Where Does the Money Go?

In December, Congress passed the federal budget for fiscal year 2015 at the last possible moment, avoiding yet another government shutdown. You have to wonder why this is such a difficult process.

Within our own households, there are often two people — sometimes with diametrically opposed opinions on how money should be spent — who fight these battles and resolve them on a daily basis. Few families that have the resources available let things fester to the point where the mortgage or utilities go unpaid or they fail to shop for food. In other words, if we have the money, we would never let our household shut down while we argue over who gets a gym membership this year or who gets a new car.

[CLICK HERE to read the article, “What’s in the spending bill? We skim it so you don’t have to,” from The Washington Post, Dec. 10, 2014.]

Like most households, there are certain expenses that must be paid and are non-negotiable. Then there are those that are more subjective. In the finance world, we call that discretionary income. Once all the necessities are paid for, we get to determine how we want to invest or spend the excess money. Since the national budget is largely funded by taxes, many people and politicians believe that taxes should be cut and there should be no excess income. However, mostly politicians battle over where that excess funding should be spent, such as toward social programs, border patrol, the military or job growth. It’s a matter of establishing our country’s values and priorities.

[CLICK HERE to read the article, “What’s Ahead for Americans in 2015?” from Gallup, Jan. 1, 2015.]

Consider the long-term prospects of funding innovation versus social programs. Technology has enabled greater productivity and cost savings in manufacturing and now is making inroads into many service jobs. For example, a patient’s MRI can be sent digitally to be read by a highly skilled radiologist in Bangalore, India, for substantially less than one in New York. Eventually, computer software may be able to do this more accurately and even cheaper. So could funding innovation eventually reduce highly skilled jobs?

[CLICK HERE to read the article, “What happens when automation leads to job losses?” from World Economic Forum, Jan. 2, 2015.]

In the U.S., nearly 20 percent of our children live in poverty — the highest rate among all developed countries except Romania. Yet we spend more money educating wealthy children than poor children. Despite whatever circumstances land an adult in poverty, children are helpless victims and education can be the surest path to a better life. Not funding education opportunities for the poor creates a perpetual loop of more public expense, because impoverished children experience disproportionately higher rates of learning disabilities and poor health. With fewer people developing much-needed higher level job skills, our economy grows at a slower rate. So can less funding for education programs stunt our long-term economic development and global competitiveness?

[CLICK HERE to read the article, “Inequality and the American Child,” from Moyers & Company, Dec. 30, 2014.]

[CLICK HERE to read the report, “Income and Poverty in the United States: 2013,” from U.S. Census Bureau, Sept. 16, 2014.]

We, by default, must trust our political leaders to set our national values, and largely they do so by directing where funding should go each year. But within our own lives, each of us is the CFO of the household income and determines where our discretionary income goes. If we can help you set a more productive budget for this year — one that reflects your personal values and priorities — please give us a call.

Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing insurance products.

This content is provided for informational purposes only. It is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

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