Pretend You Can Do It

First grade teachers are awesome.  I think they have more wisdom than most other people.  I was reminded of this with our recent parent-teacher conference.  When we met with our first grade teacher, we talked about how much they learn this year.  It can get overwhelming.  Kids can get scared to try something that they’ve not yet mastered.  She remarked that in this situation she’ll simply tell them: “Pretend you can do it.”

It’s brilliant.  And you know what, it doesn’t apply to just first graders?

Can’t you imagine a whole slew of areas where this can apply?

Budgeting

How many people don’t budget?  A lot.  One of the top reasons given is that people don’t know how.

OK.  So pretend you can budget.

How would you do that?

Maybe write down what you spend.  Also write down what you earn.  Sounds like we’re doing good so far.  Then set a couple of limits and see if you can stick to them.

Voila, you pretended you can budget and guess what you did?  You just created a budget.

Saving

Trying to save money is so hard, right?  I don’t know where to start, many will say.

OK.  So, pretend you can save money.  Let’s take this one like a kid might try.

Take a five dollar bill, put it in an envelope, and set it aside.

You just pretended you can save, and guess what?  You just saved money.

Now that you’ve done that, taking that to the bank is easy.  Setting a few more dollars is just as simple.

You just pretended your way into becoming a saver.

Cut Expenses

There’s so many expenses in life, how do you know where to start?  Many people don’t, so they do nothing.  But if we’re just pretending, we can pick one.

Look at your cable bill.  Find a premium service.  Give them a call and cancel it.  That sounds like a pretty easy game of pretend, right?

Guess what, you just pretended your way into cutting expenses.

Why This Works

This strategy works for kids because it takes the pressure away.  Think about it, when you’re actually doing something you have to worry about many things:

  • Finishing
  • Being good at it
  • Worrying what others will think

But when you’re pretending, you really don’t have to worry about those things.  If you don’t ‘finish’ your budget on the first try, no big deal.  You’re just pretending.  If you don’t get to that $500 savings goal right away, who cares?  You’re just pretending.  If you’re trying to cut $300 in spending per month, but you’re only 10% there, it’s not a problem. There’s nobody to judge.  Because you’re just pretending!

Pretending Does Not Equal Lying

Now, let’s get one thing perfectly clear. While pretending you can do something is a good strategy in many situations, lying is not.

I just finished the latest book by John Grisham.  It’s called The Rooster Bar.  In it, a bunch of law students quit

school and start pretending to be lawyers.  That’s not the kind of pretending you want to do.  Basically if it, breaks the law, skip it.

Even if it doesn’t break the law, lying can and will probably catch up with you.  For example, don’t lie on your resume.  If you claim to have a skill, you probably won’t be able to pretend your way into having it.  Joey from Friends learned that lesson when he claimed to be an expert dancer.

Bottom line, while pretending can lead you to becoming an expert, it can also get you into trouble.  Know the difference.

I love watching our kids learn.  It’s awesome when they have a teacher that really does it well.  And, look, the teacher can even teach us parents.  Just like our first grade teacher taught me.

Readers, have you ever pretended your way into something that you didn’t know how to do?  

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Remember When Federal Budget Deficits Mattered?

It’s so interesting watching the latest talk from Washington come through.  It’s all about potential tax cuts and what they mean.  President Trump is touting a plan that would lower taxes for many businesses and people.  He claims it will help the middle class.  Pundits argue it mostly helps the rich.  Either way, it’s interesting that very little attention is given to the budget deficits and the impact that the plan would have.

Budget Deficits

For as long as I can remember, the federal government has run a budget deficit.  There were a couple of years under President Clinton when there was a surplus.  However, that seems to have been a blip on the radar, and very much an anomaly.

The government spends more than it brings in.  They’re the only level of government that is authorized to do so.  States, cities, townships and the like must all balance the budget.  The federal government does not have to do so.

And they don’t.

When a deficit is created, the government essentially issues bonds or bills and repay them down the road.  For decades, it seemed, people would worry about this.  They figured too many would devalue the dollar.  People worried that it could spark inflation.  Some worried what would happen if the market got saturated and there was no demand.

With all that, it was always thought that limiting or eliminiting deficits was the right idea.

I remember that budget deficits were a big point of most presidential elections as I was growing up.

Why No More Concern?

But it seems that the impact of budget deficits has waned.  Our deficit has exploded over the past fifteen years.  Yet, when the latest tax plan was introduced, the potential impact was nowhere near the top talking points.

So why is that? Why don’t budget deficits matter anymore?

Well, first, is that inflation seems to have really lowered the cost.  With inflation at historic low numbers, the government has to pay very little interest.  So, they can borrow practically for free.

Next, the demands for the US Dollar seems limitless.  Where many once feared too much debt could destabilize the dollar, that hasn’t happened.  At all.  It seems that as long as we issue debt, there are foreign countries willing to buy it.

Finally, I think it’s seen as an investment.  Cutting deficits would mean cutting programs and jobs. This would have a negative effect on the economy.  Some might argue that deficit spending has partially helped the economy chug along for the last ten years.  An argument could be made that cutting or reducing the deficit would be worse in the long run.

What’s Next?

I don’t have any idea how this plays out.  One could argue that there has to be a limit. However, you could also say that twenty years ago, the current deficits would have been unimaginable.  If George H.W. Bush or Bill Clinton had suggested the deficits we have today, they’d have been run out of office in a hurry.

So, really, as far as what happens next, who knows?  It’ll be interesting to watch, though.

Readers, what do you think about the current federal budget deficits?  Do you think the current deficit spending is sustainable?  What about adding even more with the proposed tax cuts?  

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Friday Favorites – November 10, 2017

Happy Anniversary to my parents!  My dad and step-mom got married 33 years ago today.  They have set so many great examples for me.  They’re very responsible with money.  Family comes first.  I really love them both and wish them many more happy and healthy years together.

Favorite Posts

Here are some favorite posts I’ve read over the last couple of weeks.

I hope you have a great weekend!  Thanks for reading.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Peak Debt – What Is Your Story?

Have you reached peak debt?  That’s what I consider the highest debt you’ll willingly take on during your lifetime.  Many people may not have hit peak debt yet.  Think of people who have not bought homes but plan to do so.  They will probably hit peak debt later.  But even they can look at their peak debt to date.

Our Peak Debt Story

We hit our peak debt in June 2007.  Predictably, this was when we took on the mortgage to our current home.  I figure that for many, this would when they saw their debt at its highest.  After all, for most people that buy a home, it’s the largest purchase they’ll ever make.  Since so many people do so with a mortgage, debt lines up as well.

For us, our highest debt total was comprised of the following:

  • Mortgage – $224,000 (this was 80% of the cost of our home)
  • Student Loan Debt – $31,969
  • Auto Loan – $8,647
  • Credit Cards – $0

This put our total at $264,616.  That was the highest debt we ever hit.

Where We Stand Today

I won’t go into the individual numbers, but will give some highlights:

  • We have paid off about 45% of our total debt since then
  • The auto loan was paid off within a year.  We have not taken on a new loan since.
  • We aggressively paid down student loan debt before my wife became a stay at home mom.  There is one loan remaining.  However the interest rate and payments are low enough that we’re fine with it.  The loan is set to end in early 2020.
  • Our mortgage started slowly as we originally had a 30-year mortgage.  We transitioned to a 15-year mortgage and did another re-finance.  The first took advantage of the lower rates.  The second freed up some cash flow and continued to low rate advantage.  Ideally, I’d like to have this paid off by 2029.
  • The only new debt we took on was during our re-finances.  In each case we rolled in some of the closing costs.  Other than that our debt has gone down every month.
  • We’ve never carried a credit card balance.

What Does Peak Debt Mean To You?

I’m curious what peak debt means to you.  What is your personal story?  At what age do you think peak debt should be reached?

I’m hoping that people will write their thoughts and experiences in the comments.  I expect different perspectives.  For example, owners of rental properties might continue to hit new peak debt numbers.

Readers, I’m curious as to your thoughts and experiences on peak debt.   If you have a moment, please share in the comments below.

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