Ever doubt whether your elected representatives should be your role models? Well, here’s a new twist on finance guaranteed to convince you, one way or another: the Arizona state legislature proposes to sell state capitol buildings, presently owned free and clear by the taxpayers and including the state House and Senate buildings, and them rent them back from the new owners. So deep in debt is our feckless state government that this desperation move apparently makes sense to some of our august leaders.
Think of that.
Now let’s suppose you, the personal financier, owned your house free and clear; let’s imagine it’s worth, say, $300,000. You’ve made a few small errors in your personal finance adventure…to wit, you’ve charged up $350,000 on your credit cards, and now that the economy has imploded, you’re out of work and can’t pay those pesty, interest-bearing bills.
So to raise some cash to hush up the bill collectors, you sell your house to Bob Buzzardo for $280,000, about the best you can do in the depressed real estate market. You now have 280 grand in cash, and Bob agrees to rent the house back to you for $1,678 a month (not including taxes and insurance). You propose to pay down those nagging bills at the rate of $2,000 a month, using the money you expect will soon “begin flowing into [your] coffers,” creating a monthly outflow of $3,678. At that rate, your $280,000 will last 76 months, or about six years and four months—assuming you’ve invested the principal gained from your sale in a reasonably safe instrument. At that time—when you run out of cash—you will have paid down your $350,000 debt by $12,688.
You will still be in debt over your head, and now you’ll be out of money to pay against those debts and also out of money to pay the rent.
Amazing concept, isn’t it?
Okay, I admit: a state government is not a household, and government finances do not equate to personal finances. Still, raising taxes—a move our legislators stoutly decline to do, especially where business taxes are concerned (horrors!)—is roughly the equivalent of taking a second or third job. Which would you do: a) take a side job or two; or b) sell your house, rent it from the new owner, and use the proceeds to pay the rent and try to keep the wolf from the door?
If your choice is the second, maybe you should consider running for public office.
😀
I was choking with laughter!!!!
I cannot believe the kinds of schemes governments come up with. I mean.. REALLY.
I think they all need a crash course in basic personal finance 101.
I live in CA, so I’m familliar with clueless government.
Governments always seem to forget there is another option, which is to cut back on spending. I know this is counterintuitive to a government, but that’s what taxpayers and companies do in a recession. They stop wasting money until the economy returns to normal.
Cutting back on spending isn’t very pleasant, but it’s highly effective. To save money, I recommend getting rid of government pensions for elected officials. They could have a 401K plan and put some money in, just like taxpayers do.