What is a “Budget”?

A few years back, I was doing some volunteer work for Junior Achievement. Once each week for 10 weeks, I met with a class of sophomores and discussed “personal economics.” Most of it was basic stuff like balancing a check book or filling out a job application. However, there was one thing which stood out that I still carry with me today.

A couple of the lessons dealt with having a budget. I was trying to figure out a good way to explain the concept of a budget to a group of 10^th graders and I came up with the following analogy. Imagine that, immediately after graduating college, you get a job where you take home $20,000 each year (I said “take home” because I didn't need to get into a discussion about taxes just yet). Anyway, what are some of the things you could do with $20K/year? Well, you could save all your money for six months and buy a nice, used car. You could save your money for a year and buy a new car. You could even save all your money for five years and pay all cash for a modest house.

You see, even on a modest income of only $20K, you could still afford nearly anything you want: a house, a car, a vacation, nice clothes, etc. The problem, however, is that you can't afford everything you want. You could buy a house OR a car OR take a vacation but not necessarily all three. A budget, then, is a list of your priorities. You have to decide what it is you want the most. If you want to eat dinner out every night you can. But if you would rather save to buy a car, then eating out every night isn't a option. It might be nice to have both, but realistically you can't. You have to prioritize which you're going to spend your money on. That is a budget; it's simply prioritizing your spending.

It was a simple concept and the 10^th graders seemed to catch on quickly. Unfortunately, our elected officials still don't get it. They still think we can have it all. They want to “invest” (i.e. spend money on) education, green jobs, unemployment, social security, health care, infrastructure, foreign aid, defense, corporate bailouts, teachers' pensions, congressional salaries, and pork barrel projects. When we protest the outrageous spending that's going on, they merely answer with the question, “well, what are we going to cut?” as though everything is too important to cut funding for it.

Not only do our elected leaders not understand the concept of a budget, neither do they seem to understand the definition of “priority.” How can everything be a priority? If you want to balance the budget, you've got to decide what is truly a priority, spend your money only on those things, and cut everything else.

Now, I know some decisions are hard to make but we have reached the point where we have to make them. Is congress so weak-willed and indecisive that they can't decide what is a priority? Do I need to remind you that this was a lesson I taught to 10^th graders?

Continuing to spend money on everything we want is no longer an option.