MAY 27, 2011
The federal deficit is big news these days. And while it’s generally agreed upon that lowering tax revenue and increasing spending are what’s behind the snowballing of the country’s budget deficit, there’s a lot of disagreement over just how much of a threat to the nation’s financial future the deficit really is.
One thing’s for sure, though – Americans running on their own, personal budget deficits are headed for trouble. Deficit spending can trash your credit report and credit score, which, in turn, can make it difficult for you to find (and sometimes keep) the job you need to generate income.
The federal government has lots of tricks at its disposal that can allow it to continue operating in the red for a long time. Regular folks don’t have that luxury. If your personal budget is starting to achieve proportions that would make a Congressional Budget Office (CBO) forecaster cringe, it’s high time to start taking steps to trim that deficit – and protect your credit report at the same time. If you’re operating at a deficit every month, your credit score will eventually suffer, which could mean you pay more for such basics as auto insurance and cellphone service.
Revenue Really, Really Counts – Really!
In a recent report, the CBO said that tax cuts led to lower tax revenue, which contributed to the deficit. The federal government doesn’t have many options for making money other than taxes. Fortunately, you have options.
You can look for a job that pays more, however, that can be a challenge to find in today’s economy. You could also take a second job, an option that kept many people afloat financially during the recession. Remember, that second job doesn’t have to be a career, or even something that you’ll stick with long-term. It just needs to be enough to help you get out of the red. Take every penny of that extra cash and put it toward paying down your debts. Your credit report will look better if you do.
Save Yourself by Spending Less
The CBO also reported that increased spending was the other big factor that contributed to the federal deficit. Out-of-control spending can run up your personal deficit, too.
Take a long, hard look at how much you spend each month and what you spend it on. If you’re constantly spending more money than you bring in each month, you may need to take drastic action. Start by eliminating all non-essentials. Once you know you can pay for necessities, you can slowly begin adding back in a few small luxuries.
Budget, budget, budget
Sometimes it can seem like government isn’t operating in the real world. The federal government can overspend its budget with few immediate consequences. It’s different for common folks – ignore your budgeting responsibilities and your financial health, including your credit score, will suffer for it. So create a monthly budget for your household and be passionate about sticking with it.
There’s no debate on this one – increasing your income, cutting your spending and staying on budget is the best way to reduce your personal deficit.