A budget is a curious thing, nowhere near as simple as it looks. It is not realised monies — as in cash received in hand, cash spent out — gone! A budget places its emphasis on what we think we will see financially going forward. A budget can be (and should be) an analytical projection based upon real facts from prior years, a shrewd assessment of financial activity of the current year, an even harder look at events predicted for the future year. Sometimes, more in individual cases although no one would concede the fact, a planned budget is based partly on hope — that finances will improve.

Budgets are defined in three ways:

A Balanced budget means that revenues are expected to (must) meet expenses. No deviations. The United States government and some states have threatened, or actually shut down services until a balanced budget is put in place. Problem is, there is often frantic spending at the end of budget period, if expense allocations are not fully used up. A bizarre mindset if ever there was one. No individual family would ever frantically spend the rest of their budget for a year — because they had not used up their allocated amount. Instead, they would have saved that money to increase their net worth.

The deficit budget needs no explanation. The Bermuda Government has had a deficit budget (expenses greatly outstripping revenue received) for too many uncomfortable years already. In fact, is a deficit budget a budget at all?

The revenue budget is the very optimum, the king of budgets. This is the budget that gives every planner, statistician, politician, business CEO, Minister of Finance, Premier, President, and the like comforting thrills. Yes, there is a surplus! How shall we allocate these excess revenues?

The importance of a sacred budget. Once it is defined in print, in media, in-house analyst calls, Parliament, Congress, etc. it becomes a sacrosanct emblem of the projected performance of the country’s management team. The (our country’s) ability to generate increased revenue while controlling costs and government household expenses will be closely scrutinised, particularly when compared to the hard verifiable data, the final whole government Consolidated Fund financial statements are released (Bermuda Consolidated Fund Reports 2014/2015), unfortunately not available prior to the 2015/2016 budget release.

The budget becomes the yardstick, the barometric measurement by which all financial expectations are compared. The government’s ability to carry internal and external debt with on time repayments, ability to conduct business, ability to monitor and anticipate economic flows — all featured prominently in financial analysts credit ratings and investor confidence in the country’s economy.

There are disconcerting differences between a family budget and the Government budget.

Any family today in Bermuda — living on the edge of financial distress after losing, say 40 per cent or more of their income due to unemployment, sickness and other life events — knows exactly what a budget means to them. They are sharply aware how much of their money cushion is left, how much income is coming in, and how little they can afford to spend in order to not deplete their entire savings.

Governments do not always know their actual revenue. The family is very aware what their actual income is at any time; they don’t have to project what they will be paid.

Governments can borrow to offset budget deficits. Families whose cash coffers are empty do not have the ability to go out to capital markets, or banks to borrow money. In fact, when family financials are suffering, they are at their most vulnerable. Well, yes, they can run up credit card debt — to a point. Then, the spigot is turned off. This can happen to a government, too.

Additionally, governments in budget deficits can also raise taxes (to generate more revenue) arbitrarily, that all the local population, businesses, etc, will be required to pay. Families in a budget deficit can only use personal efforts at extra jobs, working harder than ever to catch up, cut costs to survival mode, and/or sell off assets to finance daily living.

Government needs to do something. In difficult times, it is a common complaint here on our beautiful isle. We know that business entities can succeed or fail on their own initiatives. Individuals are in the same boat. So who do we turn to when all recourses are gone. Government! as in “Gummint needs to do something.” However, our Government cannot always be the savior of last resort, although we’d all like to think so. Government is a business, just like any other, needing sufficient funds to operate for the common good while managing the country’s resources in a disciplined financially conservative environment.

After all, how can we be a world-class financial centre, if we don’t manage our own finances in a world-class manner?

We can choose to support government or not, but at the end of the day, we are all affected.

Because Government is us.

And Government is doing something: rigorously getting our financial affairs in order, revitalizing our revenue-producing natural product, providing education, training and myriad other opportunities, and most importantly, continuing to upgrade confidence in our international financial centre reputation to attract foreign investment to our shores.

In the 2014 Budget presentation, the Minister of Finance stated that “confidence is like the wind, an invisible yet powerful force whose strength could fill sails and propel a ship forward”.

Let us be confident in our government’s mission to recover our financial security. How we recover, too, will directly depend upon our attitudes, and our commitment to work together confidently for ourselves and our country’s future success.

“Tis the set of the sails, and not the gales which tells us the way to go. Like the winds of the sea are the ways of fate — as we voyage along through life. ’Tis the set of the soul that decides its goal, and not the calm or the strife.” — Ella Wheeler Wilcox, ‘Winds of Fate’

Martha Harris Myron CPA CFP JSM; Masters of Law: International Tax and Financial Services. Appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. The Pondstraddler Life Consultancy providing planning for international tax, immigration, investment, retirement, legacy, and related financial challenges to the lifestyles of internationally mobile individuals and their businesses residing, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle. Specific focus for residents of Bermuda. Contact: martha@pondstraddler.com