Laguna Niguel, CA

Monday, August 01, 2011

As the world focuses on the fiasco that is the United Sates Government as it so ineptly attempts to deal with its well forecasted debt problems, it is instructive to contrast its financial situation with that of the American family. The United States Government has over $14 trillion in debt, an amount that is equal to 70 percent of the country's gross domestic product (GDP), which is the gross amount of goods and services produced in this country in a given year. Furthermore, for every dollar that the government spends it must borrow forty cents to pay for its expenditures. To put it another way, it finances 40 percent of its bills. The government's profligate ways have saddled its citizenry with debt of over $180 thousand per capita, which is an amount in excess of four times the country's per capita GDP.

Like the United States Government, its consumers are not exactly known for their ability to live within their means. However, they have done a better job than their elected officials. In 2009, according to data prepared by the Bureau of Labor Statistics and the Federal Reserve, the average consumer unit (family) had an annual after tax income of $60,753 and annual expenditures of $49,067. This is a far cry from the government where annual expenditures exceed annual income (tax revenues). The consumer unit devoted 13.11 percent of its after tax income servicing its outstanding debt. To paraphrase Professor Henry Higgins "Oh why can't the government be more likes its people?"

While aggregate data on consumer finance are interesting, there are significant differences between consumer units based on age, income levels, regions of the country and whether they own or rent their homes. Younger consumer units tend to earn less, have more debt, and rent their homes than older ones. However, despite the differences in their financial situations, they all are concerned about the financial security of their households and are seeking a means of determining where they stand financially and how they can improve things.  Fortunately, there is an answer. In his book, Common Sense Prescriptions for Financial Health introduces Quaestrology, a methodology for measuring the state of one's finances and guidelines for making improvements.

About the Author

Experienced as a registered representative, an individual investor and a management consultant to Fortune 500 companies, Marvin Doniger has developed his perspectives on the economy from a lifetime of smart investments. He has taught undergraduate and graduate level courses in finance, information technology, and production management. His other books include A Common Sense Road Map to Uncommon Wealth, and A Common Sense Approach to Successful Investing. He is also a regular guest on the Business Talk Radio Network and other radio shows. His articles have been published in media outlets such as Investor's Digest of Canada and Morningstar.

Marvin H. Doniger

Doniger Associates

Laguna Niguel, CA

949-661-5456