DODGE, or the Department of Government Efficiency—no matter where you are or what you do, there’s no doubt you’ve heard someone talking about this lately. Some people love it, while others hate it, but what is this all about anyway?
Well, it’s presented as a tool to identify and eliminate waste, fraud, and abuse in our government spending, and it is, but I think it’s about something else.
I think it’s about America’s “Freedom Number,” which is how much revenue we need to run this country without going into more debt. The revenue required for that is about 7 trillion dollars per year. Still, we only take in about $4 trillion per year, piling onto our already staggering 36 trillion dollars of national debt—and the House just put forth a bill to raise the debt ceiling by another $4 trillion.
That’s what DOGE is about—eliminating this growing deficit to save America.
So, how does this apply to you and me in our own household budgets?
Unlike the government, we can’t simply print money, so we have to live within our means. But do we? Many of us are blessed with the ability to earn a high income, which often covers up a lot of financial inefficiency and poor choices.
Of course, you earned every bit of that. You put in the time and work to develop whatever skills and expertise provide that income for you, so you deserve what you have—but at the same time, you have a “Freedom Number” which tells you how much income you need to create the lifestyle you want for yourself and your family.
Unfortunately, many Americans let their lifestyles creep particularly close to the maximum that their income can support, leaving little room for investing, business growth, and emergencies.
This is why we need a personal version of DOGE to reign in our own spending, creating a more resilient household budget that better prepares us for life's ups and downs and for retirement.
Are you using baseline spending in your household budget?
Many Americans run into a problem in their own household budgets that is, unfortunately, standard practice in government budgets. That is a concept called baseline budgeting. In this method, the past budget is automatically continued into the coming fiscal year, and any new spending is simply piled on top with no consideration for reducing any unnecessary spending.
This has directly contributed to the outrageous growth in our government spending, but this same mindset often drives dramatic increases in our household spending. Our income typically continues to increase as our careers advance, so rather than reevaluating our expenses from time to time, many simply add new expenses with the added income.
It’s easy to see how this happens, with all the luxuries available today that previous generations didn’t have. Entrepreneurs typically subscribe to dozens of software, services, information, and other resources needed (or not needed, as we soon find out) to run their businesses.
In many cases, even regular employees use these tools in their personal lives, like cloud storage, automation tools, and email services, not to mention the countless streaming, food delivery, and meal prep services we all seem to depend on these days. Dining out, travel, and unplanned purchases also contribute significantly. While small individually, these expenses add up quickly and soon become normalized.
As a result, our burn rate—or the spending required to maintain our standard of living—tends to climb in proportion to income increases, and often, it even outpaces income growth because our access to credit also tends to increase proportionately.
What’s the solution?
Much like DOGE has been doing with the federal budget, you need to dig deep into your household budget to identify what expenses are no longer required or align with your financial goals.
Balance is essential here. While you don’t want to come in with a chainsaw like Musk famously did, but at the same time, you don’t want to come in with a scalpel either. You need to make significant cuts to have a meaningful impact.
Beyond this, you’ll also want to follow the “5 bullet points” approach, applied to your activities and investments, to determine what is currently creating income and return on investment from your efforts. The idea is to identify your highest-producing activities, increase your efforts there, and eliminate your lower-producing activities. You can maximize this impact by investing the savings you achieved from your cuts into your highest-producing activities to increase the compounding effect.
Cut with compassion
In the same way, some politicians and citizens are melting down over DOGE’s proposed cuts, and some family members will likely push back.
While cuts will be necessary, you shouldn’t approach this with a dictatorial mindset. Your spouse and even your children will be impacted by this, so it’s important that everyone involved understands the importance, plan, and impact of your cuts. While you clearly don’t need your children’s permission to move forward with your plan, it will certainly reduce conflict in your household if you can get them on the same page.
A good approach is to gamify the process by enlisting their help in finding opportunities to cut expenses, and maybe even offering “bounties” on some of the bigger wins.
An equation for financial success
The key to success here is to treat your household income like your own personal GDP. As such, you should never allow your debt to exceed income. This better insulates you from the market's ups and downs, puts you in a stronger position to capitalize on opportunities, and prepares you for a more rewarding retirement.
- Much like baseline spending, expenses pile up in your household budget
- Subscriptions & memberships
- Entertainment that’s become normalized
- Unplanned purchases
- Burn rate grows in proportion with income
- Cut what’s unnecessary/no longer aligns with goals
- Not with a chainsaw, but not with a scalpel either
- We also need our own version of Musk’s 5 Bullet points
- What 5 activities or investments produced positive ROI
- Maximize these by putting cost savings here to create more income
- Be proactive about backlash
- In the same way politicians and citizens are melting down, some family members will likely push back
- Prep them before the cuts
- Enlist their help identifying opportunities to cut
- Be diplomatic
- Gamify by offering “bounties” on big wins
- Treat your household income like your own GDP
- Debt exceeding revenue creates a negative GDP
- Interest payments erode growth opportunities
- Focus on minimizing this deficit
_______________
Dr. David Phelps created Freedom Founders to help its members achieve the freedom they wanted in their lives by building the necessary financial foundation. He is a noted financial expert who is regularly cited by the media, and recently helped the FL Dept. of Education develop its new financial literacy curriculum.