The Moment Of Clarity
Over the course of my profession as an Investment Adviser and Financial Consultant, I have had the privilege of working with a wonderful variety of clients. My work has brought me into contact with people of large financial net worth, high levels of income and many people who were just living on the edge. While I enjoy working with investors with lots of money to invest, I have particularly enjoyed trying to help those families who are struggling with finding their financial identity and the formula for long-term financial success.
Sometimes it amazes me how people can get into such disastrous financial situations. It is not unusual to have a couple with six figure incomes reach a point where they are on the edge of the financial abyss. Most of the time, the culprit is either excessive spending or excessive debt or, usually, both. Countless times, I’ve had to have that “come to Jesus” discussion with them where we walk together down the path to understanding. At the end of that walk, I get to witness them reaching the moment of clarity.
The secret to individual financial solvency is incredibly simple. You must spend less than you make. It is as simple as that. If your income declines, you must reduce your expenditures. If you wish to purchase a big ticket item such as an auto or a house, you must budget to make the payments, including reducing other optional expenditures. If your income is limited, you buy a used auto or a smaller house. Trust me folks, it is this simple!
Now I realize that unexpected expenses and financial setbacks can occur with anyone. That is why it is important to actually spend less than you earn and then save the difference as a rainy day fund or for the future.
After I get the couple to give me a detailed picture of their incomes and expenditures, we get to the moment of clarity or the “aha” moment pretty quickly. You can see the light bulb come on and can almost hear the brain screaming, “The reason we are in this mess is because we spend too much and borrow to support our lifestyle.” When we reach the moment of clarity, we have clearly reached the fork in the road where the couple decides to continue down the path to insolvency or takes the less worn path of personal financial responsibility. Thankfully, most of the families that I work with realize that there is no magical fairy sprinkling “hope and change” who will wave a wand and make their financial dilemma go away. They know that to economically survive over the long run they must change their ways and change it immediately.
This brings me to the point of this column. Government must simply learn to live within its means. For almost one hundred years, our Government has financed an ever-growing list of expenses by either piling up debt or by increasing income taxes. It has been lost on most citizens that the first Federal Income Tax was only one quarter of a percent. My, has that grown and grown! Our Federal Government has increasingly poked its budgetary nose into areas that our founding fathers could have never imagined nor condoned. In fact, our patriot fathers repeatedly warned about the dangers of a monolithic National Government. Or, as Ronald Reagan put it, “A government big enough to give you everything you want is big enough to take it all away.”
I fear that we have now reached the end of our National walk to enlightenment and the citizens and taxpayers of this country have achieved their moment of clarity. They now understand that our Nation can no longer permanently endure massive deficit spending. They understand that we cannot continue to pile up debt on our children and grandchildren. They understand that the economic well is dry and the average taxpayer has been bled of most of their wealth. Yes, there is a recognition that even a government that owns printing presses that can churn out an endless inventory of greenbacks can reach the tipping point.
The choice for the voters and for those we choose to lead is whether to continue on the path to our economic destruction, a well-worn path that treads through massive inflation and ends in complete social upheaval or do we balance our national budget, pay down our debt and save a little for the inevitable rainy days in our future.
I believe that the 2010 election will be written about by our historians as the day that the American people reached their moment of clarity on a National, state and local basis and spoke loudly, clearly and unmistakably about which path they want to travel. For the sake of our children and grandchildren, we owe it to them to “with all our getting, get understanding,” the moment of clarity.
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