The Congressional Budget Office (CBO) projects that under current law the U.S. Federal Debt will double as a share of the economy over the next 30 years, rising from 100 percent of GDP in 2021 to 200 percent in 2051. The Concord Coalition

Elected leaders have long known that the federal budget is on an unsustainable trajectory, yet elected leaders of both parties have “delayed, dodged or simply ignored the warnings”, writes Robert L. Bixby, executive director of The Concord Coalition. In fact, elected leaders have recklessly piled on new fiscal spending and cut federal taxes.

In fiscal year 2020, the reported federal budget deficit increased for the fifth consecutive year. Driven largely by the federal government’s response to the COVID-19 pandemic, the federal budget deficit for fiscal year 2020 reached $3.1 trillion—triple the level in fiscal year 2019. This represents the largest budget deficit as a share of GDP since 1945.

The unsustainable fiscal path strains the federal budget and contributes to growing debt.

• Federal Deficit – The federal deficit is the amount by which the government’s spending exceeds its revenues for a given period, usually a fiscal year.
• Federal (National) Debt – Federal debt is the amount of money that the federal government owes, either to its investors (debt held by the public) or to itself (intragovernmental debt).

According to CBO, high and rising federal debt increases the likelihood of a fiscal crisis and could lead to a large drop in the value of the dollar or to a loss of confidence in the government’s ability or commitment to repay its debt in full.

Consequences of rising debt. Rising debt could also cause policymakers to feel restrained in their capacity to support the economy during a downturn or unexpected events, such as global military conflicts, natural disasters, or public health emergencies. After the current pandemic recedes and the economy substantially recovers, policymakers should turn their attention to swiftly developing a strategy to change the long-term fiscal path. The sooner actions are taken, the less drastic the changes will need to be.

Effects of compounding interest. Persistently low interest rates have resulted in lower spending on net interest. However, due to the substantial size of the debt, GAO projects net interest will become the largest category of spending by 2050, growing from 1.6 percent of GDP in 2020 to 8.9 percent of GDP by 2050. The costs of debt vary based on interest rates, and increased rates can have a compounding effect on the debt. Spending on net interest was $345 billion in fiscal year 2020 and is projected to exceed $1 trillion in fiscal year 2033.

As a result, the U.S. has arrived at a critical point with the National Debt nearing its highest level as a share of the economy since World War II and climbing steadily upward.

The nonpartisan Congressional Budget Office (CBO) projects that under current law the debt will double as a share of the economy over the next 30 years, rising from 100 percent of GDP in 2021 to 200 percent in 2051.

The main drivers of the escalating U.S. National Debt are the nation’s aging population and rising health care costs, which translate into ever-rising spending for popular benefit programs such as Social Security and Medicare. Revenues are projected to rise as well, but not by enough to keep pace with spending.

Health care. Total health care spending (public and private) in the United States continues to grow faster than the economy and is driven both by an increase in the proportion of the population enrolled in Medicare and by the increase in health care spending per beneficiary. GAO projects federal spending on major health care programs to grow from 5.9 percent of GDP in fiscal year 2020 to 8.0 percent of GDP in fiscal year 2050.

Social Security. Demographic factors, such as longer lifespans, an aging population, and slower labor force growth, are straining Social Security programs and contributing to a gap between program costs and revenues. GAO projects spending on Social Security will grow from 5.2 percent of GDP in fiscal year 2020 to 6.1 percent of GDP in fiscal year 2050.

As the trustees of those two programs warned in their respective 2021 report, Social Security and Medicare both face long-term cash shortfalls under currently scheduled benefits and financing. Both programs will experience cost growth substantially in excess of GDP growth through the mid-2030s due to rapid population aging. Medicare also sees its share of GDP grow through the late 2070s due to projected increases in the volume and intensity of services provided.

Trustees’ warnings over several decades have been consistent, and yet inaction has turned what was once seen as a long-term problem into a much more immediate concern. The trustees project that the combined Social Security trust funds will be exhausted by 2034 and the Medicare Hospital Insurance trust fund will be exhausted by 2026, leaving little time to phase in changes that would prevent sudden benefit cuts, tax increases, or higher deficits.

Whether it’s the Social Security and Medicare trust funds or the overall federal budget, delay does not just burdened future generations, it actually increases that cost. According to a 2020 estimate by the Congressional Budget Office, the annual amount of deficit reduction needed to keep the debt at 100 percent of GDP in 2050 would rise from 2.9 percent of GDP to 4.8 percent if actions were delayed by 10 years.

America’s growing fiscal deficit and federal debt

Historically, spikes in debt are often correlated with major events such as wars and economic disruptions, such as a pandemic. Deficits went up during the crisis and came down when the crisis passed. We are witness to that dynamic now after the pandemic-induced recession.

Deficit reduction is a natural phenomenon of an economic recovery after a recession or economic downturn. However, deficit reduction would change the preexisting and long-standing imbalance between revenues and spending. Increasingly, episodic crises will simply add to a trajectory of debt that is already on an unsustainable path.

One thing is certain. New unexpected future challenges that will require extraordinary measures will arise that will occur and surprise future presidents. And some future challenges should not be surprises at all, such as a new pandemic or a climate crisis.

“We have not put ourselves in a stronger fiscal or economic position to deal with today’s unanticipated events by allowing old problems to fester, nor will we be in a stronger position in the future if we continue forward with our heads in the sand,” states Bixby.

America’s net debt currently stands at approximately 124% of nominal GDP (historically high and unprecedented). The debt level continues to get worse, but at an accelerated pace over the ensuing decades. We have time to fix it, but this problem will not age well, and the sooner we start to fix it, the better. If we don’t fix the growing federal deficit and ballooning federal debt, it will morph itself into a fiscal and debt beast we won’t like.

References:

1. https://thehill-com.cdn.ampproject.org/c/s/thehill.com/opinion/finance/596740-bidens-had-many-surprises-this-term-the-budget-crisis-isnt-one-of-them
2. https://www.gao.gov/assets/gao-21-275sp.pdf
3. https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287

The Concord Coalition is a nationwide, non-partisan, grassroots organization advocating generationally responsible fiscal policy. The Coalition is dedicated to educating the public about the causes and consequences of large-and-growing federal budget deficits and national debt, the long-term challenges facing the economy and how to build a sound fiscal future for all generations.

“Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income.” King Solomon

A study published by the National Academy of Sciences demonstrated a strong correlation between income and life satisfaction, as well as income and “emotional well-being,” up to $75,000 in annual income. After that, the study finds that life satisfaction and happiness leveled off.

It is a common misunderstanding and widespread belief that high income are associated with success, contentment and happiness. But this belief is mostly illusory.

A lot of people believe also that accumulating significant wealth is somehow equates with success, contentment and happiness. Yet, people with above-average income and significant wealth are relatively satisfied with their lives to a point, but are barely happier than those who live paycheck to paycheck.

Moreover, the effect of income on life satisfaction seems to be exceptionally transient. People tend to exaggerate the contribution of income to happiness because they focus, in part, on conventional achievements when evaluating their life or the lives of others. King Solomon asserted a couple of thousands of years ago that, “Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income.”

Several 2018 studies by the National Institutes of Health found that even among millionaires, more wealth can lead to more happiness. Interestingly, they found that the source of the wealth also mattered; self-made millionaires were happier than lottery winners.

Some people are quick to say, “Well, I’d rather be happy than rich.” Wealthy people wonder why anyone questions that you can be both. However, the happiness wealth brings alone is at best fleeting unless income and wealth are closely aligned with your life’s purpose, to your continued learning and growth, to your practicing gratitude and to your helping others.

And while wealth can’t “buy happiness” per se, it can buy you more time with your family and friends – which, presumably, would make you happier. You can use wealth to switch to a single-income household or to help you and your partner retire young and raise children full-time. For that matter, you can use it to reclaim more of your time to do anything you want.

Combine Building Wealth with Purpose, Growth and Helping Others

“I would rather have it said ‘He lived usefully’ than ‘He died rich.’” Ben Franklin

Founding Father Benjamin Franklin lived his life not in terms of how much wealth he could accumulate, but rather in terms of how many people he could help. To him, being useful and continuing to improve were more important and represented there own reward.

Wealth and income as forms of fulfillment and happiness in Franklin’s views were just an illusion. Franklin did not want his life to be measured by dollars and cents. He wanted to live a more meaningful one, one where he consistently improve himself and always positively influence other people. He live a life that counted to himself, others and a grateful fledgling nation.

Key takeaway is that high income and significant accumulated wealth alone does not guarantee a life of happiness and success unless it is closely aligned with your knowing your purpose in life, your continuing improvement and growth to reach your maximum potential, your gratitude and finally your strong desire to help others.

References:

1. https://www.moneycrashers.com/wealthy-money-mindsets-financial-success/
2. Kahneman D, Krueger AB, Schkade D, Schwarz N, Stone AA. Would you be happier if you were richer? A focusing illusion. Science. 2006 Jun 30
3. https://www.success.com/john-c-maxwell-the-3-things-i-know-to-be-true/

In the book “Don’t Sweat the Small Stuff, and it’s All Small Stuff”, Psychotherpist Richard Carlson P.H.D talks about one hundred things in life that are seemingly insignificant yet they tend to take up our time, stress us and keep us from achieving our best results.

Carlson says that “Often we allow ourselves to get all worked up about things that, upon closer examination, aren’t really that big a deal. We focus on little problems and concerns and blow them way out of proportion. A stranger, for example, might cut in front of us in traffic. Rather than let it go, and go on with our day, we convince ourselves that we are justified in our anger. Try to have compassion for the person and remember how painful it is to be in such an enormous hurry. This way, we can maintain our own sense of well-being and avoid taking other people’s problems personally.”

“Money is a terrible master but an excellent servant.” ~P.T. Barnum~

Phineas Taylor (P.T.) Barnum—American founder of Barnum & Bailey Circus—was renowned for being a showman who knew how to make a buck, which is how he became one of America’s first millionaires. His quote that “Money is a terrible master but an excellent servant”,  sums up the importance of making your money work for you.

Barnum points out that, if all you do is work for money, it essentially becomes your master. On the other hand, if you put your money to work paying bills and for life’s necessities, acquiring assets and other investments, etc., it serves you. So strive to be the master of your destiny—financially, anyway—by ensuring you’re the master of your money.

How to Rectify Past Financial Sins

Everyone makes mistakes, especially when it comes to money. Find out how you can set yourself on a better financial path by atoning for some of your worst money missteps.

Nobody’s perfect — especially when it comes to managing money. While you may try to keep track of your funds, budget wisely and spend well now, you may have made some serious money mistakes when you were younger. Since having money doesn’t exactly come with an owner’s manual, you may have had lackadaisical spending ways or gone wild with credit before you smartened up and started taking money seriously. Still, those past sins can come back to haunt you in the form of creditors or less-than-impressive credit scores. Your best bet is to face money issues head-on and atone for those missteps so you can move forward with better habits.

Open up
When dealing with past financial mistakes, it’s easy to turn a blind eye and hope that they simply go away. But when you owe money or default on loans, not only are those creditors still looking to get paid, it can affect your long-term ability to secure credit and enjoy future financial freedom. Instead, gather up all of your statements and go through them with a fine-tooth comb to give yourself a general picture of which mistakes you’ve made but can be easily rectified with dedicated work.

Make a plan
Once you know where you stand money-wise, it’s time to create a plan to pay back creditors, and remove any inaccurate information on your credit report. This may require some leg work on your part, so plan on working with creditors on settlement deals, checking your credit report and contacting your creditors or credit reporting agencies to remove inaccuracies that you may have found. Consider your plan like you would a work project: focus, then put your energy into accomplishing it.

Start small
No one is saying that you need to put all of your savings toward paying off an old debt to get rid of it. In fact, starting with smaller debts — an old credit card or small tax bill, for instance – helps you get rid of some of your smaller mistakes, and can also help provide a sense of accomplishment. Start with the most manageable issues. That way, you’ll have more of a leg to stand on when negotiating with larger creditors.

Keep it rolling
Once you’ve made headway on some of your smaller money mistakes, it’s time to get serious. Keep up the good work by taking a look at your current budget and cutting back spending to free up money for payment of other debts, or making settlement agreements with other creditors. When you have cash in hand, creditors may be more willing to settle, but you’ll need to be prepared to act immediately. While it might mean a few months of leaner living, having a clear conscience and rectifying the mistakes of the past can help you move forward with your future financial goals.

References:

1. https://www.creditonebank.com/articles/10-famous-quotes-about-finances-credit

There are many well-known historical racial based disparities in the American financial system that have contributed to the current wealth gap between Black Americans and their White peers.

Wealth (defined as the difference between a household’s assets and debt) provides a critical safety net to households during economic downturns. According to The Brookings Institute, wealth holds several significant advantages over wages as an economic resource: In particular, income from wealth is taxed at much lower rates than income from work, and wealth can serve as a source of savings to absorb temporary setbacks such as a loss of employment income.

The denial of access to wealth-building homeownership and education benefits in the GI Bill, redlining and loan rejections for businesses are several critical components of today’s widely discussed racial wealth gap.

Throw in historically lower wages and education gaps and you find there is a staggering difference in wealth by race. White families have roughly eight times the wealth of Black families, according to The Brookings Institution. In 2019 the median white household held $188,200 in wealth—7.8 times that of the typical Black household wealth of $24,100.

This historical context is critical in understanding that individual achievement must be matched with policies that address the framework that has yielded this result.

While there is much to do to address the broader systemic issues, every day that goes by is an opportunity to shore up individual situations. There are steps to building and creating wealth such as stock ownership.

Stock ownership

While more than half of White Americans own some equities, that number falls to about a third for Black families, according to data from the Federal Reserve.

Investing in stocks is an important means of building wealth over time and generating the returns necessary for retirement.

Take action: For many people, the easiest way to start investing in the stock market is through their workplace retirement plan. If your employer offers a retirement savings plan, make sure you contribute enough to earn any matching contribution your employer offers. Also be sure to evaluate the investment options and get the assistance and information you need from your employer to select an investment approach that is right for you.

If you start with a low percentage contribution, you can typically increase the amount you save over time (some companies even let you do this automatically), with the goal of saving at least 10% to 15% of your income for retirement. The compounding effect of investing money over time can often help you accumulate more than you think.

If you don’t have access to a 401(k), consider contributing to an IRA for retirement savings. You can open an IRA with a brokerage and follow similar principles as you would with a 401(k) account.

Source: https://www.kiplinger.com/personal-finance/604231/the-biggest-financial-barriers-facing-black-americans-and-strategies-to

“The most difficult thing is the decision to act, the rest is merely tenacity.” ~Amelia Earhart~

Amelia Earhart addresses one of the hardest parts about achieving financial freedom and building wealth—just getting started. After getting started, she suggests correctly, it’s merely a matter of sticking with a system and your financial or wealth building plan.

Ms. Earhart’s advice mirrors another adage about the importance of just getting started by China’s Lao Tzu, the father of Taoism: “The journey of a thousand miles begins with a single step.”

Saving money is important, whether you’re creating an emergency fund or working toward a long-term goal like a vacation or retirement. But there is a difference between saving money and building wealth.

If you establish an habit to save 10% to 20% of your income each year, the money will add up over time, and you will end up with savings that you can dip into when you need it. If you invest the money that you save, your money will start working for you and create more money through stock price appreciate, dividends and the power of compounding.

This is when and where you will begin to build substantial wealth.

How you think and feel about money plays a huge role in your decisions about money.

Your mindset is what makes money a positive experience or a negative one.

To learn more, register for my MindFrick e-Book 👉🏻 https://t.co/NM2Q5ZnGDE pic.twitter.com/HZ6T6ByMkM

— T. Harv Eker (@T_Harv_Eker) February 25, 2022

The purpose of earning (active and passive income) and saving money are to pay for your investments, which will build wealth and pay for your future. Investing involves buying assets, which are things that will likely go up in value. It’s important to “see every dollar as a “seed” that can be planted to earn a hundred more dollars, which can then be replanted to earn a thousand more dollars”, says T Harv Eker, author of The Millionaire Mind.

“Focus on all four of your net worth factors: increasing your income, increasing your savings, increasing your investment returns, and decreasing your cost of living by simplifying your lifestyle.”– T. Harv Eker

Focus on all four net worth factors:

The true measure of wealth is net worth, not working income.The four net worth factors, according to Eker, are:

1. Income (working income and passive income)
2. Savings
3. Investments
4. Simplification – decreasing your cost of living by simplifying your lifestyle (you consciously create a lifestyle in which you need less cash flow).

By tracking your worth, you are focusing on it, and because what you focus on expands, your net worth will expand. By the way, these laws go for every other part of your life: what you focus on expands and, like, what you measure, you manage.

The goal is to get educated. Learn about the world of investing. Become familiar with a variety of different investment asset classes and financial instruments, such as stocks, bonds, mutual funds, exchange traded funds (ETF), real estate, mortgages, stocks, and currency exchange. Then choose one primary asset class in which to become an expert. Begin investing in that asset and then diversify into other assets later.

It comes down to this: you must work hard, save, and invest your money so you can have options, live the lifestyle of your dreams and achieve financial freedom later in life.

References:

1. https://www.creditonebank.com/articles/10-famous-quotes-about-finances-credit
2. https://www.thebalance.com/how-do-i-begin-to-build-wealth-2386145
3. https://www.edwardjones.com/us-en/market-news-insights/personal-finance/investing-strategies/investing-rules-road
4. https://www.harveker.com/top-10-tips-for-wealth-success/
5. https://www.wealthofhappiness.com/secrets-of-the-millionaire-mindset/
6. https://www.sitrakaratsimba.com/secrets-of-the-millionaire-mind/