Dave Ramsey Gives the U.S. Budget A Money Makeover

Cover of Dave RamseyThere is a great article over at DaveRamsey.com comparing the U.S. Federal budget to an average families budget. Whenever I hear on the news, how out of balance the federal budget is, it's difficult to understand how messed up it really is. The actual amounts of money talked about are mind numbing. 


Dave Ramsey is the financial guru who teaches people, at meetings all over the country and on his radio show, how to manage your money. Recently he posted a great article explaining how the government took in $2.173 trillion dollars in revenue in 2011. 


It is a lot of money and should pretty well do the trick to pay for a years worth of government expenses. The only problem is the government spent $3.818 trillion during the year. This leaves $1.645 trillion in overspending. Over the last few years the debt has grown to a grand total of $15 trillion. 

That deficit was borrowed and it was put on the big federal credit card.

Dave Ramsey gives a good example how this relates if the government was an average family:

"If a household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000! "

What would Dave recommend to this out of control family?

"Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it’s the only way out of debt for John Q. Public."

Is Dave Ramsey's advice to simplistic?

Personal finance is just a matter of spending less than you make and allocating your money correctly. The trouble with the U.S. federal budget is, plain and simple, it overspends. Cutting back to pay off debt and save can be painful. It's a great sacrifice. So it will be when the government begins to do this. The people who have been on the government dole will be the ones hurt the most.

But I have to agree with Dave Ramsey when he says the best way to not be affected by the governments future austerity programs is just to not be dependent on them. Have your financial house in order by doing the right things:

1. Live on less than you make.
2. Have an emergency fund.
3. Save for college and retirement.
4. Stay away from debt except your mortgage.

Link to original article - Federal Budget vs. Household Budget: How Do They Compare?

What's $40 Dollars To You?

As usual our employees in Washington D.C. are making a mess of everything. They can't even get it together to give us a meaningless tax break. The bottom line of this whole mess is that the average family will lose their $1000 tax cut if the Congress doesn't act by the end of the year. Why is it they always wait till the last minute to take care of these things? It's like my kid waiting till the last minute to do his homework.

The $1000 tax break comes down to $40 every two weeks. Is that such a big amount to get so worked up for? Well, the White House seems to think it is a big deal and they have set up a web site for you to chime in on what you think: www.whitehouse.gov/40dollars

It seems $40 every two weeks can amount to something over time. In 3 years it turns into $3,531. In 5 years it grows to $6,403. In ten years it grows to $15,951.

It seems $40 is a significant amount. Such a small amount invested every two weeks can have an interesting effect on your retirement needs.

Related Post: Investing 101: Index Funds

Real Resolutions For 2012

Image by ElvertBarnes via FlickrWith the Christmas season nearly over it's time to make some real resolutions for the coming year. I don't mean the typical resolutions to lose weight and eat better. Those are admirable things to aim for but usually fall along the wayside by the end of January. I want you to make some important resolutions that will put some money in your pocket and make life better.

Save more in 2012.

If your not saving enough or at all, it's time to do a better job. Next year the contribution limit for 401(k)s, 403(b)s, and the federal government's Thrift Savings Plan will increase by $500 in 2012, to $17,000. Here Uncle Sam is is allowing you to save $42 more per month in your retirement account. Take advantage of this and adjust you payroll deduction when you go back to work in 2012.

Low-income savers whose modified adjusted gross incomes are less than $28,750 for singles, $43,125 for heads of household, and $57,500 for married couples may also be able to claim the Saver's Credit, which is worth up to $1,000 for singles and $2,000 for couples.

If your putting money into a Roth Ira be sure you are putting in the max. Any other money you can save, outside of retirement accounts, can be put into a nice emergency fund.

Related post: Savings Plan Pays Off

Emergency Fund.

Is your emergency fund completed yet? If not why not address it this coming year. The key to staying out of debt is to have that rainy day fund ready. It's a vital part of a financial plan. It should be large enough to cover 3 to 6 months of your living expenses.

Related post: The 4 Ways to a Better Emergency Fund

Reduce Expenses.

It's a good time to go over your monthly expenses. Maybe you have some monthly subscriptions you are paying for that you no longer use. Cancel them.

Reduce your expenses of your cable bill, phone bill, or cell phone plan. Call your providers and see if there are any cheaper plans available. Every time I call my cell phone provider I learn of a reduced plan they are offering. They won't be calling you so it's your job to be proactive.

Are there any ways to reduce your utility cost? Find ways to use less water and electric. There are many new devices that can help you cut back without impacting your lifestyle.
Related post:  How To: Create A Budget

Insurance Bills.

Insurance companies are still competitive in there rates. I recently moved my car insurance to a new provider. I not only saving  $50 per month, I have the rate locked in for the next year. Even your home insurance can be reduced by evaluating the bill. Call your agent and see if you have coverage you may not need. I recently reduced my coverage on a detached storage shed on my property. By not insuring the shed I am reducing my costs by $40 per month.

Related post:  Car Insurance Discounts Are Waiting For You

Make Sure Your Will Is Up to Date.

If you have a will make sure it is up to date. If not then make any corrections needed. If you don't even have a will make it a priority to have it done in January. The best gift you can give your family after you die is an orderly transfer of your affairs.

Have Adequate Life Insurance.

Not everyone needs life insurance. The only reason to have life insurance is to fill a financial need if you die. It may be taking care of your young children, college costs, or paying of a mortgage among other things. Check to see if the benefit is an amount adequate to fill your purpose. 

Related post:  How Much Life Insurance Do I Need?

Make the coming year better than ever by getting you finances in order. Slowly the economy is getting better. Learn the lessons it has taught us and carry them on into 2012.

The Business Platinum Card® from American Express OPEN

Audible.com Giving Away A Free Book For The Holiday Season

Audible.com is the website that provides quality and timely audio books for you to listen to on your computer or portable device. I have been using Audible .com for the last couple of months and really like being able to enjoy many books that I really don't have the time to sit and read. Mostly while in the car or at work I have time to listen to a book per week. 

For the holidays Audible.com is giving away the audio book, "The Adventures of Sherlock Holmes" by Sir Arthur Conan Doyle, to new and existing members till Dec 23 at 11:59PM EST. Existing members just have to go to the website and download it. If you are new to Audible.com, now is the best time to join.

Member Benefits:

· 1 audiobook per month
· Members save 30% on additional purchases
· Free previews, chapters and excerpts
· Free digital subscription to the New York Times or Wall Street Journal
· Invitations to exclusive member-only special sales and promotions
· Free daily audio newspaper subscriptions
· Now Over 100,000 titles to choose from
· Compatible with iPod, iPhone, BlackBerry and over 500 mp3 devices


When you sign up for membership you receive your first audio book free during the 14 day trial period. If you decide to not join you still get to keep the free audio book of your choice. If you join before Dec 23 deadline you get to also download the free Sherlock Holmes book.

Try Audible Now and Get A FREE Audiobook!


Further Reading : 5 Reasons Reading Books Is Important To Your Well Being