I'm not American. I'm Canadian, which is almost the same thing, but not quite. We add silly "u's" in words like favourite and colour. Our government pays for our health care (which I don't think is an ideal solution, either; I think the ideal mix of public/private has yet to be found). We say "out" and "about" and "roof" funny.
But most of all, we haven't had to bailout our banks. Our economy is actually very strong right now, though we're hurting just like everyone else. But of all Western countries, we're probably doing the best! So if any of you want to move up here, feel free!
Anyway, I am watching what is happening in the U.S. right now with all the bailouts with a mix of shock, incredulity, and just plain fear. And then I turn to God and remember that difficult times are to be the norm, and when we are weak, then He is strong.
I want to talk a little bit today about personal responsibility. I'm going to touch on the bailouts, because I think they matter, but on the whole I believe in certain immutable laws of human nature that God put in place: you reap what you sow. If you make a bad decision, bad things will happen. That's just the way it is. We may not like it, but that's how life works.
In our personal lives, it is extremely important to act responsibly. I've talked about that ad nauseum on this blog when it comes to parenting, getting kids to do chores, being strong in your marriage, keeping your relationship alive, overseeing your children's education, and more. We are the ones who primarily determine the course of our lives.
That's why we need to budget appropriately. Credit card debt is a horrible thing. It enslaves you to too high payments and makes you live a lifestyle you ultimately can't afford. All of our expenses need to stay within our means. Perhaps that means that you can't afford a house and you rent for a time. Perhaps it means that you don't have a flat screen TV, that you live with thrift store furniture, that you only have one car (or none at all). This was the case in our family for the first seven years of our marriage. We lived very frugally and managed to save tens of thousands in those years for a downpayment for a house. We could have lived in a better apartment, and we could have bought a car. But we didn't so that we could save up for a house.
What happens if you decide to buy that house too early? You end up owing too much. And the mortgage payments are too high because you didn't have an appropriate downpayment. So you have to borrow from credit cards to meet your monthly expenses. And once you have a house, you have to decorate and furnish it appropriately, right? So you buy all this stuff on the "don't pay a cent for one year!" deals, and then you commit yourself to major debt, even if there's no guarantee that your income will actually increase. You just get further and further in debt. You may look like you have it good on the outside, with a nice house, but your net worth is negative. If, on the other hand, you live frugally, you may look like you're poor. But you're actually further ahead, because you're managing to save.
At one point this was all common knowledge. This was how everybody lived. Today we don't. It's like that Steve Martin skit from Saturday Night Live, "Don't Buy Stuff You Can't Afford". They've taken it off YouTube, so I can't link to it, but here's a remake:
The reason that's funny is because they make something that is pure common sense sound revolutionary--because today it is. We have lost that sense of perspective.
With the bailout, what Obama is essentially doing is saying that all these people who bought homes when they shouldn't have need help, and we have to help them. So that family that has been living frugally in an apartment and saving is now going to help pay the mortgage of someone who bought a house that was too big with no plans to pay for it. That hardly seems fair.
The argument is that the effect on the economy of doing nothing will be worse than doing something. So we have to intervene, even if it sounds dumb.
But is that true? I'm not an economist, but one thing I do believe is the markets, and here's why. TV news reporters and journalists can talk about what a great deal this bailout is. They can talk all they want about how Obama is bringing hope to the nation. But the way to actually tell is by looking at the markets, because in the markets real people put their money where their mouth is. And the stock markets are essentially people betting on the future: they're buying and selling based on what they think will happen down the road. And right now the markets are tanking. They fell 500 points when Obama was elected. They keep falling everytime he talks about another stimulus. And they've lost 20% since the election. Here's an analysis of that that's pretty easy to understand.
In other words, journalists and the chattering classes can talk up the bailouts all they want, but the people who actually have to invest in the economy aren't buying it. They think it's making it worse. And I believe it will.
You're throwing good money after bad money. These people in these homes have already shown they can't afford them. How is helping them out in the short term going to solve that? And if they simply let those mortgages foreclose, yes things would be tough--but likely only for a short while. In the meantime, housing prices would fall to where they should be, and people would start buying again, like those people living in that apartment who have been saving responsibly.
It's the same thing with the bailout to failing industries. These companies have already shown they can't handle money. Why give them more? Yes, it will be a shock if those companies go under. Yes, people will hurt. But then the resources and the people would be moved to a more profitable sector of the economy.
But there's another aspect to all this. As a Canadian, our deficit is quite small. We've been paying down our national debt lately, and it's only 20% of our GDP. The American debt is now 50% of your GDP, and that's before factoring in the trillions in bailout funds. Your deficit stands at about 10% of your GDP.
Why is that important? Well, have you ever been in a position to have paid off your house? What a feeling! It's like winning the lottery! Because all of a sudden you have $1200 or $1500 or even $2000 more money a month, because it's not going to mortgage payments!
By contrast, when we add to debt, every month we have to make massive payments to support that debt, even if all we're paying is interest. The higher the debt goes, the less America will be able to spend on normal government expenditures as time goes on. More and more will have to pay down the debt. And that's our children and grandchildren who will be primarily on the hook. There won't be social security or medicare for them; the country simply won't be able to afford it because it has to pay back all this money. We eventually do have to reap what we sow.
Responsibility is the cornerstone of a healthy society, and right now, whether it's at the individual level or the government level, our society is showing very little of it. And that makes me very, very scared. And very glad we have a God to run to who is above all of this!
So as we're going through these rocky economic times, can I make a few suggestions?
1. Pay off your debt as quickly as you can. Do not go out to eat. Do not buy stuff you don't need. Get yourself on as strong financial footing as you can. Downsize if you have to. It's not nice, but try it.
2. Start saving. You never know when unemployment will hit. Make sure you have a cushion.
3. Research small businesses you can start. Often small buinesses are more stable during a recession than a regular job, where you can be laid off. A small business is more adaptable to the market. Raise your children to be entrepreneurs, so they aren't dependent on others.
4. Learn how to garden! At least if things get really bad, you can grow your own food! Plus, boy is it tasty! And it's fun for kids.
5. Pray, pray, pray. We need God right now. That's the good thing about tough times; they push you back to your Maker. So get close to Him, rest in Him, and know that He will always care for you.
And next time it's time to vote, think carefully about responsibility. Only vote for those who believe in it, of whatever party.
Thank you for listening to my rant! Have a great weekend!
In my column last week I wrote about the jar system of budgeting--it's really as old as time. You divide up your money that you have to spend each month into different categories, keep them in jars, and then only spend what's in the jar. Presto!
I received an email back from a reader of my column asking me to explain the jar system in more detail, because they're in debt and she wants to get out of it. So my Works for Me Wednesday post is all about getting out of debt, and budgeting properly!
Here's what you do. Figure out your income. Calculate your take home income on everything you make, and try to maximize that as much as possible. Can you baby-sit some kids a few times a week? Can you help your husband work overtime if possible?
Now figure out your expenses, in this order. First comes tithing. 10% off the top. It's always fun to have a family meeting each month and figure out how to dispense that money, if it's not already being given automatically. It's fun to give stuff away! And if you think you don't have the money for it, you're wrong.
A friend of mine told me that she and her husband have only begun to truly tithe in the last few years. But since they have, the money has never run out. Last week they found out that the husband, who has been taking seminary courses in a city three hours from us, is going to have to stay over an extra night a week to finish up this year. That's an extra hotel, and extra meals. About $150 a week.
They were quite scared, because money is tight. But the very next day they received a phone call from his work saying that they had made a mistake on his pay to the tune of $600 a month. Problem solved.
That doesn't always happen, but I've found that it frequently does. So tithe first.
Now you want to save, right off the bat. I recommend at least 10% in that, too. Your savings may be going towards debt repayment, but try to take out a good chunk every month to bring that debt down as quickly as possible. And take the money out at the beginning, not the end.
Now you have your remaining money. Figure out what is necessary to spend: rent, car payments, insurance payments, utilities, etc. Put this amount on a piece of paper in one jar marked "necessities".
The rest of your money is your disposable income. Take it out of the bank so you actually have it in cash. Don't spend using a debit card if you're heavily in debt, because it's easy to lose track of stuff. Cash you can't lose track of. Let's say you have $700 left. So how are you going to spend it? Figure out what your categories are going to be. I'd recommend food, entertainment & outings, health & beauty, clothes, transportation, kids' stuff, gifts, and whatever else you may think you need. Allocate reasonably.
Some of those jars are going to have hardly anything in them. It's going to be depressing. But do it. The clothing jar may only have $15 in it, but every month you can add to it until you can afford to buy some stuff. Similarly, the gift jar is one that's going to have to be added to every month so that when birthdays and Christmas roll around you have some money on hand to buy stuff. But you don't want to blow that all in one month, because you're going to need it on an ongoing basis. And the transportation jar is important, too, because it reminds you that taking the car everywhere may not be such a great thing to do. Can you walk a bit? If it's within 25 minutes you probably can, and that gives you exercise as well!
Last week when I was speaking about ten women who stopped by my book table paid in the same unique way. They pulled an envelope out of their purses and took the money out of their. I could tell that they were using the jar system. When they leave the house, they take the money from the jars and put it into separate envelopes in their purses, and that's what they get to spend. So everything is already budgeted.
The good thing about the jar system is that you know you won't overspend. You have to make those dollars stretch, and it reminds you how much you have. It teaches us to be really careful.
But it also takes away the guilt. You don't have to feel guilty for every Starbucks coffee you spend, if you've been careful this month and it's left over in the jar. It means that you do have money for that coffee. And you know you do! You're not just mindlessly handing over your debit card and hoping for the best.
When we started the jar system with groceries I couldn't believe how much I spend without thinking. When we had to budget, my shopping habits changed considerably. And for the better.
Budgeting really only works, though, if you take those big things off at the start. Give the money away and pay down your debt first. Don't wait to see what's left over at the end of the month. Make those things your priorities, and you will feel richer, because you are acting more wisely and more responsibly.
I hope that helps! And if you don't want to go all out with the jar system, why not at least try it for groceries? That's often our biggest expense when it comes to our disposable income, and if you get that under control, you'll feel better already!
Thanks for stopping by! Why not look around a bit? I've got posts on marriage, parenting, and more!
As women, one of our primary responsibilities in the home is to be responsible with what we have been entrusted with.
That includes our kids, obviously. We should raise them, discipline them, teach them to be independent, and teach them about God.
It includes our homes. We should care for them appropriately (make them comfortable, not perfect), invite people over, and ensure our family members have a good place to relax. And by the way, that means you, too. Make sure you have candles by the bath after a long day!
And we should be responsible for our money. A big theme on many of the mom blogs I read is learning to live within your means. It's practical, biblical, and necessary. And I love the comments on my previous post! You moms obviously get that. And feeding a family of 6 on $325, as one woman wrote! That's awesome. (And yes, someday soon I will share more about the cloth pads, since you asked :) ).
But in the past few months we've witnessed the federal government and the Democrats running for President talking about the need to bail out those homeowners and banks who took on risky mortgages. I don't understand why we want to penalize responsibility and reward irresponsibility.
With that in mind, I loved McCain's speech early this week on the crisis. Here's a part of it:
I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.
But read the whole thing. I think there's an important principle there for us who want to make sure our kids have a solid financial footing as they grow!
And for all those who were responsible and didn't take on a risky mortgage, I'm sure you would like to see housing prices fall back down to a reasonable level, right? Well, they won't if the government bails out these mortgages.
I find the whole thing tremendously sad, because I do feel badly for those who made a poor decision and now may lose everything. But at the same time, that's the way the world works. And the sooner people realize that, and learn to live on a budget, the better it will be for everyone.
About Me: I'm a Christian author of a bunch of books, and a frequent speaker to women's groups and marriage conferences. Best of all, I love homeschooling my daughters, Rebecca and Katie. And I love to knit. Preferably simultaneously.
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I received an email back from a reader of my column asking me to explain the jar system in more detail, because they're in debt and she wants to get out of it. So my Works for Me Wednesday post is all about getting out of debt, and budgeting properly!
