{"id":494,"date":"2012-11-20T11:53:04","date_gmt":"2012-11-20T16:53:04","guid":{"rendered":"https:\/\/www.cashflownavigator.com\/blog\/?p=494"},"modified":"2018-08-13T19:39:03","modified_gmt":"2018-08-13T23:39:03","slug":"the-impact-of-our-federal-debt-on-your-household%e2%80%99s-net-worth-and-cash-flow","status":"publish","type":"post","link":"https:\/\/www.cashflownavigator.com\/blog\/2012\/11\/the-impact-of-our-federal-debt-on-your-household%e2%80%99s-net-worth-and-cash-flow\/","title":{"rendered":"The Impact of our Federal Debt on Your Household\u2019s Net Worth and Cash Flow"},"content":{"rendered":"

The Bad News: The Average U.S. Household is Now Bankrupt (Really)<\/em><\/strong><\/h3>\n

As I write this, our federal debt \u2013 the sum of many years of annual budget deficits \u2013 stands at $16.1 trillion, or about $135,000 per household*.\u00a0 (No, that is not a typo.) As noted in our e-booklet,\u00a0Wealth is Good, Cash Flow is Better<\/strong>, the average U.S. household\u2019s net worth in 2010 was $77,300\u00a0excluding<\/em>\u00a0this federal debt item.<\/p>\n

While economists and politicians prefer to speak of the deficit in terms of abstract formulas and ratios like \u201cpercentage of debt to GDP\u201d, I prefer to keep it simple and relevant to you, the individual.\u00a0 Adding the federal debt to\u00a0the balance sheet\u00a0would move the average U.S. household’s net worth into negative territory, to -$57,700.<\/strong><\/span><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/strong><\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0 \u00a0 The cost to the average household to pay just the interest<\/em> on our federal debt <\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 is equivalent to losing the opportunity to make at least one car payment <\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 each month for the next 20 years.<\/strong><\/p>\n

 <\/p>\n

This isn\u2019t an imaginary number.\u00a0 It\u2019s real and has to be repaid.\u00a0 In fact, we all do pay a tiny portion of it \u2013 interest on the debt \u2013 from our taxes.\u00a0 It currently accounts for 8% of our federal tax payments – about $2,000 annually per household, or a negative monthly cash flow of\u00a0–$165<\/strong><\/span>.<\/p>\n

Interest payments on the federal debt are projected to more than double by 2030,** so the cost to each household for just the ongoing interest<\/em> payments is equivalent to losing the opportunity to make one car payment each month for the next 20 years.\u00a0 So in a very real sense we can say the interest alone is costing each household a car.<\/p>\n

To make matters worse,\u00a0those interest payments\u00a0don’t even reduce\u00a0the\u00a0“principal”.\u00a0\u00a0Essentially, each household has a credit card balance of $135,000 on our “Uncle Sam” card – nearly the\u00a0cost\u00a0of an average\u00a0house!\u00a0 We’re making minimum monthly payments equivalent to a car payment, yet the card balance never goes down. \u00a0In fact\u00a0it continues to\u00a0grow – rapidly.\u00a0 Clearly, it’s time for credit counseling.<\/p>\n

So What\u2019s The Government\u2019s Repayment Plan?<\/strong><\/p>\n

For a simple explanation of our government\u2019s response to the problem, a video entitled \u201cGovernment Debt Simplified\u201d *** by EngageAmerica does a great job.\u00a0 Here\u2019s a summary.<\/p>\n

The government takes in $2.3 trillion a year in taxes but is spending $3.6 trillion, resulting in an additional $1.3 trillion in debt.\u00a0 Add this to our existing $14.8 trillion from prior years and we now have a total debt obligation of $16.1 trillion.<\/p>\n

How much has Congress agreed to reduce this? \u00a0By $21 billion, or 0.1%…by next year.<\/p>\n

Here\u2019s how EngageAmerica helps us put it in perspective:\u00a0 They drop 8 zeros from all the numbers.\u00a0 So, it\u2019s like a family having annual income of $23,000 but spending $36,000.\u00a0 That\u2019s another $13,000 each household owes just from this year\u2019s budget shortfall. Tack it on to your existing unpaid \u201cUncle Sam\u201d credit card balance of $135,000 and your new balance is $148,000.<\/p>\n

And how much would you reduce your household\u2019s $148,000 in credit card debt if we follow Congress\u2019s \u201cplan\u201d?\u00a0 By $210.\u00a0 Next year.<\/p>\n

*\u00a0\u00a0\u00a0\u00a0\u00a0 www.usdebtclock.org<\/a><\/p>\n

**\u00a0\u00a0\u00a0 Congressional Budget Office (CBO) Long Term Budget Outlook<\/p>\n

*** \u00a0http:\/\/www.youtube.com\/watch?v=JMDtp-bII9Y<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The Bad News: The Average U.S. Household is Now Bankrupt (Really) As I write this, our federal debt \u2013 the sum of many years of annual budget deficits \u2013 stands at $16.1 trillion, or about $135,000 per household*.\u00a0 (No, that is not a typo.) As noted in our e-booklet,\u00a0Wealth is Good, Cash Flow is Better, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,9,45,20,11,8,7,46,21],"tags":[54,24,92,53,59,40,55,25,23,57,91,60,26,56,58,48],"class_list":["post-494","post","type-post","status-publish","format-standard","hentry","category-assets","category-cash-flow","category-debt-2","category-debt-reduction","category-liabilities","category-net-worth","category-retirement","category-wealth","category-wealth-accumulation","tag-bankrupt","tag-cash-flow-2","tag-cash-flow-navigator","tag-cashflownavigator","tag-credit-card","tag-debt","tag-deficit","tag-financial-independence-2","tag-financial-life-cycle-2","tag-interest","tag-keith-whelan","tag-monthly-payments","tag-net-worth-2","tag-payment","tag-principal","tag-wealth-2"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/494","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/comments?post=494"}],"version-history":[{"count":27,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/494\/revisions"}],"predecessor-version":[{"id":948,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/posts\/494\/revisions\/948"}],"wp:attachment":[{"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/media?parent=494"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/categories?post=494"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cashflownavigator.com\/blog\/wp-json\/wp\/v2\/tags?post=494"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}