Operate Your Household Budget Like a Company or Business Would- Freeze Expenses in a Weakened Economy

A few weeks ago, the company I work for announced a “freeze” on unnecessary expenses, or basically anything that was not absolutely necessary to get work done and/or directly billable to a project or client. Many companies around the world are taking such an approach, and also enacting hiring freezes, restrictions on nonessential travel, and even temporarily stopping 401k matches.

Why are companies enacting freezes on expenditures?

It all comes down to cash flow, available credit, and attempting to avoid layoffs, in my opinion. I am not talking about companies on the verge of bankruptcy that are blowing through cash without likelihood of recovery, like GM and others. Many businesses are good, stable companies, who are experiencing a downturn in revenue due to the sluggish economy, and may have had credit lines they use for payroll or other operating purposes reduced or even eliminated.

When these things happen, the fastest way to reduce expenses is to lay people off. The problem with layoffs, though, is that you lose people you may very well need when the economy starts to turn around, and you may lose out on new work due to a lack of manpower to get the job done, or you may lose people that bring in new work.

Ordinary people can follow some of the tactics employed by businesses or companies during trying times as well. Focusing on debt reduction, building up a larger emergency fund, and getting a little “leaner” with your household budget can help you weather the down economy and position yourself for the better times ahead.

Cut back on spending on nonessential items- Things which you don’t absolutely need, don’t spend money on.

Cut back on vacationing or travel- Instead of that two week vacation, plan a couple of short weekends or outings.

Don’t take on any new expenditures- Don’t sign up for any new, recurring expenses for a while.

Don’t hire anyone unless you have to- This one may not seem straightforward for an individual or family, but does someone cut your grass, wash your car, or do your dry cleaning? You may not want to eliminate things you have someone do for you because of the time you save or because you really don’t like doing that particular task, but think carefully before you “hire” someone else to do another task for you.

Have you put a freeze on any household expenditures? What are they?