Tuesday, May 11, 2010

The Daily Note - The Lost Art of Budgeting

Da rally da rally .. everyone was ready to shout yesterday, but I feel a rather cool realization finally settling in, that it can't go on. A billion here and several billion there is one thing, but we are now speaking in terms of high multiple billions. How did Greece's problem increase to nearly a trillion dollars, from $54 billion or so? We hear supposed smart (I refuse to use the word "wise") people, running countries and world banks, from a budgetary office telling us how to spend, yet they can't calculate well enough to save a dime.

Where did the art of budgeting go? Where are the people who are good budgeters? Better question is, do YOU know what it means? I challenge each one of you to do a budget by yourself, not dole it out to someone else, if you bother with it at all. Write it down on a ledger, forget the computer for a bit, do pencil to paper each month, and balance it to the penny.

You see no matter how much money you have, a budget is what will help you decide on spending. It is what keeps people in balance and from over spending. But I really think most people don't pay any attention to it at all anymore. Paychecks get deposited automatically now, taxes are withdrawn automatically, bills get paid automatically and we barely look at or even touch real money.

Compare that to nations where people still get paid in cash. Imagine once a month going to the company cashier having your pay counted out and handed over in an envelope, in cash. You sign a ledger that you received it and put cash in wallet. That's all you've got for a month. That is how I was paid less than 20 years ago, as a teacher overseas. No credit cards, nada.. That is all you have until next payday. So do you think you'll go on a shopping spree to spend it all and wait until next month? Nope, you don't because you know you have to hand over some of that cash directly to your landlord, and your utility collector first; then, you have to budget for food, then for your children's and your needs, and you have to take some to the savings bank too, before you ever think of a shopping spree.

In this country, the great USofA, the last generation that knows of what I speak was the "greatest generation" ; the one that saved the ass of the government out of depression. Not by the government spending money, but by them saving and budgeting their own money. It was all cash.. in mattresses, in coffee cans, in jars and envelopes labeled for the different needs. What's more, most of them never thought of getting a government handout. They lived within their means. Does the past 3 -4 generation know what that means?

It's no wonder that people are not outraged in America as more and more money is thrown around by this Congress. It's because the citizenry doesn't know how to budget and therefore cannot demand it from a government what they do not understand nor do themselves. It's easier to close the eyes and pretend it's not so. It's easier to ignore the phone calls, it's easier to blame someone else for not keeping the budget, and we elect a government mirroring ourselves.

In my opinion, the citizens of Greece understand budgeting more, probably still some live by cash, probably they are outraged that a government would overspend so much while continuing their promise to give them more. It's a righteous outrage by a people who keep budgets against the government that does not.

Let's get back to cash. Today's accounting is just a respectable word for "let's fudge here and put it there". Real budgeting is in envelopes, cookie jars, and the like, where you have to know where the last penny went because you don't know when your next one will arrive.

Why aren't we, Americans, outraged at our government's promises to give and spend more money when the budget is not balanced and we are out of cash? Why aren't the people who are outraged being heard? Is it because we would have to put the truth on our faces that we do not know, when our next penny will arrive nor where the last one was spent?

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1 comment:

Anonymous said...

No one want to endure the pain of cutting back... its so much easier to pass the problem on to our children and our grandchildren. I suspect that the Politicians don't believe that they can cut back and still get re-elected without the pork spending. Then there is the conundrum that if we cut back there will be nothing to stimulate an economic recovery of any sort. Without the endless borrowing for an artificail stimulus, the cost of goods, services and real estate will need to sink down to match income and wage levels, which they will and must do eventually. The core problem is that jobs and wages are not recovering and I can't see how that will change with the current policies, regulations, etc...