You must be following what is going on in Washington DC on the budget. You know me and I see every thing as being very simple. You know that this is not complicated if you have been reading my blogs. Let me show you how simple it is.
Think about being in a life boat out on the high seas. It is in the black of night and you don't have any idea how far you are from land or when you might be rescued. You notice on the life boat that there is all this kinds of baggage that people have loaded on. In those bags are shoes and pictures of their children. What do you do? Again, it is easy. You throw overboard everything except food and water and enough close to keep you and the others warm. Everything else goes overboard. It might turn out that you are rescued the next day or you might enter a storm that would sink your boat if it remained over loaded. Now, what is the decision rule that this whole thing points out? "Always go farther than you think you need to go to save your life and those of your children". You can always buy the stuff you threw overboard if you live thru the event. If you keep the extra stuff and die as a result, you are out of the gene pool and thus the human race is better off. See, it is simple isn't it?
From this example it is clear that you can always spend less than you think you need to spend and if you turn out to be wrong, you can always spend more in the future to make up for your error. The opposite is not possible, because you can't unspend money. If you spend too much and lose your home or car, it may be very difficult to unspend and get them back. Business is no different. I have seen it a million times.
A business is in trouble and knows they need to reduce cost and people. They have a couple of choices. Fire the exactly correct number of people to allow them to get thru the trouble that your company is in. As I have blogged in the past, it is almost impossible to hit the number to fire right on the button. This means that you will end up either firing too many or too few. Is there a best side to be on? Yes!!!
Always fire more than you think you need to. You can always hire them back, but if you go out of business, no one has a job. Simple isn't it?
Isn't this how our congress should be dealing with the budget? It is simple isn't it? Our guys are trying to cut cost like they know "exactly" what is needed when they don't have any idea. We all know that we need to cut "more" rather than less. If we cut too much we all know that it would be very easy to kick up the spending.
Another point that always works. Rather than looking at expenditures one on one, it is normally better to "rank order" the expenditures. It is real simple. All you have to do is to make a list from "best" to "worst" of items that you spend money on. We don't ask if they are worth it or not. It is easy to do. In your home budget, you can justify why you need all the items on your list, so that method does not work. If you make a list from top to bottom with the best on top and the worst on the bottom, all you need to do is to start from the top and stop when you run out of money. Isn't that what our government needs to do? I told you that it was simple. You would not need to know any complex math to rank order expenditures and then to see when you ran out of money. What you might find is that there are some items at the bottom that are "good", but sorry, there is no money for them. This is life.
Think simple!!!!!
