When I did construction work, I used to see mockups all of the time.

For me, I was fascinated by how much detail went into them. For those who are unsure, a mockup is a cute, tiny version of a major construction project.

They are created to test the design and performance BEFORE installation.

Mockups are used for guidance and direction,

which is why the financial insolvency (irresponsibility) of the United States is something to be studied, analyzed and taken into consideration as the ultimate mockup of what not to do. It definitely shouldn’t be replicated.

Let’s start with the fact that the US Government has over 6 trillion in total assets, and over 47 trillion in liabilities. The debt has surpassed 39 trillion with a T. That’s kind of ridiculous right?

What does this mean for us?
In case you are wondering, it means the depletion of the Social Security retirement trust fund. It will trigger a 24% benefit cut, that will be substantial for those relying on it.

Medicare's Hospital Insurance Trust Fund will be exhausted, and too, will trigger a benefits cut.

TAXES WILL BE GOING UP.

Count on THAT.

The world is a stage, and everyone is watching ‘bad business’ play out in real time.

We can’t just go out and print money, or force people out of nowhere to pay more when our businesses run out of cash.

If we followed the government’s financial mockup, it would lead us straight to Chapter 11.

What are some things we can we do to avoid the same outcome?

~Check numbers: Divide your current assets by your current liabilities. You are doing good if the number is greater than 1. If it is less than one, then it looks like you may not have enough to cover short term liabilities and you may want to consider increasing sales, refinance short-term debt, or renegotiate payment terms with vendors.

~The money should be there: It’s not a good idea to treat projected revenue as cashed checks. Create a reserve, especially if you have the means to do so. 3-6 months of operating expense savings in a high-yield liquid account, would be a great start. Now, you don’t have to take from Peter to give to Paul. If something happens, you won’t be FORCED TO CUT benefits like the US Government will have to.

~Are you running a collection agency for the bank? Watch your Debt Service Coverage Ratio annually. We want it to be greater than 1. Revenue should be going towards Research and Development or marketing, and be used for scaling, not a crutch for survival. Out of control debt is what got us in this mess now. The Government’s spending is used to pay interest as we speak. It’s not being used for infrastructure or growth.

~Pricing for perfect conditions may be problematic: If taxes are going up, you already know the vendor’s prices will be too. Price for the worst-case scenario. If there is a 15% increase in operating costs, you must be able to pay it and continue on in business.

So,

You have a front row seat and a clear view of what happens when you are not right with the money when in business. Debt should be assisting your growth, not holding you hostage and sucking the joy out of doing business.

That is why it should be used and watched very carefully. The Mockup of this Government’s financial disaster is the perfect example why.

Quote of the day

“It will work, if you forget all the reasons it wont.”

~Paulo Coelho

Thank you.

This has been a very interesting week. All I can say, is I am glad that I have fantastic people in my life. It really pays to have support in your corner. I appreciate you too for still allowing me into your inbox. I hope the rest of the week is awesome for you, and it continues right on into the next week. Take care. 💛💜

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