The U.S. budget crisis grabbed a lot of headlines. But if you want to keep your finances healthy, you can’t make the same mistakes the government did.
For example: Don’t spend what you don’t have! The U.S. government brings in about $2-trillion dollars a year, but they’re over $14-trillion in debt! Financial planner Mark Singer says that’s like earning $100,000 a year, and having $700,000 on your credit cards.
Another lesson learned from the budget crisis: Cut your costs, and find other sources of income. Governments can cut spending and increase taxes. And you can do something similar. Say by brown-bagging your lunch, canceling your cable, and getting a second job. Or by turning a hobby into a side business, or selling things you don’t need anymore.
Next: Restructure your debt. Currently, it’s costing the U.S. government 40 percent of their income to pay down their debt. But if you had to spend 40 percent of your paycheck on old bills, you’d never get out of debt. So, see a credit counselor. They can sometimes negotiate with credit card companies to lower your payments, or even reduce the total amount you owe.
The final, most important lesson you can learn from the financial crisis: Don’t get into debt in the first place. That means: Spend less than you earn. Save at least 10 percent of every paycheck. And pay cash – because you can’t get into debt that way.