I agree with most everything Dave Ramsey says in regard to personal finance. He’s helped thousands and thousands of people pay off their debt and reach much more stable financial footing. I wish he would give me 30 minutes to show him YNAB.

Anyway…

I received a newsletter from him yesterday: “Breaking News on the Government Bailout Plan”

It had steps each of us should take in regards to the plan. Before we get into it it, let me back up for just a second.

I’m no political scientist, economist, academic…but I’m becoming increasingly worried about the US debt load. I’m not nearly as smart as all of the people in all the rooms in Washington, but despite a lot of respected people telling me that we absolutely must get the $700B bailout plain through…it just doesn’t sit right with me. That $700B is all borrowed. We’re talking about more debt. A lot more.

A lot of families finally face their breaking point because their required obligations consume so much of their available funds. The US Government’s budget, for the most part, is not discretionary. It’s tied up in debt and other welfare obligations. We’re losing our “wiggle room”. We scream and holler about earmarks, and McCain says he’ll, “make them famous” when he vetoes the earmark spending…but that’s such a small amount compared to our much larger obligations!

Obama’s quick to point out just that. Yet at the same time he also seems very much in the direction of more overall spending, not less.

Either way, both of these guys, at least from what they’re saying right now, are not very budget-oriented.

Oh, how I wish they would all operate following Rule Two.

They’re not. And they haven’t for years. And the spending has simply skyrocketed — some of it perhaps justified — but then, as I type that I think about how you can justify pretty much anything these days.

My number one concern is the spending. Remember the family that finally can’t meet all of their required obligations? They declare bankruptcy. We don’t want to have to do that. What will happen when our creditors decide they don’t want to give us any more credit?

Why couldn’t we start allocating some funds toward paying down our national debt? I miss Ron Paul. Not that I was ever some huge supporter of Ron Paul, but his record in the house shows that he never once voted for a budget that included a deficit. That guy understands zero-based budgeting!

So there’s my brain dump on why I’ve just had this sick feeling regarding the $700B bailout plan. One side of me hears the doomsday (media) folk telling me the sky will truly fall, and my beautiful country will be destroyed, and that we absolutely must pass the bailout. It didn’t pass, so the parties started blaming each other. And I’m sure if it did pass and then didn’t work, they’d blame each other again.

The media leveraged the biggest point drop in the history of the DJIA to really toy with my emotions. Actually, I wish I would have had $3k in my brokerage account to drop in the market Monday evening, just like Flexo did (Well played Flexo! I hope you picked it up at the bottom and already pocketed profits. Annualize that return for me…it’s gotta be big).

To be honest though, the drop we saw Monday didn’t even rank as one of the top ten worst drops (percentage-wise, which is obviously a smarter benchmark) in history. But MAN! Everyone was talking about it! We were all in a frenzy. What did the market do the next day?

Now, the markets open in two minutes on the east coast, and who knows what will happen today, but did you notice the difference in media coverage on the big recovery the next day? I’m not saying the stock market has been some gleaming beacon of ROI in the past several years, but that swing down and then quite a ways back up is notable.

Why did the markets do that? They panicked, and then got about their senses, and realized they’d overreacted perhaps just a little bit.

But during that panic, we were all thinking the sky would fall and we’re thinking Oh my gosh, we have to act now or the country will crumble! and in that frame of mind, we’re supposed to decide how to fix things?

On the micro level, that’s why I tell people to have their Buffer (one month’s expenses) in place. That gives you some breathing room and prevents a panic attack when you’re right in the thick of some horrible event. In government, we like to think we have no breathing room (and in actuality, because elections are so close, the timing of all of this is great — politicians are forced to make a hard, hard decision with election right around the corner!).

But back to this spending…it’s just got to stop. We’re literally mortgaging away our capital one bite at a time. Warren Buffet said it best in his Annual Report in March of 2005:

As time passes, and as claims against us grow, we own less and less of what we produce. In effect, the rest of the world enjoys an ever-growing royalty on American output. Here, we are like a family that consistently overspends its income. As time passes, the family finds that it is working more and more for the “finance company” and less for itself.

I didn’t realize this post would be so long — it was supposed to just be about Dave Ramsey’s common sense approach to the bailout, and here I’m going on some tirade. Sorry. I only wanted to make clear what was rubbing me wrong about the bailout idea from the get-go.

As soon as I received this newsletter and read the plan, I sent it along to JLP to see what he had to say (I trust JLP’s opinion on these things and like that he doesn’t beat around the bush). He said (and I quote), “I LIKE it!”

Here’s the skinny, straight from Dave Ramsey’s newsletter:

1. Read the Common Sense Fix
2. Copy the text and
3. Send it to your representatives and senators.

Someone please chime in here if you see a problem with this approach. I liked it. I’ll readily admit that our financial regulation system needs some serious updating, but I don’t think the time to do it is now when we’re all in panic mode. I don’t want to talk about parties or who’s to blame (as if this could all be pinned on one particular person or thing, I could name a dozen just off the top of my head).

I recognize this is probably my most political post I’ve ever written, but it honestly doesn’t feel very political at all. It’s about budgeting, right? I mean we’re talking about our money here and we want to make sure it’s doing the job we want it to do, right?

I do hope beyond hope that we can break away from the days of spending without regard to the future obligations we’ll owe — and I’m talking about it on both the individual and government level, including everyone in between. I do hope it doesn’t take another depression to teach us that lesson.

I wholeheartedly believe in the American Dream.

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