Kicking The Can Down the Road Is Not Financial Durability

Posted On 8 October 2023

Last updated on April 4th, 2024

Canoosa Finance is not here to get into political debates – money is the topic. The US federal government avoided postponed a shut down due to the annual budget not being agreed on before the current budget expires. This is a great time to look at how we can increase our financial durability despite the federal government. We can also take this event and set ourselves up so that future events will have minimal impact on us.

You have probably heard (just I have heard) that government jobs are safe and secure. The question is, have we set up our own finances to be safe and secure? Just don’t compare yourself to the government!

Third Party Spending

The big problem with government spending is that they engage in what is known as third party spending. What is that? Let me explain.

First party spending is when we spend our own money. We try to be careful with our money and get a good deal. Money means something to us because we work hard to earn it.

Second Party spending is when we spend someone else’s money for them. Say our co-worker asks us to buy something for them. We still try to get a good deal, but it is not our money. There is a bit of slack in the care we give to the money or the purchase because it is not our money. Since we know that we have to answer to them, we do a good job.

Third party spending is when we spend an unknown person’s money. This is what government spending is. The main guidelines are the budget, the regulations, and not getting fired. The person who the money came from does not get directly answered to about the spending of that money.

Weaponized Money

Lately, it seems that the politicians have been using money as a weapon. It’s an easy way to show that the “other side” is not in agreement. No money means that the spending cannot continue.

The US has gotten to the point where the money is not the real issue. They can print as much as they like! Too much printing, though shows up as inflation. In 2020 we saw governments spending money like drunken sailors. Just as a sailor on a drinking binge will have a hangover, overspending (or printing) has its consequences.

Governments tends to subsidise what they want, and tax what they don’t like. Yes, their policies can help build wealth, or the policies can destroy wealth. It all depends on who benefits – the people or the elite.

Overspending Can’t Continue Forever

When a person is overspending, an early warning sign is that their credit card balance is increasing. A young person just getting started with credit can hit their $500-1000 credit card limit very easily. As long as it is getting paid off, no big deal.

A person with established credit that has credit card limits in the tens of thousands, should not ever get close to their limit. If they acted like the government, though, hitting their limit (debt ceiling) just means that they need to get the limit raised. That is not being financially responsible!

Debt is a tool that needs to be used with the same caution as fire. Used properly, debt should be used to build wealth – not to fuel consumption. The amount of debt can grow, but the amount of assets should be growing as well, hopefully faster.

Going Crisis to Crisis is a Red Flag

A major warning sign that a person’s finances are not solid is when they find themselves constantly going from crisis to crisis. Financial durability is the ability to make it through the occasional crisis.

The person who finds themselves regularly maxing out credit cards, being late with payments, or having to wait until payday, are not durable. They will find themselves almost always in a state of crisis.

Work Together

The government keeps running when the politicians can work with each other. They don’t have to like each other – just be able to work with each other! For us to build financial durability, we need to work with others.

We need to communicate with our spouse about our finances. Talk about any changes that need to be made. The best time to fix things are when they are going well. If things aren’t going well financially, money must be talked about with each other.

If a person is struggling financial, they need to talk with their creditors. Often, arrangements can be made. Be open and honest with people and businesses. If you need, get professional advice.

A Full Pantry

At Canoosa Finance, the 1-Up System has been written about. That is a simple way to maintain a well-stocked pantry. When there is an item on sale that you regularly use, buy an extra one.

When we have a well-stocked pantry and freezer, we have food for a while. At the same time, we should have an amount of food that we can rotate through before it expires.

Should there be a disruption in our paycheck, a supply chain problem, or an emergency, we will have food to eat. Panic shopping doesn’t happen if a person is always stocked up.

An Emergency Fund

It amazes me that around 50% of Americans are not able to cover a $1,000 emergency with their savings! That’s not to say that they couldn’t handle an emergency, they just couldn’t do it with cash.

An emergency fund should be 3-6 months of expenses in the bank. That may sound like a lot, but if a government employee has to keep working during a shutdown, how fast would that money be spent? I know that the employees get paid at the end of the shut down, but what do they do during the shutdown?

Even with a safe and secure job, we don’t know what will come our way. We need to do what we can to protect ourselves and increase our financial durability. Even with the safety nets that the government has in place, we need to make sure that we have the durability to survive.