He who laughs, lasts.
– Mary Poole

There is a LOT of political clamor these days about health care and government spending, and it’s about time I weighed in as YOUR personal financial guide.

But here’s my main point–we all need to calm down and stop talking (or screaming) past each other.

Advocates of small government are angry. And their anger is creating a new and genuine political activism. These citizens are deeply frustrated, and they don’t know where to channel their dissatisfaction.

Some on the “other” side don’t come across as very understanding or empathetic. They brand all conservatives as mean or stupid. They discount the sincerity. They say conservatives don’t represent the real America.

So our American family is more polarized than ever. But we are still a family. Siblings can drive us crazy. They tap repeatedly on the annoy button. Their rhetoric runs hyperbolic. But for many people, it has gotten to the point that everything is maddening.

Our only civil war was inevitable, as Shelby Foote said in Ken Burns’ classic film, because we failed to do what we Americans do best: compromise. “We like to think of ourselves as uncompromising people,” he said, “but our genius is for compromise, and when that broke down, we started killing each other.”

Let’s be grateful that we are still just yelling at each other. Or perhaps yelling past each other. The two very different views take the opposite sides of nearly everything debatable. If you are quick to assume the other side is ignorant or selfish, you will never understand enough to make peace. You are part of the problem.

Compromise is not capitulation. It need not be more costly than either alternative. Every act of the free market is a compromise. Public policy ought to wait for a consensus. We must understand the two views well enough to safeguard the fundamentals of both.

It may seem counterintuitive, but the government that governs best, governs least. The most fiscally responsible periods in recent history occurred when the two political parties split the executive and legislative branches. Ronald Reagan with a Democratic Congress broke the back of inflation and reduced the top marginal tax rate from 70% to 28% in seven years. This limited government produced the economic boom of the 1980s.

Part of the cost was congressional deficit spending that raised the national debt from $700 billion to $3 trillion.

The second period of fiscal responsibility was Bill Clinton’s presidency with a Republican Congress. This combination held back on spending increases and actually began to run a surplus and pay down the deficit.

Right now, we don’t have the luxury of two sides of the political spectrum with equal and opposite power. Even more reason for us to stop yelling…and work towards a compromise.

Moving on to this week’s Personal Strategy Note, I’ve got some early advice on planning ahead for the holidays. Yes, I’m a planner by nature–so I’m putting my techniques in your hands–even if you are NOT a planner!

(Please do feel free to send comments…I read every post and email that comes my way!)

“Real World” Personal Strategy
Budgeting For The Holidays…It’s Not Too Early

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It’s hard to believe, but Thanksgiving is just two months away. And while that may seem like a lot of time, you’ll be diving into that turkey dinner sooner than you think…and right around the corner will come the Christmas holidays. That’s why now is the perfect time to start planning for your holiday budget. By formulating a plan now, you’ll achieve more than just the happiest of holidays. You’ll ensure that the New Year will begin without worries of too little cash flow or too much debt. Here’s how.

Learn from the Past
The best place to begin when it comes to planning for this year’s holiday spending is to examine what you did last year. Dig up the credit card receipts and checkbook registers, and add up how much money you spent. You’ll also want to take notes regarding where you spent it. Don’t forget to include money used to purchase gift wrapping supplies, cards, postage, food while shopping, entertainment costs, and special-occasion clothing.

Now that the numbers are in front of you, it’s time to form an opinion. How do you feel about last year’s spending? Did you spend a realistic and appropriate amount, or did you go overboard? Try to be objective. This analysis will serve as the backbone of your plan.

Look at the Present…Pun Intended

Financially speaking, how have you fared this year compared to last year? Be sure to look at any changes in income as well as expenses. If your finances haven’t changed and you’re happy with last year’s spending, then you’re starting off in very good shape. If your overall financial status has declined, or if you were less-than-pleased with last year’s performance, then you’ve got some work to do.

Begin by looking at the number of purchases you made a year ago. Which ones would you make again and which ones have you scratching your head? It may be time to reduce your gift-buying list or change the amount you spend on each purchase. The obvious way to accomplish this is to be less extravagant with your selections. A less obvious but often effective approach is to research your potential purchases. Sometimes you end up paying extra for the convenience of one-stop shopping, so look through the newspaper to find which stores are offering deals. Then look on the Internet to see if you can beat their prices by purchasing online. This practice will cut down on last-minute shopping which can be an expensive proposition.

Look Toward the Future
So, you’ve figured out how many purchases you need to make as well as which ones need scaling back in terms of price. Now it’s time to create a budget. Once again, there is no magic formula. Creating a budget and sticking to it requires two main things: common sense and commitment. Let’s take a closer look.

A budget should always be based on the money you have, not the money you can borrow. If you are still paying off charges from last year, then you need to avoid using credit cards to make gift purchases this year. The amount of money you decide to allocate toward holiday spending should be based solely on what you’ve saved or what you will save from now until the time you start shopping.

When drafting your budget, start by creating a list of recipients, along with columns for the gifts you intend to buy and the dollar amounts you expect to spend. As you make purchases, keep track of the results. If you overspend on one gift, it is imperative that you make it up somewhere else. Your diligence is one of the keys to staying within your budget.

It’s also important that you watch out for potential pitfalls, including impulse shopping. Getting into the spirit of the holidays is one thing, but spending frivolously based upon a last minute decision is something else. You’ve got a list, and your job is to stick to it!

One final thing that may need an adjustment is your overall philosophy. It’s easy to look at the budget you’ve created as a restriction. After all, it’s nothing more than a set of rules. The flip side is that these rules are there for your protection. Sticking to them will not only help you feel comfortable about your finances before and after the holidays, it will free you from the stress that comes from accumulated debt. When you look at it this way, a budget can be downright liberating. Give yourself the gift of a financially stress-free holiday, by planning in advance.

I hope this helps!