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Albany, NY – In today's Academic Minute, Dr. Jerry Mason from the College of Saint Rose breaks down the national debt and explains what your portion means to you.
Dr. Jerry Mason is Associate Professor of Finance at the College of Saint Rose where he teaches course on personal financial planning and management.
Dr. Jerry Mason - The National Debt
Each American's share of the federal deficit will be about $50,000 when the current federal budget year ends next September 30th. The deficit is expected to grow nearly 1 point 3 trillion during this fiscal year or nearly 4 billion dollars a day. Currently the federal government is borrowing 33 percent of the dollars it spends each day. This is similar to you earning 67-thousand dollars a year but spending 100-thousand dollars.
Currently three components of the budget - interest on the national debt, Medicare and Medicaid - account for 23 percent of the budget. By 2020, those expenditures are expected to consume 42 percent. The U.S. government currently accounts for nearly 50 percent of all military expenditures worldwide. In the near future, Congress and the Administration will spend a great deal of time discussing both budget cuts and changes to the federal income tax system.
Reductions in federal spending are likely to impact every American, especially senior citizens.
What options do individuals, especially older Americans have? Spend less than we earn. Save more. Everyone should accumulate enough money to pay for one year of needs. If retired, but could work, find employment until this goal is reached. Pay off all debt except a low-rate mortgage. Make sure your investment portfolio is adequately diversified, but exclude long-term bonds. Turn any non-sentimental item that you have not used in the last 12 months into cash. Last, but not least, ask your representative to responsibly cut the federal deficit.
The federal government's finances may be out of control; make sure yours are not.