Saturday, March 5, 2011

The GOP is Right

One of the GOP’s regular talking points resonates with populist power.  “The government should manage its budget just like hard working families manage their household budgets.”  It has common sense appeal, and many of us can relate to having to make difficult trade-offs in life because some want (and sometimes some need) is beyond our ability to pay for it, either now or in the future. 

So I’ll join in the experiment, and imagine our government managing its finances just like my family would, and many of my neighbors do today.  It is not fair to compare government revenue to household revenue, since household revenue is generally fixed by salaries of the parent(s), and government revenue fluctuates based on economic conditions across the country and the globe.  We can focus on spending, however, and that seems to be the focus of today’s debate anyway.  Let’s see…

Our house needs new windows.  The old windows are unsafe for our children because they are heavy and they have a tendency to fall quickly and without notice.  The windows are no longer well sealed, and the drafts of cold wind from the outside are driving up our heating bills.  The cost of the oil to heat our home can fluctuate from month to month, and it is tough on our budgeting to predict the price.  We make the decision to buy the new windows, and finance the cost over a period of years.  While this puts our family into debt in the short term, it does reduce our dependence on the volatility of the oil bill, and better protects our kids from injury.  As an extra benefit, the value of our entire home increases more than the cost of the windows.  This is a good debt to incur.

We value our kid’s education, so we are saving money for college every month.  Since college could cost more than we have saved so far, we are prepared to incur some debt to finance part of their education.  Of course, we are open and honest with the kids that we will contribute towards their future in this manner, but part of the bill will come to them.  As beneficiaries of the great American college education, they will need to shoulder some of the burden, but we believe that a college educated child has a better long term earning potential than one without a college education.  This is a spending decision that will pay off for us as a family.

We need transportation to get to and from work.  We could consider moving into an urban area with public transportation available, but that has its own trade-offs, and it isn’t entirely cost-neutral.  We decide to buy a car, and regularly maintain that car according to manufacturer’s recommendations.  We want the car to last as long as possible.  There are times when paying for the next tune up puts us behind, but we realize that a repair bill would be far more costly.  It doesn't need to be the newest car, but it does need to be efficient.  Paying a little more up front for the most efficient car will pay off down the road. 

We contribute to charitable causes that our friends and family support.  If someone is running a 5K for cancer research or a bike ride for MS, we will allocate some dollars to these worthy efforts.  We know that it is important as contributors to society to be engaged in this manner, and our children need to know that no matter how tight things may be, supporting those in need during their time of need is worth the sacrifice.  We are not one family in isolation, but one family that is dependent on the health of the entire community.  These contributions may need to be reduced, but never completely eliminated.

We save money for our future health care expenses, knowing that it is inevitable that we will someday need health care assistance.  We pay the premiums as insurance protection, and live a lifestyle with smart eating and regular exercise.  We take responsibility for our own health, but realize that the insurance is mandatory.  I try to work for the company with the best health plan, usually the one with the largest pool of participants.

We believe as a family that the future belongs to those who have a creative streak and can synthesize information in new ways.  Rote book learning is a good foundation, but our kids need exposure to the arts to truly succeed and stand out in the 21st century.  Therefore, part of our limited household budget will go towards dance and music classes for the kids.  Some may see this as an extravagance, but we see it as a necessary part of raising a well-rounded generation of active, curious, lifelong learners.

We eat out at restaurants too often.  If we divert that money to grocery shopping and eating at home, the cost per meal is less.  We are not delusional – we recognize that money not spent at a restaurant doesn’t flow directly to our family’s bottom line.  We understand that the real savings is the difference between the restaurant cost and the grocery store cost added to our home infrastructure cost (heat, light, water, cooking utensils, etc.).  Eating at home is cheaper, but not as the full cost of restaurant meal.  We can cut here.

Home defense is an area where we can reduce our costs monthly.    We can buy better locks, and install better lighting around the outside.  An expensive alarm system might make us fell safer, but there are other, less costly ways to provide for our defense.

In short, we as a family understand the difference between good debt and bad debt, and we manage our finances accordingly.  We agree with the GOP that our government should manage finances with the same philosophy as our family.  Not all dollars within our budget are equal. And each cutting and spending decision does not carry equal weight. 

Our family financial future is a marathon, not a sprint.  We go up and down, debt rises and fall based on circumstances.  If we keep our eye firmly fixed on the end of the road, financial freedom, we will get there.  We also recognize that trying to get their by exclusively eliminating all of our spending is counterproductive, and ultimately the wrong course. 

Our family will invest in infrastructure and education, so perhaps our government should do the same.  Thanks for the advice, Republican Party!

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