Corporate Earnings Provide Good Lesson on Budgeting

Last Updated Jul 24, 2009 12:58 PM EDT

We're in the midst of earnings season on Wall Street, and the numbers are coming in a little better than expected. Why? Because companies have slashed their expenses to become lean and mean. You should be doing the same in your own household.

Keeping More of Less. Even though revenue is down across the board, many companies have been able to squeak out some decent numbers because they have worked their budgets pretty hard. They've cut unnecessary expenses, focused on increasing productivity and ended up keeping more of what they earned.

  • As incomes are falling within the American household, you can still run a profitable home if you approach your budgeting like major corporations do. You have to be ruthless about what you need and what you don't.
Budgets. But sadly, most families don't even have a budget. And those that do generally run a very loose budget. To do it right, you need a line item budget. Then you've got to slash those expenses that aren't contributing to your bottom line. I'll bet you could cut five to 10 percent off your monthly budget if you were just more diligent about where your money is going.
  • Sometimes the solution is to reduce the amount being spent in a certain area, and other times the solution is to eliminate the expense all together. You'll have to decide what's important for your family.
Here's a list of expenses corporations have cut translated into things you may need to cut in your household:
Corporate Expense Household Expense
Travel Vacations
Transportation Car payment
Marketing Entertainment
Equipment Big screen TV
Communications Cell phone / cable bills
Employee benefits Auto / home insurance
Energy costs Utility bills
Easy Tools. Fortunately, if you're interested in getting serious about your budget, there are a number of new and easy online tools available to do that. The programs have the ability to automatically aggregate data from your bank account and credit cards to help you create a line item budget. See Stacey Bradford's recent post on budgeting programs for consumers.

Will To Do It. So you've got the tools, the question is do you have the will to get it done. On the job, we don't have much choice, it's got to be done. But at home, there's no outside pressure to run a tight budget. You've got to create it yourself.

Bottom line. The world's most successful companies have shown that good budgeting is critical to getting through a recession. We should learn from that.