couldn’t meet my
budget I shut off my TV and my internet.
I ate dinner out of a can and it almost always cost less than a
dollar. I turned off the heat when the
kids weren’t over. I sweat in the house
without AC. I brought in a
roommate. I balanced my budget by
reducing my spending to a level below my income. It’s not a hard concept. You stop paying for things you can’t
afford. It’s that simple. But Romney keeps saying the poll approved,
“Balanced Budget Amendment” and Santorum will forget what a budget is once he
gets a Republican majority. If he did
manage to pass the poll approved “Balanced Budget Amendment”; it would probably
fail due to a gay marriage ban or some other such non-sense being attached to
it.
What I find really disturbing is that people seem to want
more of the same. Romney is another Big
Government, business as usual guy and he has won New Hampshire, Florida, Nevada
and Maine. That’s 4 out of 9 states that
can’t do basic math and don’t understand basic budgeting, but are still engaged
enough to vote in a primary. Santorum
has won Iowa, Colorado, Minnesota and Missouri.
That’s 3 out of 9 states that are more concerned with forcing people to
act in accordance with their personal moral code no matter how much it costs. (I gave Missouri a pass because Newt wasn’t
on the ballot there and I would have picked Santorum over Romney. However, if you all had voted for Paul over
Romney I’d be applauding your courage).
Only South Carolina seems to understand how to pay their bills.
The numbers I’ve seen show voter turnouts in counties that
Romney wins are at lower than 2008 levels.
What I take away from that is that fiscally responsible voters do not
see an option. Why go to the polls when
there is no one worth voting for? Their
absence should be ringing loud and clear.
I’ll be honest with you; it’s going to be a good year to be a 3rd
party candidate. A study out recently
says that 23% of Americans would consider themselves Fiscally Conservative and
Socially Liberal. http://www.cato-at-liberty.org/more-data-on-fiscally-conservative-socially-liberal-voters/
Guess what, those people are Libertarians.
They just don’t know it yet. If
the Libertarian Party manages to finally get their message out, this could be
the most surprising election in my lifetime.
The “independents” may finally flip the metaphorical bird to both
“mainstream” political parties.
If not, well, I refer you to that episode of the Simpsons
when Kang and Kodos both ran for president and it didn’t matter who you voted
for. Either way you were going to be
enslaved.
(If you want to see
where your money goes, check this out: http://www.whitehouse.gov/omb/budget
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