By the time this blog comes out, we would have hopefully seen the conclusion to the United States’ partial government shutdown and inadequate debt ceiling.
The economic issues facing the United States are very complicated to say the least and this blog is not a venue for dissecting it. I would rather focus on how such a shutdown can be faced by an ordinary household.
A high maintenance household or one that has a lot of fixed (non-discretionary) operating expenses will always need to be in high gear when it comes to earnings. Such a state can be highly stressful and lead to greater problems like health issues. An alternative way is to focus on expenses.
One way to lessen fixed expenses is to cut variable operating expenses that appear to be fixed. Examples would be to lessen or reduce the: a) use of expensive to operate appliances like the air-conditioner, TV and even electric fan; b) use of family car; and c) number of household help.
Another way is to sell those assets that are causing the high fixed expenses like a big engine car, excessively large refrigerator or even a large home.
It is unfortunate though that some think they can borrow themselves out of their tight financial situation. Debt in this situation is like illegal drugs; it is nothing more than a temporary fix. When it is time to repay the debt plus interest, cash flows are going to be tighter than ever.
For any household to run efficiently and effectively, it needs to be three things: 1) profitable in operations; 2) capable of producing additional income from its assets; and 3) able to use debt mostly to grow earning assets instead of just using it to fund consumption.
Now to be all of the three foregoing things is easier said than done. Each family member must toe the line when it comes to controlling costs and increasing profitability. Making assets themselves earn involves risks because such assets would need to be invested in either non-guaranteed financial securities or businesses. And such risks only compound when debt is used as part of the funding.
Yet, nothing is impossible. Firstly, the family that prays together stays together. Second, there are plentiful financial planners who can help guide families along the right path to financial freedom. The expert financial planner will not only provide the guide but also be the guide post as he helps his clients monitor their progress.
So plan your finances well and avoid a household shutdown. You want to have a household and not a house holed.
Shared by Coach Amos
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