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The following is a guest post by a good friend of mine who owns his own accounting firm devoted to serving non-profit organizations. He’s always provided me with wise counsel and I hope to include more of his writings for you in the future. -Aaron
If you follow the pressing issues facing our nation these days, you are certainly aware of our economic problems. Unemployment rates are rising, economic growth is stagnant, and personal net worth is falling. But chief among our country’s economic problems is a budget deficit that now exceeds $15 trillion.
As this troubling issue is debated, this helpful, clarifying question has emerged: “Do we have a revenue problem or a spending problem?” In other words, is the country not taking in enough revenue or are we spending too much? Simple question, right? (Quick answer: our country has a spending problem, but that is not the point of this article.)
While pols debate this question, it occurred to me recently that this very question is fitting for individuals and families who face budget challenges.
Every few months, my church hosts a festival that provides services to our neighbors. While at the “Financial Counsel” table recently, I was approached by a man who was not making ends meet. I asked him a few questions about his income and his life situation to get an idea why things were not working out. A quick review of his income seemed to indicate that he had enough coming in to meet his needs.
We then reviewed his expenses and the problem quickly surfaced. Among the monthly cash obligations was a payment for a new car he had just purchased. He lived in the city and was unemployed– did he really need a car? Yes, he said, because he occasionally has some work in the suburbs. Was there a more economical way to get to the job? And, if he needed to own a car, did it have to be a new car? Did he realize that the costs of the car payment, the insurance, the license and the gasoline were destroying his budget?
I don’t know if our 15 minute conversation convinced him. But if he is unwilling to make a difficult decision regarding the car, his budget will continue to be stressed.
When a budget is not working out — whether it is the nation’s or your’s – bring some clarity by asking if it is a revenue problem or a spending problem. If you aren’t sure, confide in a trusted friend or financial coach. And if it is a spending problem, you’ll need the courage to make some difficult decisions.
Putting off these tough choices will only lead to greater problems – such as a $15 trillion deficit.
David Osborn, CPA (inactive) founded CFO Business Partners, a Minneapolis accounting firm in 1994. CFO provides a wide variety of accounting services to non-profit organizations and churches. He provides one-on-one coaching and consulting as well.