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Dealing With Deficit and Debt Issues

April 18, 2012 | Comments: 0 | Views: 141

Every time there is deficit in finances, the culprit could easily be identified as spending more than what money is earned. This is true for individuals who could not seem to restrain themselves from shopping beyond their capability to earn money. This goes the same for governments who pursue projects and policies that drain their coffers with ensuring means of increasing their income. Apparently, deficits are caused not just by lack of discipline and foresight. On the part of governments, it is also sticking to unsound fiscal policies that lead to expenditures for non-productive items. Of course, the effects of deficits on the economic condition of the individual or on the country could be disastrous.

It would be foolish to just bear the impact of deficits. For governments, this would result to cutting the budget, which could be a very contentious issue. Individuals who experience in their deficits would also be forced to skip paying for some bills, which would naturally worsen the problem later. Ultimately, the most convenient way out of the effects of deficits is to seek for fresh loans. The loans would be used to cover the deficits made. Since these become debts, these would naturally have to be repaid soon.

Repaying the debts, would actually complete the vicious cycle. When one allocates money from his regular income, his budget for the expenses that he normally makes would have to be reduced. Governments who need to pay loans according to the conditions set by the creditors would have to channel a good amount of money also for debt payments, funds which could have been used for other items, such as social services. Since a good portion of the income is allocated for debt repayments, deficits again would be the unavoidable consequence. Acquiring loans again would be resorted to. Of course, this has got to stop.

Self-control and the wisdom are two very important requirements if the problems of deficits and debts have to be addressed effectively. One must always remind himself always that spending too much would do him any good. Governments, especially, should determine which expenses are considered as priorities and which are those that could be set aside because they are basically unproductive. The government sometimes bails out financial firms that are on the verge of collapse. Instead of spending millions, which came from taxes anyway, it should instead assist people who have been burdened by both deficits and debts.

However, bail outs are just temporary solutions. As pointed out above, the problem really is the lack of wisdom and control when it comes to spending. If individuals just learn to turn their backs on items that are offered to them by the market, especially because they do not need these, the problem of deficits would not arise and heavy debts would be avoided. This goes the same for the fiscal managers in the bureaucracy. If they just prioritize productive activities as well as those needed by the people, they would certainly avoid creating deficits in their budget and there would be no need for loans.

Jim Oneil is a writer with a special interest in debt issues and personal finance. He has written for small local newspapers in the past and now devotes part of his time writing about debt services and also UK based financial products.

Source: EzineArticles
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