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Living within our means

As individuals and as a Country, we have to start living within our means. As I listen to the new Minister of Finance lament about the state of Bermuda’s finances, I’m left to wonder what in heaven’s name we have been doing for the past 15 to 20 years.I’m no economist but I do have financial common sense which I use to run my own family and which goes like this:If I make $500 a week or $2,000 a month, I cannot spend $600 a week or $2,400 per month. Why should a business or a Government be any different?About a year or two ago, a person who supposedly knows way more about finance than me, told me that Bermuda’s credit rating is just fine and many other countries have similar credit ratings. Are you kidding me?It is this kind of thinking that has put us in the predicament in which we now find ourselves with a national debt of some $1.3 billion.I looked up Gibraltar’s data. At a quick glance, because I don’t need to go too far into this to make my point, I learned that in 2005, its revenue was $455 million and expenses $423 million.That, ladies and gentlemen, is how you run a country. They had $30 million surplus to pay off any debt, to reinvest in their infrastructure, or to do whatever the heck they wanted to do with it.Let‘s keep it real, you do have to borrow sometimes. The only things I will borrow for are major expenses buying a house, major renovations to that house. Only as a last resort will I borrow to buy a car. But the way you work this out is such that all of your monthly payments must not be more than you make each month.In a younger and sillier life I took out a loan to buy myself a fancy new car. STUPID DECISION! Nowadays, I refuse to buy a brand-new car and will only purchase a second-hand vehicle. Here’s why: If you buy a brand new car, the day you drive it off the lot it loses 15 percent of its value. At the end of the first year, it has that same value, 15 percent less than its purchase price. So in essence, the car’s value on day one is the same as it is at day 365. So if you really want a fairly new car, buy one that’s a year old or six months old, because the price will be much lower but the insured and book value will be the same as day one.Then each year a car loses ten percent of its value, to the point where it one day has little or no value. At two or three years old, most cars have a lot of useful life left without causing costly problems. Most cars are built to last nowadays for about ten to 15 years before they start causing you serious problems if you take good care of them.I recommend you save up as much money as you can and buy whatever second-hand car you can afford. If you have to get a loan, fine. But don’t get a five- to seven-year-loan for a $60k car. You will be paying that off in large chunks each month which will kill your cash flow and stress you out, limiting your ability to buy even food.If you already have a car, sell it when it’s around ten to 12 years old. That way you get some return on it that you can use as a down payment, if you have to get a loan. Or if you’re really clever and not too proud, buy whatever you can buy with the proceeds from the sale of your car. You will then have a car that’s debt-free.Also, check the bank for repossessions. Get a nice deal on a second hand car that someone else unfortunately can no longer afford.Here‘s the other bit. If your monthly expenses are more than you make you have to either make more money or cut back your expenses. Old-school, hard-working, diligent and goal-directed Bermudians got themselves part-time jobs to supplement their incomes so that they could meet their monthly commitments.Don’t be too proud. At the end of the day, you will be able to take care of your family.Now if we could run the Country the same way I’m proposing that people run their homes and families, we would really be onto something. I get that nations have to borrow, just as a family borrows to buy a home, major renovations, etc, but we have to live within our means and not spend unnecessarily.When you’re borrowing 100 percent of the value of something you wish to purchase, you probably can’t afford it. If you have to borrow money to meet current expenses which should be funded by your regular cash flow/income, you are getting yourself into a debt problem. This is how it works in a family, a business or a Government.Bermuda has to stop borrowing and start paying off its debt. As individuals we have to simply reduce our spending, eat out less, travel less, send our kids to public school instead of private if we can’t afford it. Otherwise, we will always be in massive debt as individuals, as businesses and as a Country.Moreover, the Government will never pay off our $1.3 billion national debt or look after its citizens, and as individuals/families we will never be able to meet our commitments and properly provide for our families.And now, the top 20Still holding on to the top spot at #1 is Rihanna’s latest hit, Diamonds. Rihanna’s hit is still banging and filling dance floors.Improving to #2 is Let Me Love You (Until you Learn to Love Yourself) by Ne-yo.Tumbling to #3 is Die Young by Ke$ha.Falling to #4 is Gangnam Style by PSY.Improving to #5 this week, is Girl On Fire, by Alicia Keys featuring Nicki Minaj.Also on the rise, up to #6, is Locked Out Of Heaven by Bruno Mars.Slipping to #7 is One More Night by Maroon 5.Up to #8 is a former essential new tune, Whistle, by Flo Rida.Improving to #9 is a former essential new track, Clique, by Kanye West, Jay-Z and Big Sean.Up to #10 it’s the new pop hit from Justin Bieber and Nicky Minaj entitled Beauty and a Beat.Up to #11 is Anything Could Happen by Ellie Goulding.Improving to #12 is Don’t Stop The Party, by Pitbull.Tumbling to #13 is Scream by Usher, a popular dance track.Falling to #14 is I Can Only Imagine by David Guetta featuring Chris Brown and L’il Wayne. Flopping to #15 is She Wolf by David Guetta featuring Sia.At #16 is Only Man She Want by Popcaan.Now this week’s essential new tune. Thrift Shop by Macklemore and Ryan Lewis featuring Wanz enters at #17In at #18 is Scream and Shout by will.i.am and Britney Spears.New at #19 is I Found You by The Wanted.In at #20 is Big Banana by Havana Brown featuring R3hab.