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It seems like talk about Congress raising the debt ceiling is reaching a climax. Apparently, our government has less than a week to decide whether it will raise the debt ceiling or we, as a country, risk not being able to pay our federal bills. However, when hearing all of this, it seems that our debt ceiling and the federal deficit become interchangeable in some conversations when they are actually two different terms that are related but not the same.
What is the debt ceiling?
Our debt ceiling is the maximum borrowing power of the government, which is currently $14.3 trillion.
What is the federal deficit?
The deficit is the amount that our spending exceeds our revenues and is estimated to be about $14 trillion dollars.
Although the numbers are the same, the difference is in the definition. The debt ceiling limits how much money we can go somewhere and get (in simple terms) while the deficit is how much we already owe. This is important because our government, much like its citizens, lives on credit. We borrow money from other countries and through the sale of bonds to pay our bills.
If we don’t raise the debt ceiling then the government won’t be able to sell bonds or borrow enough money to pay our bills. Although it is uncertain what will happen if the government fails to raise the debt ceiling because it has never happened before, we are at risk of having our federal credit down graded and having to cut approximately 40% of the federal budget.
I find this especially ironic because the average American has been battling with this issue, on a smaller scale obviously, for years. There isn’t enough money to pay your bills, you’re living on credit but eventually the bill comes due and you have to make some tough decisions. In some instances, you are able to borrow some money to get you by but eventually, you have to pay that money back also. So what do you? What should our government do?
The struggle, for the consumer and the government alike, becomes what do you cut? How do you prioritize what’s most important? Do you allow the stellar credit that you have built all of your life to become compromised or do you make some tough decisions? Is it wise to continue borrowing and disregard the effect that it will have on your future?
I am not educated enough on the intricacies of our government but I have three suggestions:
One of the main complaints that we all have with credit card companies soliciting teenagers is that they don’t deserve credit. The theory is that they haven’t earned the right to have access to thousands of dollars that they may not be able to repay. However, how many of us deserve credit?
I
t wasn’t until the prosperity years of the ’90s that credit became widely available. Before then, you had to have excellent payment history or lots of cash in the bank to access credit. Creditors were leery of allowing the common man access to its stash. This seemed to change when they realized that we are a consumer society. Studies have consistently shown that Americans spend more than they earn. It doesn’t take a rocket scientist to figure out that credit keeps us in that flux. We take no issue with buying a home that we can’t afford, driving a car we can barely maintain or wearing clothes that we never should have bought. Credit has allowed us to create a lifestyle that may be enviable on the outside but no one realizes the strain that paying these bills puts on our lives which essentially makes us a slave to our jobs. We can not enjoy the freedom of doing what we want to do rather we are forced to stay at jobs in which we are unhappy or defer our dream job which may not pay as much as we would like because we have so many bills.
Credit alone is not the culprit, instead it is the fact that creditors realized that the people wanting credit didn’t deserve it so they figured out a way to punish them for their selfish desires – interest. Interest is a complicated beast that can take over a balance and have it whooping your butt before the ink is dry on your purchase. If you are only paying the minimum payments each month, then you are essentially feeding the beast (interest) and starving the monster (principal). It may seem that the monster is being held off but the beast is growing and taking over your life.
I have nothing against credit, when used responsibly. It’s almost like a gun, in the wrong hands it can be deadly. Credit is actually necessary in our society. If you want to make a significant purchase, like buying a home or a car, then your lender will want to know how you have handled yourself in the past. They will be looking for your monster and your beast to be tamed in a nice little cage called “low/zero balance without an extraordinary amount of available credit”.
Every person should have at least once credit card, preferable a universal card like Visa, MasterCard or American Express, for emergencies. Opening your wallet and displaying a credit card collection like newborn baby pictures is not impressive. The more accounts you have open the more leery a credit may be about lending to you regardless of their balances. Imagine you have six cards with $30,000 in available credit and an annual salary of $40,000. You may only have a total outstanding balance of $4,000 but imagine some traumatic event happening in your life, a creditor’s worst nightmare is that you are going on a $26,000 shopping spree and never be able to repay your debts.
Not many of us deserve credit because we are selfish and materialistic. Rather than living within our means and using credit cards for emergencies, buying the best house with an affordable mortgage and choosing an economical car; we choose to be slaves.
Free yourself and pay down your debt so that you can enjoy life. Having a low or no debt lifestyle allows you to take advantage of jobs that you enjoy, allows you to save extra money for vacations and keeps you from dreading to open you mail.
Living young and fabulous is all about having freedom. Your money matters – it’s not about how much you make, but how much you keep.
I'm an Author, Blogger, Business Consultant, Minister, Host of The LaKesha Womack Show and Founder of The E4 Network.
I write and speak about a variety of lifestyle, relationship, religious and business topics.
My goal is to help you develop personally, professionally and spiritually because... You can have it all!
Check out my books on amazon.com
Is She The ONE?
Success Secrets for the Young & Fabulous
Building a Brand Without Spending a Bundle
My Money Matters (Adult, Teens and Kids versions)
