The Secret To Avoiding Debt

calculator-260x183As the so-called “fiscal-cliff” looms, Americans are scratching their heads wondering how we got into this situation.

I’ve offered an answer to that question in another blog post, On The Debt Crises. That post begs the question of how Americans can avoid debt.

I grew up in an upper middle-class family. There were families who had more and those who had less.

Since then I’ve had periods in my life when I didn’t have a lot of money and times when I have.

When I was in law school, I didn’t manage what little money I had very well and as a result brought a lot of credit card debt into our marriage. My wife and I decided to deal with it and our other debts early on.

Continue reading “The Secret To Avoiding Debt”

Musical Chairs

Perhaps you’ve been following the Greek debt crises.

Greece has been teetering on the edge of bankruptcy for the last three years. A few weeks ago the Greeks elected new politicians in a reaction against austerity measures they previously accepted as a part of a deal to borrow more money from the European Union.

The European Union was initially reluctant to offer a bailout, but now they are all in, and Greece, like a petulant child, has shown its appreciation by deciding after it took the money that it doesn’t want to take its medicine.

Greece’s profligacy is not the EU’s fault, but it is now their problem.

We face a similar problem in the USA. Greece’s public debt was 152% of their Gross Domestic Product in 2011. Their 2011 government expenses were approximately 120% of their revenues. American public debt was nearly 100% of Gross Domestic Product and expenses were 150% of revenues in 2011. Continue reading “Musical Chairs”

On The Debt Crisis

As the negotiations over the U.S. government budget drag on, I alternate between anger and indifference, anger because I understand the motives that got us into this crises, and indifference because I know how it will end.

Our government is in a budget crisis because it has repeatedly violated the most fundamental of financial principles: Don’t spend money you don’t have.

The choices now are so unpalatable neither political party can agree on who should take the medicine.

Americans, however, are in no position to blame their politicians for this mess.  In a democracy, people generally get the government they deserve.  Our government is in debt because the people it governs don’t believe there is anything wrong with debt. It’s no coincidence Americans are more indebted than ever at a time when the government is posting record debt and budget deficits. Continue reading “On The Debt Crisis”