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Why you should stop complaining about Obama and the budget — and fix yourself first

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I wrote this a few months ago, when the entire country was freaking out about Obama’s budget and the bailout, but never got around to posting it. Even though it’s a few months old, I cover why people love to complain about taxes, macro-policy questions, and Obama, but fail to spend even 1 hour managing their own money.

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Turn on the TV or read any comments section of an online newspaper — even the New York Times — and you will quickly feel the need to take a shower and to physically distance yourself from common citizens of dubious intellect.

Dumb people

You’ll notice people complaining about their taxes, while never cutting their own spending, earning more, or optimize their spending (like the CEO Model I describe in the Save $1,000 in 30 Days Challenge).

The problem is multi-faceted:

First, once something incurs spending, it’s incredibly difficult to stop spending on it. Why? On a national level, because there’s momentum, jobs, and opposition to change. On an individual level, we’re more motivated by loss than by gain, so it’s easier to do nothing than to take away something we’ve grown accustomed to.

Second, people get emotional. You see this with jobs and taxes (and rightfully so), but also with areas as prosaic as design changes on Facebook. In many/most circumstances, we don’t like change, and we over-emphasize our own interests (“I CAN’T UNDERSTAND WHY THEY DON’T MAKE A MAC PRODUCT!!! GRRR!!), while never seeing the big picture (Macs have a ridiculously small market share).

Third, the natural progression is to do more: more staff, more funding, more spending. Without a conscious spending plan, you’ll find that executing a Think, Want, Do analysis will reveal some huge disparities in where you think your money is going vs. where it’s actually going.

Let’s take a look at some numbers.


Federal spending almost always increases


Federal spending goes up a lot
Those numbers are in billions. From Heritage.org
.


When people argue about a local issue, where does that fit into the bigger picture?


wallstatsdatlarge


Stunning visualization of Obama’s announced $100m budget cut


Now, you can take a couple routes after seeing these:

1. Complain about Obama, Democrats, Republicans, the war in Iraq, etc. The funny thing is, people love to debate minutiae but fail to realize that energy is a valuable resource — and it’d be much more productive to focus on things we can control (like our asset allocation, automation, negotiation, etc). If you do this, you are just like everybody else who loves to complain but does nothing to improve their own finances.

2. Realize that the real message of this post is to focus on the BIG WINS — the things that let us save significant amounts of money. While it might be fun and emotionally liberating to debate over some local issue, the way to move the federal budget forward is to fix the 800-lb gorilla: healthcare costs. The same is true of your spending: The very first tip in my Scrooge Strategy is called the Two-Headed Savings Approach, where I show you how to focus on dramatically cutting the costs on your two biggest discretionary expenses, rather than trying to save 5% on 50 things (as most people do), and ending up feeling guilty and achieving no behavioral change.

Stop complaining about things you can’t control. Realize that the correlation between macro-economic and political decisions has very little to do with our money on a day-to-day basis. Most importantly, we’re cognitive misers, and only have a limited amount of attention. Focus on your own finances first, and let the fools (or politicians) debate the macro-level.

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55 Comments

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  1. Well said, Ramit. Although it’s important to have debate and informed voters, it seems that when people “debate,” they mostly just spread misinformation and rumors. People need to take the airline safety mentality here: “secure your own mask before trying to fix the government!”

  2. Amen! There will always be government and whatever yours views on it, it is smart to focus your energies on what you actually have control over. Strictly speaking, if government decisions bother you that much – emigrate! Otherwise it’s most productive to do the basics – increase your income, your savings, and invest it wisely. I’m not saying keep your head in the sand, though – we need to stay aware of what’s going on. Just don’t get caught up in the latest bandwagon of complaints and excuses.

  3. Pretty sure there’s a 5,000 pound gorilla next to the 800 pound one, and it’s defense costs. Unless you consider that one of the things we just can’t change.

  4. Realize that the correlation between macro-economic and political decisions has very little to do with our money on a day-to-day basis.

    Bravo, Ramit! If each one of us committed to spending 4 hours a month improving our knowledge of personal finance, the forward economic momentum in this country would be astounding…

  5. I think I’ll hold people even more responsible than Ramit – they need to take a look at their own finances AND be a participant in how the government manages theirs, not just complaining about it. Part of your money will be going to the government regardless and therefore it’s up to us (especially politically apathetic young people) to hold the powers that be accountable.

    Another point: Ramit’s arguments are contradictory to what the economic goal of the government is: to get us to spend more. I think it will be an uphill battle towards fiscal responsibility for everyone if the message is conspicuous consumption.

    Just some thoughts,

    JM

  6. Ramit…It is so dissapointing to see such a thoughtless article from a normally thoughtful person. I have been reading your blog for a long time, and you have so many great pieces of advice for people. This is not one of them.

    Please please please understand the situation when you write an article like this. You say, “the way to move the federal budget forward is to fix the 800-lb gorilla: healthcare costs.” Do you understand that every bill that is being proposed will INCREASE healthcare costs? That’s one reason why people are upset about it. And in America, our lawmakers are elected by the people, so it is extroadinarily important for our personal and financial futures to debate and understand these issues.

    • Jon, we have to address the big spending areas, not focus on tiny areas that make us feel better but accomplish very little. How we address the big challenges is a separate issue. Please don’t conflate the two.

  7. Ramit – I am not confusing the two. How are you foolish to not realize that taxes are a humongous percentage of virtually everyone’s spending plan? Taxes are not a ‘tiny area’. If legislation in Washington is going to impact taxes in a huge way, as the healthcare bill certainly will, then how is focusing on it focusing on a tiny area that accomplishes little? If the federal government spends money unnecessarily then a huge chunk of money will be missing from my pocket. I think this is an instance where you are breaking your own advice, and choosing to focus on the little things, rather than the big things. You are accusing me of confusing the two, but in this situation it is you who is unfortunately confused.

    Please put on your thinking cap and use the evaluation skills that helped you become the successful blogger and personal finance guru before you make these types of postings.

    • Jon: Maybe it will increase costs, or maybe not. There isn’t even one bill to consider right now, so that’s not the point of this. But it’s all too common to jump on the how without considering the what (in this case, that we should focus on lowering healthcare costs compared to minuscule pork-barrel spending that amounts to virtually nothing).

      Of course we should have thorough debate about the healthcare bill. But that’s not what I’m talking about.

  8. Jeremy Freelove Link to this comment

    Ditto, Jordan_M. What about option 3, Ramit? Manage your personal finances AND perform your civic duty of being involved in government affairs. Maybe worrying about taxes and other macroeconomic policies wont affect our day to day finances, but it certainly has a large impact in the long run. When it comes to decisions like this, I prefer to use the utilitarian question, “What if everyone behaved like me?” If we all were to ignore government spending, it would doubtlessly continue rising as your graph shows. Instead, if all of us took five minutes to write a letter or email to our representatives, it could make a large impact.

  9. I think that you have a great point. However, inasmuch as we need to take individual responsibility for our own spending we need to be vigilant in keeping our government accountable for its/our spending as well.

    Just because government spending has historically always gone up doesn’t mean that it should continue to do so. If my individual spending continued to go up every year and yet there were years that my income did not go up at the same rate then I’d start running a deficit. I can do that for a year or two but not much more, and either previous to or following that deficit I need to run a surplus that can absorb the over spending.

    Our government is not playing by those rules and we need to stay up in their business about it until they do. I realize that the point of your blog is to get people to be real with their money and that’s fantastic but that’s no reason to keep quiet about out of control government spending.

  10. Ramit: Do you have any sort of expertise or knowledge regarding the healthcare industry? If so, I would be very interested in what that is which allows you too make the statement that ‘maybe it will increase costs, or maybe not.’ Because, every version of the healthcare bill that has been floating around WILL increase costs, according to the CBO or other industry professional.

    Additionally, you make the error of thinking that it is not possible to lower healthcare costs and eliminate pork-barrel spending simultaneously. While your impression may be that pork-barrel spending is a relatively small percentage of the national budget; it is still a fantastic sum of money. Whether you are an individual, a nation, or an organization it is foolish to flush significant amount of money down the toilet simply because it is not the most significant percentage of your budget.

    But pork-barrel spending isn’t my issue. My point is simply that it is extroadinarily foolish to say that we shouldn’t worry about legislation from a financial standpoint simply because you believe it’s “out of our control”. I feel that assertion shows a lack of understanding about the American system of government and a lack of understanding about personal finance. I have such a respect for your body of work as a whole that I hate to see you making these foolish assertions.

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