Thursday, July 21, 2011
Let's say you magically find yourself in $10k in debt. Don't worry about how it happened, just suppose it happened. You can do a few things to get rid of it.
1) Spend Less Money - This is pretty self explanatory. In order to have more money to pay off your debts, you free up money you would otherwise spend to dig yourself out of a hole. For many people, this might mean getting rid of a car, downsizing homes, putting their kids in public school, doing your own hair, cutting your own grass, and eating out less. In short, the less money you spend, be it on obligations (rent, food, transpo) or luxuries (eating out, entertainment, smartphones), the more you have to pay off your debt.
2) Make More Money - Spending less isn't the most foolproof way of getting yourself out of a hole. Life still goes on, and any unexpected bill (car repair, medical issues) pushes you that much further away from financial freedom. You can speed things up by asking for a promotion, finding a weekend job (no small undertaking in this economy), starting a legitimate side bidness (blogging, cutting grass, doing hair) or hustlin' (selling weed, phone sex). Either way, this means more income, and thus, more money to dedicate to paying down your debt.
I don't really see any other choice here. You could borrow money to pay off your debts, but you're likely just trading one problem for another. You could default on your debts by filing for bankruptcy, but again, pick your poison. Not the best option either.
Of course, as I watch these continually silly deficit/tax/debt ceiling deliberations continue on, I can't help but wonder why those on the Hill (and in the White House) can't come to some simple middle ground that mixes a bit of options 1 and 2. Cut spending and bring in more revenue in the form of raised taxes. If this works for Real Americans, why can't it work in DC? This isn't rocket science.
Of course, you guys are experts in deficit reduction, so I'm sure you'll tell me why my analogy is flawed. Have at it.
Question: Is reducing the deficit really as simple as spending less and making more? Why not?