People from all over the MK Community have been reaching out to us asking for some help in interpreting the news of the last week. I love that y’all trust Ascend on money stuff; you made me blush with delight! Alright all you savvy business women, let’s dig in.
The hoopla that went down around here while you were at Seminar will affect you both directly and indirectly. Here are the highlights in plain English:
· The Debt Deal: Congress and the President reached an agreement to RAISE the debt ceiling so that we didn’t default on our debt. (Need the 5 min crash course on the debt ceiling? Click here) This allows the government to borrow more money to make minimum payments on past loans. Double ugh.
· Strings Attached: The Debt Deal has strings attached. The government promises that it will cut spending over 10 years—the spending cuts will be will be felt in places that are considered “negotiable” (like Defense and Education) because that no politician is willing to go elbow deep in REFORM in the months leading up to an election year.
· Time for Vacation: Once the Debt Deal was brokered, and a congressional committee was appointed to figure out how exactly to exercise the Plan, they decided they needed a vacation. Off they went on “recess” against the express wishes of the President. Needless to say, the President isn’t keen on their choice and has asked them to come back to Washington.
· Kicked While Down: Days later, the sovereign USA got kicked in the gut while it was down: credit rating hit and the stock markets fell.
· AA+ Isn’t Good? Even though we met our deadline to pay the creditors, the rating agencies downgraded USA’s credit score. (more on why below) The credit score for government and business is based on how many big A’s you have next to your name. AAA is the best.
· Before You Say Who Cares: A worse credit score means the government will need more money for the same bills! That affects everything. Remember, your Income is the collateral the Government put up to borrow (more) money.
· The Double Whammy: The GDP (gross domestic product) and Unemployment/Jobs Report came out the day after the Debt Deal was brokered. It looked and smelled rotten. So Wall Street freaked out and dropped 10.8% late last week! Imagine 10.8% of the money in your checking account just disappearing. That’s exactly what happened to most of our IRAs and investments.
Holy Stinky Election Year
Look, there’s no pretty way to say it. As the world watched our government play politics until 11:59p something became very clear: The United States of America cannot make a decision to save its economic life… especially not with the 2012 elections just around the corner. Republicans are standing firm on not raising taxes, so they won’t vote on anything that smells of tax increase. Democrats are standing firmly on their commitment to not touching Social Security, Medicare as a way to decrease government spending. Impasse.
Be careful dear entrepreneur that you don’t bury your head in the sand, or throw up your hands in the air. Nothing is more important to our economy than the work you do in your business. You still have a fantastic business model to work with—so do the best you can with what you’ve got. Don’t wait for things to happen around you or for reform, do it yourself. You are in control of your Income and Expenses. Nobody is going to do it for you. And with high levels of unemployment, many people need leaders they can follow into starting their own business. Are you that leader?
If you want your voice heard in Washington use your liberty to make phone calls. Tell your Senators and Congressmen to go back to work and to courageously embrace reform. Tell them how you feel about the things you learned here today. If you have investments (or your spouse does) that are in the stock market, call your financial advisor with questions and ask if changes need to be done to your portfolio.
Most of all be diligent, work hard, be a good steward of your finances, and keep on keeping on!
LeAnne
PS: For the record I’m not an economist… I’m a professional financial advisor who just happens to own Ascend Live, which helps the Mary Kay professional keep more of what she makes. Sign up for Ascend at AscendLive.com