Financial awareness, like the study of economics, is a lesson in human nature.  Your nature.  Are you one not to care about the effect of your decisions, or do you over-obsess?  Or perhaps a more balanced approach best suits your personality.  Regardless, a few moments of rational thought now will pay dividends later.

Financial awareness allows one to make a smart decision today and reap its rewards in the future.  It is not difficult to do.  Just ask yourself a question before you act.  “Will this action help me and others, or could it hurt me or others?”  Often the right decision will involve giving up a current, fleeting, pleasure for some benefit in the future.  It is called discipline. 

As we travel the road to financial independence, consider Newton’s Third Law of Motion: for every action, there is an equal and opposite reaction.  It’s as accurate in the physical world as in the financial world: every decision carries a reaction.  If I spend money now, I will not have it later.  If I save my money now, I will have more later.  In other words, every decision carries consequences or opportunity.  The good news is that you get to decide what you do.  The bad news is that our government can put us into debt if they do it to everyone. 

As citizens and individuals responsible for our actions, when we don’t have enough money to buy something, we stop spending.  When our debt gets too high, we stop spending and reduce that debt.  Our government should be held accountable for its actions.

These basic rules apply to governments.  For instance, the Federal Reserve is the only entity that is allowed to print dollars.  Suffice it to say that printing dollars creates debt in the form of Treasury Bonds.  Two issues are significant here.  The first is that the Federal Reserve can print dollars only as long as the Treasury can sell bonds.  When foreign nations refuse to buy our debt, in the form of Treasury Bonds, then we have a problem.  Once again, we see that every action has a reaction and every cause, an effect.

To dive a bit deeper into the second issue, consider the reason behind all the debt the Fed has placed on our nation through printing dollars and, thereby, increasing the supply of money.  The way to understand the underlying thought process is to examine the way that money was spent.

Sixty to seventy percent of all federal spending is to entitlement and welfare programs.  Another 8% goes to the military.  Another significant amount goes to subsidize green energy and social engineering programs.  And the last bit goes to paying for the massive employment costs of federal employees.

We can debate all day about this program or that.  But the real issue is why?  What good?  What helps everyone?  We are talking $19 trillion in spending every year, which creates debt that citizens will pay back.  Stop to think about what good it is doing.  We are paying for their spending.

The point here is that we are suffering massive inflation, while the Fed shuts down non-governmental business activity with high interest rates and our government continues to place more debt on each of us through its spending activities. 

For every effect, there is a cause.  For every action, there is a reaction.  The same thread runs through our personal lives to our government’s actions.  Since our government is not feeling the effect, and we are, then it is up to us to change our government’s spending habits.

Jay Davidson is founder and CEO of a commercial bank.  He is a student of the Austrian School of Economics and a dedicated capitalist.  He believes there is a direct connection between individual right and responsibility, our Constitution, capitalism, and the intent of our Creator.

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