Practical Austerity

Global economic conditions have forced the widespread adoption of austerity programs – not just within governments, but also corporations, small businesses, and individual households. Greece’s complex financial issues are constant fodder for world news, and our U.S. government is knotted up in bi-partisan debate over a stunning spend rate that continues to increase the national debt. Most financial struggles have a lower news profile than these stories, but they all have a few things in common from which we can learn.

Managing financials requires a great deal of practicality and discipline. Budgets must be well-conceived and realistic. Actual spending should be governed by the budget, and not obscured via accounting smoke and mirrors. When revenue is down, expenses must be cut. Difficult decisions have to be made by leaders that carefully consider the short and long term impact of available options for action.

Few are fond of operating in an austere environment. Merriam-Webster defines “austere” with words like “cold”, “somber”, “grave”, and “unadorned”. It sounds like there should be little room for fancy expense account meals in an austere budget, doesn’t it?

When money is tight in our own households, we eat ground chuck instead of choice steak, vacation at home instead of flying abroad, combine errands to conserve fuel, use coupons to stretch a dollar, do our own mani/pedis, postpone large purchases, repair electronics instead of replacing them, and mend clothing to avoid buying new. Credit cards are cut up or put away to avoid undue temptation.

Small businesses modify their business plans to stay afloat. They postpone growth, operate with a skeletal staff, renegotiate rents, forge cooperative partnerships, and get creative with marketing. They make the changes necessary to stay in business, even if they are painful.

We hope that big business and government leaders have the courage to apply the practical austerity we employ in our smaller-scale finances. Instead of tolerating posturing to protect executive positions and privilege, let’s hold leaders accountable for making the difficult decisions for the good of employees, stakeholders, and citizens.