Nothing Worth Having Comes Easy

Nothing worth having comes easy




March 05, 2011 7:49 AM

www.waltson.com




Like many worthwhile things in life, fiscal responsibility is not an easy path. If done properly, fiscal responsibility, often but not always, means difficult choices. We know we should adequately fund retirement but there are competing goals like enjoying life. What gets lost is a sustainable lifestyle, while employed or retired, should be your goal.

A secure retirement requires adequate savings. You can make a 2010 IRA (Roth or Traditional) contribution any time prior to filing your 2010 tax return or April 15. Here?s another hot investing tip. Your paycheck for the last two months has a 2 percent boost due to the temporary reduction in Social Security taxes. Increase your 401K plan or IRA contribution by the same amount. This is your chance to prove you can do better than Social Security, if you don?t take this baby step then you forfeit any future claim of beating Social Security. Bank, don?t spend your 2 percent tax cut.

According to Washington rhetoric, drastic budget cuts are necessary. However, there are some voices of dissent. More importantly, politics aside, a confidential report authored by Goldman Sachs stated the budget cuts proposed by the U.S House of Representatives will slice Gross Domestic Product (GDP) growth by 1.5 percent to 2 percent in the second and third quarter of 2011.
Until now we have dodged the ?double-dip? recession and spending cuts alone won?t send us spiraling toward one but being hell-bent on cutting GDP growth when we are still recovering is misplaced. If you have a problem with credit card debt, you could have your electricity cut off and your family could live on Ramen noodles until you paid the debt. A better way would be to develop a sustainable budget and reduce debt over time. Yes, you would pay more interest but you would have a better life. While I don?t like much of what Dave Ramsey recommends, his recipe for getting out of debt gradually over time is spot-on.

The House budget cutters have sacred cows. The 700 pound gorilla in the budget room is Medicare and no one asked current beneficiaries to help with our budget woes. After you kick the Medicare can down the road it?s a bit intellectually dishonest to lecture anyone else about fiscal responsibility. Medicare?s unfunded liabilities are the prime driver of projected budget deficits. According to Choosing the Nation?s Future (www.nap.edu), a low spending/low revenue path to fiscal sustainability necessitates ?direct reductions in the growth of federal health spending? by 2012. Simply put either taxes rise or benefits go down, take your pick.

It also appears farm subsidies have complete immunity. Maybe it?s because Michelle Bachmann?s family receives farm welfare, err, subsidies. Agricultural states tend to be red states but a low spending/low revenue path means tough medicine for farmers, too. While our farm does not directly receive payments, we weigh the benefit when we factor rent. So be it if our rent goes down.
Fiscal sustainability requires difficult choices. If you take taxes off the table then everything has to face the budget ax, not just the federal programs you dislike.

I know fiscal conservatism when I see it. In 2010, Susan and I contributed to five different retirement plans and have zero credit card debt. When you complain about the federal budget, make sure your house is in order first.

Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial.net.