“Annual income twenty pounds, annual expenditure nineteen pounds, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds, nought, and six, result misery.”

The Micawber Principle teaches what we all think we already know, that we should live within our means and failing to do so is the beginning of financial difficulty. It seems fairly obvious but until you do the numbers, you might not realize in what areas you are, in fact, living beyond your means – something that will eventually snowball into real debt struggles.

Start by making a budget. List all expenses that are unavoidable and necessary such as rent or mortgage payments, utilities, car payments, fuel, food and other household expenses regularly incurred. Compare your monthly expenses to your income, if you still think you look like you are in pretty good shape, then make the list that really counts.

Track all your expenditures daily, not the big items from your budget but the little expenditures you don’t think about. Cups of coffee, eating lunch out, birthday gifts, movies, impulse buying… you’d be surprised how these little items add up. Now look at how many times you pulled out a credit card to pay for one of these expenses, probably because you didn’t have the cash available and count in the interest.

Chances are, you will find that without realizing it, your expenditures regularly exceed your income. By putting this purchase on one card and the next on another, you spread the debt around and so it doesn’t appear to be growing very much. But over time you are keeping yourself in debt, even if you manage to juggle the money around to meet all the minimum payments.

Oil prices continued to slide down, dropping again today another 82 cents per barrel. The truce in the Middle East, a possible decrease in air travel and the good news that the damage to the BP pipeline in Alaska is less severe than first reported, all are responsible. BP is still pumping and half the oilfield is open while repairs on the pipeline continue.

Prices at the pump were lower by an average of 4 cents last week following the announcement of the cease-fire and consumers have seen some relief from the climb of gasoline prices over the previous three weeks.

As expected, the Federal Reserve opted not to raise interest rates hoping to keep inflation down in the flagging economy. The FOMC has announced it will keep its Federal Funds rate target at 5.25 percent.

The statement released today indicated that this was a pause rather than a halt in rate hikes and expressed the opinion that inflation pressures may moderate over time thus implying that rate hikes in the future cannot be ruled out.

The pause by the Fed was not unexpected by investors, although the possibility of future rate increases was disappointing and stocks slipped after the announcement.

The July jobs report, released on August 4, 2006, showed a rise in unemployment and that the growth of new jobs was smaller than expected.

Unemployment rose to 4.8% in July, taking the bloom off the rosy economic picture at the close of the second quarter for some. The likelihood is that the Federal Reserve Board, which meets this Tuesday, will put a hold on interest rate increases in order to keep inflation from becoming a runaway. The stock market reacted to the probable pause with an initial surge but only momentarily. The possibility that the economy was slowing outweighed the short term benefits of the anticipated rate pause.

The view from the administration was more optimistic. Commerce Secretary Carlos Gutierrez seemed hopeful in spite of the hike in the unemployment rate, pointing to the 113,000 new jobs that were created.

“With the addition of 113,000 jobs and increasing wages, today’s employment report shows President Bush’s economic policies are working for American workers. Since 2004, the U.S. has created more jobs than the rest of the G-7 countries combined. Our economy has grown a strong 4.0 percent this year” Gutierrez declared during a visit to a power tool manufacturing facility in Virginia Beach, VA. “We will continue to advance the President’s economic policies of keeping taxes low and spending down in order to create jobs and opportunities for U.S. families and businesses,” he added.