Running Your Personal Finances like Congress is Supposed To

by Evan

I know you may not believe me but Congress is supposed budget itself.  I know all you hear about is how Congress isn’t/won’t/can’t keep within a budget.  However, they should be at least according to rules set in place by President Bush (#41) and re-ratified by every President since (Including W. and Obama).  Regardless of how you feel about PAYGO the issue is whether you can apply this strategy to your personal finances?

What is PAYGO?

According to The Tax Payer Center,

PAYGO, which stands for “pay-as-you-go,” is a budget rule requiring that, relative to current law, any tax cuts or entitlement and other mandatory spending increases must be paid for by a tax increase or a cut in mandatory spending. The legislation must be paid for over two time periods: 1) the period of the current year, the budget year and the ensuing four fiscal years, and 2) the period of the current year, the budget year and the ensuing nine fiscal years.

While Paygo is the law, it is more or less one with absolutely no repercussion if broken.  Congress is on a spending spree with really no end in sight.  Notwithstanding whether you agree or not PAYGO, if applied to your personal situation may help you avoid a deficit.

Applying PAYGO to Your Personal Finances

I don’t really budget (J please don’t hate on it).  Even before the credit card debt was eradicated I didn’t feel the need to track every last penny.  Instead The Wife and I came up with a list of fixed expenses and would try to make sure those expenses were set up efficiently.  For a recent example – not paying full price for Sirius Satellite Radio.

If one were to strictly adhere to PAYGO rules in their personal finance world they may slow down lifestyle inflation because every purchase/new expenditure would need to be justified.  Maybe justification would be the increased income, however, you’d then at least have an idea as to where your raise went OR you’d have to reduce other expenditures.

I think I may be on to something!

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8 comments

Mandy June September 7, 2010 - 3:56 pm

I am totally like you and your wife. I don’t write down every single penny spent but I do like to have an overall idea of where and how much my money is going towards something. I think budgeting overall is just much more efficient than tediously tracking your every cent.

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Joe Plemon September 8, 2010 - 3:06 pm

I figure that PAYGO was written by a lawyer (slight dig), but I read it several times without understanding the four years and the nine year clauses. Nevertheless, obligating how new purchases are to be financed would probably help most peoples’ finances. I love your cartoon…PAYGO has to be a big joke for government.

By the way, I, like you and Mandy Jane, am not uptight about tracking every penny in our budget. I have a budget, but it is structured to keep our finances on track without getting ulcers over details. We are in this for the long haul and would never stick with being overly anal about details.

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Evan September 13, 2010 - 11:07 am

The ulcer it would cause you would certaintly destroy the budgeted amount for restaurants lol

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Jesse September 10, 2010 - 1:32 pm

Your budget sounds a lot like the Conscious Spending Plan that Ramit Sethi creates in his book I Will Teach You To Be Rich. It’s something like what I do as well. We run on a checks and balances system with a fluctuating budget for every category we spend in, and try to make sure everything comes out balanced at the end of the year.

Budgets are like consciences: The more you ignore one, the easier it gets.

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Evan September 13, 2010 - 11:08 am

I didn’t read his book, but I freaking love that guy’s blog.

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Betty Kincaid September 11, 2010 - 9:38 pm

Evan,

Even PAYGO is a cheat. 9 years to pay off today’s debt? That’s crazy.

If you really want to build long-term wealth do the opposite of everything the government does.

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Evan September 13, 2010 - 11:08 am

“If you really want to build long-term wealth do the opposite of everything the government does”

Hmmmm I love it! Thanks for the post idea.

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Betty Kincaid September 13, 2010 - 11:18 am

I can’t wait to read it. 🙂

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