On McCarthy: Obligations Now, Spending Later

Everyone is trying to suggest Speaker Kevin McCarthy rolled over on the debt ceiling debate. Maybe he did? Maybe he didn't. The thing is, getting anything agreed upon on any bill is a tough thing to do on its own. It's when we throw in all these add-ons and ultimatums that we get all tangled up, and processes take longer or shut down.

The key issue, in my opinion, regarding the debt ceiling is that it is about money already spent and making sure we honor our debt obligations. We have to pay our bills regardless of the reality of out of control spending. 

You can't go to Discover and say, "Let's hold my payment until we can talk about spending less." That's just not how it works. You spent the money, the bill has come due, and you have to pay it. Even if the spending was irresponsible or out of line.

McCarthy does assert that the dems are onboard with furthering the discussion to include some welfare reforms, cut spending and slash IRS funding. Who knows if they will actually be onboard when the real debate begins. 

Nonetheless, I think all of these are important issues and I truly hope McCarthy can bring these items to the table.

But the point is that that's the time to have the discussion. Before future spending occurs. And we need to stop just talking about cutting spending, but actually do something about it. That's where we always get stuck. When the bills come due and the other side wants something we use it as a tool but once all is said and done it's back to business as usual.

Almost as if the government is simply playing games with the American people to make the appearance they want to cut spending. If they really did then the issue would not come up nearly every time the bills come due and we have to raise the debt ceiling.

Because we spent too much, again.

Even when Trump threatened to shut down the government, I thought that was a wrong-headed approach, and I am a strong Trump supporter. To me, it serves no purpose to default on our obligations and shut down the government. It doesn't help any American if that happens. And beyond that, it does nothing to actually curb spending.

To further call for McCarthy's ouster for coming to some terms around the deal, I think, is wrong-headed.

Beyond that, the animus from our side, against our side, against McCarthy is just more of the same problem republicans always have. We simply have trouble rallying around and uniting as a party. Debt ceiling aside, it kills us in elections.

We already have an uphill battle to win seats and offices as it is. When we can't unite, the other side wins by default a lot of the time. And beyond that, it's fodder for the other side and its accomplice media to spread the news that our party is in chaos. It never looks good for us. 

Say what you want about Nancy Pelosi as Speaker, but no matter what she did the democrats stuck by her side come hell or high water. Regardless of what you think about McCarthy, I think our side needs to do the same.

Because while McCarthy might not be our "winner," so to speak, if we can't rally behind him now, how are we going to be united in 2024 to win back the White House? Because one can argue that because we have such animus toward certain candidates, if we don't go to the polls to vote for whoever the nominee winds up being, it may as well be a vote for the other side to win.

Frankly, the bottom line for me is this. We're being way too hard on McCarthy. We need to give him a chance and cut him some slack and stop fueling discussions of infighting and chaos that the democrats can use as a reason NOT to vote republican in 2024.

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Taking "Pay Yourself First" One Step Further

The age-old adage in the art of saving away a few bucks for a rainy day and beyond, pay yourself first, is still one of the best ideas to not only plan for, spend around, but to also live by with absolute determination and commitment. For years I have advocated what I like to call the 80/20 rule which basically states that you only live on 80% of your means, and save and invest the 20% you don't need. These days the amount I save is actually higher since the 20% affords, eventually, an increase in your means through dividends, capital gains, and other things that the money "in the bank" tends to generate.

Money makes money is another thing everybody says, but that is also absolutely true.

Something that I find often gets overlooked in all of these concepts surrounding saving money is actually a very important factor that can, if not considered, eat away and terribly counter a great deal of the effort you put into your savings commitments.

The COST of money.

Where this factor is most encountered, it is when we are dealing with how we manage and use credit. Most people who understand credit also understand that there is a difference between good debt and bad debt. Naturally there are some people who will tell you that there is no such thing as any good debt. I am not in that camp. By my definition good debt is debt which leverages an  appreciating asset such as your home. In this instance the cost of the debt is typically negated by the appreciating value of what has been financed. Bad debt is debt that is used to leverage depreciating assets, such as a vehicle. But even I am guilty of making use of this kind of debt—although I do everything I can to minimize the impact. For example when my wife and I purchased our Ford Edge a few years back we put down $10,000 to keep the monthly payments down and reduce the overall interest we would pay. I did the same thing recently when I replaced my old Ford Sport Trac with a newer Ford F-150 and laid out $14,000 cash at the bargaining table.

But the worst debt is the credit card.

Credit cards can be used in ways that actually help you toward your savings goals. For example, I use a Discover card which pays me cash back on every purchase. The trick here is to pay the card as you use it otherwise the cash back rewards are really worthless.

But rather than use credit cards, and finally we're getting to the meat of what I meant when I said let'syour own line of credit? I call this little concept the Credit Savings Account, or CSA. Key here is that if you are following strict savings plans, there should be plenty of money sitting around somewhere that you can allocate to a "credit card" where you are your own bank. My CSA sits in my checking account and when I use it, it is as simple as swiping my debit card.

take the concept of paying yourself first one step further, why not simply establish

And by the way, this is a great way to also avoid overdraft fees, and WORSE, paying for overdraft protection which is absolutely a total waste of money.

Here is how I set up my CSA:

• Establish an amount to fund the account with and determine this to be the credit limit.
• Establish a day each month when you will make payments. Mine is on the 20th of each month.
• Establish an interest rate you will charge yourself. This can be whatever you want it to be. I typically charge myself anywhere from 15%-29.9% depending on the balance, but I never pay myself less than 15% interest.
• ALL INTEREST PAYMENTS MUST BE EITHER PUT INTO SAVINGS, OR USED TO INCREASE THE CREDIT LIMIT. THIS SHOULD NOT BE SPENDING MONEY.
• Establish a minimum payment based on at least 3%-5% of the balance. But of course you can repay yourself any way you want.

When I calculate the interest I don't bother with how credit card companies actually do it, using daily periodic rates and average daily balances etcetera. But of course if you want to you can do it this way—but it is naturally much more time consuming. Here is an example of how I will determine my payment and interest:

• Balance ($300) x 15% interest =  $45 / 12 months = $3.75 (this is my interest charge). Balance ($300) x 5% minimum payment = $15. In this example I will pay $15 on the 20th (my due date). Of the $15 I will apply $11.25 to the principle (balance) and direct $3.75 to interest (which will be deposited to my savings).

There is a caveat here. When you set up this account for yourself you must avoid playing games with yourself, such as forgoing making a payment, or playing around with the interest you charge yourself. This will foil any benefit a CSA will afford you. You are the banker. Act like one and fiercely demand payment and interest, and penalties when you don't pay.

Establishing a CSA takes paying yourself first one step further because it will accomplish two very important things. 1) it will force you to save more money away and 2) it will reduce your cost of money since you are using the CSA in lieu of traditional credit cards.

Perhaps even when I bought my vehicles I should have simply paid cash and set up a loan for myself.

Hmm. Something for me to consider on the next set of wheels I think. Let's keep our fingers crossed that Ford doesn't actually come out with a new Bronco or I may have to revisit this idea sooner than I would like.