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!