Pay Attention to the Arithmetic

"Now people ask me all the time, how we go four surplus budgets in a row. What new ideas did we bring to Washington? I always give a one word answer: Arithmetic." President Clinton from his 2012 DNC speech

I agree.  Simple math is all that is needed for good personal finance.   Here are some examples:

• Income - Expenses > 0.  What one spends should not be greater than what one makes.



• Tax Revenue - Spending > 0   To have a budget surplus, the government should spend less than what it takes in in taxes.

When the equation yields a number less than zero, debt is required to balance the equation.   Too many years of taking on additional debt will mean bankruptcy.  This true for individuals and countries, as is being learned in Greece.

For more on The Practice of Personal Finance, check back every Wednesday  for a new segment.

This is not financial advice. Please consult a professional advisor.

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