The new Obama Presidential administration would like to allocate $825,000,000,000.00 to help rescue the United States economy. On the receiving end are new government spending programs and tax cuts. In addition, Obama will put his new Secretary of the Treasury to work examining the list of banks requesting bailout funds and decide who will get a handout as a continuation of TARP (the Troubled Asset Relief Program) initiated by Bush.
Before the government attempts to bail anyone else out or hand out tax cuts, it should take care of its own needs, first, by making up deficits in state budgets and investing in state-sponsored government projects.
Remember the wise words of the airline attendant: “Be sure to put on your own oxygen mask first before assisting others.” Otherwise, you might suffocate while attempting to tighten the yellow rubber strap on your squirming child’s mask and then you’ll both die.
Dozens of states have already stripped their budgets to the bare bones. Despite valiant efforts, states need money NOW to continue operation of schools, law enforcement, road maintenance, pensions, and countless important and essential programs. If our local governments cannot afford to operate, they are in danger of collapse. If this happens, we are all done for.
Fortunately, the Obama administration does intend to spend some money helping to bail out state governments. According to a January 25, 2009 article in the The Christian Science Monitor, roughly $241 billion of Obama’s stimulus package will be allocated to states to help them rescue their budgets by funding $87 billion in Medicaid programs, $120 billion in education, $4 billion in law enforcement, and $30 billion in roads and infrastructure.
However, state budget deficits are predicted to total at least $350 billion over the course of 2009 to 2011, according to the Center on Budget and Policy Priorities (CBPP). And that’s with all the cuts to “non-essential” services.
Why are state governments in trouble? They haven’t been able to collect as much revenue as expected, either from taxes, sales of lottery tickets, fees, other sources big and small and, SURPRISE!... low to zero dividends on investments. Yes, even local governments invest in the risky stock market.
Whenever a local government faces a deficit, we all hear about the cuts in education. “No instruments for the band,” or “We’ll have to cut the wrestling team.” Such dire predictions always garner sympathy at election time so that governments can get their local tax levies passed.
However, there is much more at stake this time than just new uniforms for the football team. A lot of private companies depend on the guarantee of local government spending for their own survival when times are lean.
For instance, when a state must cut a building program, someone on the other end is suffering. There’s the engineering firm in Texas and the architecture firm in New York who was counting on the job and now must lay off their own workers. There’s the local contractor who must tell their masons that they’re sorry, the job was cancelled, but, “You won’t get unemployment because you weren’t an employee.” There’s the supplier who already put in the order for steel I-beams from Pittsburg and limestone from Idaho. Cancelled. Then, there’s the manufacturer who won’t be moving to your state after all. “We’ll just keep outsourcing to China where the government has built all the necessary buildings, roads and docks we need, not to mention the cheap labor.”
When a state must cut funds to museums and parks, they are in danger of falling into disrepair, or worse, closing down completely. The seasonal employee who counted on the summer job cleaning cabins might not be able to afford tuition at Ohio University next year. The hotels and restaurants who depend on tourism to Yosemite will lose customers. The gift shops at Cape Hatteras will lose sales and stop ordering cutesy molded light houses from the artist who makes them in Seattle.
When a state must cut funds, the effects are far reaching. Jobs are lost far and wide across the nation. You may not care that Montana needs new rest areas built on I-90 because you never plan to go there. However, perhaps the door manufacturer in your local state of Utah was counting on getting the supply contract.
Other countries invest in their citizens in infrastructure and free education. Other countries now have the jobs which used to belong to our own citizens.
It’s time we invested at home. Let’s heal ourselves first before trying to heal anyone else.
Showing posts with label Budget. Show all posts
Showing posts with label Budget. Show all posts
Monday, January 26, 2009
Friday, January 23, 2009
How to Not Layoff a Worker
Last week, my mother was laid off from her “very” part time job at a non-profit organization. Mom had started working there 25 years ago after the kids were nearly grown, working part-time to full-time as needed. Mom built her life around her job and made many close friends among her coworkers with whom she spent a lot of time off the job.
After many years and many budget cuts, Mom was now the only remaining person working in her department who performed her specific duties. Although she was paid to work only 12 hours a week, Mom put in an extra 12 to 20 hours per week in volunteer time doing what she truly loved. She liked to joke that she was “cheap” labor.
On top of Mom’s volunteer contributions, she also supported the non-profit financially, buying gifts for all of us at Christmas from the non-profit run shop and donating money to special programs.
Mom assumed her job would always be safe. She was sadly mistaken.
Her employer, the non-profit, held a meeting one day where they told their shocked and dismayed staff that all part-time help and some full-time help would be “separated.” Mom tried to negotiate even fewer paid hours via her supervisor, who told her that the “powers that be” were not interested. She was told to pack up her personal things and collect her last pay check.
“But, you’re welcome to continue volunteering,” said the receptionist who handed her the check. “That’s the plan – to shift most of the work to volunteers to save money,” she said.
“Humph!” said Mom as she boxed up all the materials she had purchased with her own money and not sought for reimbursement.
Mom wasn’t upset that there was no warning. She was upset that the decision to lay her off was all done out of her control; that the method seemed cold and inhuman; and more importantly, that it seemed unnecessary. She loved her company, loved her job, and would have gone right on putting in tons of hours for free if she’d felt respected. However, she felt she was being treated as a Social Security number, just another “part time” status employee sent to the slaughter house – and not treated the way she saw herself – as an intelligent and important, incremental part of the non-profit’s operation.
Mom decided she would eventually go back to volunteering, but at the competing non-profit instead.
I told my mother that her old employers are idiots.
On March 20, 2003, after several months of threats to invade Iraq and take down Saddam Hussein, President G.W. Bush ordered the “shock and awe” bombing of Iraq. We were now going to war.
Just like so many Seattle-based businesses around me, my own business came to a screeching halt. Since I extended credit and billed my clients after the work was done, I relied on them to pay me in a reasonably timely manner so that I could pay my own businesses’ bills. Usually, there were a few stragglers: about 10% of customers on average paid late and some never paid at all and had to be sent to collections. However, in April of 2003, only 25% of my clients had paid for services provided for them from January through March. In other words, 75% were late with their payments. I began to panic.
I had always paid myself last out of whatever was left after paying my staff and the bills – it seemed the fairest way to operate. It also helped me gain the respect of my employees and those in the business world. If there was more money leftover, I stashed it away for a rainy day. When revenue fell short, I made up the difference with savings and never took out business loans, so that I had no business debt.
Despite having done everything correctly, I was now faced with a serious cash flow deficit. I sat down my employees to tell them the bad news. “We’re running out of savings. Old customers aren’t paying their bills. New customers aren’t placing orders. Due to the lack of demand for work, we’re going to have to lay off production workers if money doesn’t start rolling in very soon.”
I did not expect the amazing transformation that occurred within my own staff. Sabrina, the office assistant who was usually quite obstinate, suddenly became quite helpful and got on the phone calling customers to remind them to pay their bills. The sales staff who had whined about the bad economy suddenly began to make sales again, and also were able to personally collect many of the unpaid bills. I had tears in my eyes – I was so impressed with all of their contributions to save the business.
Sabrina later came to me. “I took another job at night so you can cut my hours if you want,” she said.
“Why would you do that? You know your job is safe,” I asked.
“Because,” she said, “I don’t want to see Mitch get laid off.” Mitch was her friend and unfortunately, the first on the chopping block due to his low seniority.
In the end, the business was saved. Everyone got to keep their job. However, Mitch and Sabrina, young and inexperienced in the work world, both left soon after since they were concerned about their job stability. The business began to do well again and flourished and prospered better than ever before as new staff members, some who were seasoned experts laid off by my competitors, filled Mitch’s and Sabrina’s former positions.
Looking back on the experience, I realize that the reason my staff rallied together to save the company was because they viewed it as their own company, not a business which I technically owned. Their pride in their jobs, their sense of ownership, their camaraderie and friendship among each other was their motivation for keeping the company intact. The long hours and hard work I invested was an example to them. My openness showed my sincerity.
I gave them the power to save their own jobs and they came through.
After many years and many budget cuts, Mom was now the only remaining person working in her department who performed her specific duties. Although she was paid to work only 12 hours a week, Mom put in an extra 12 to 20 hours per week in volunteer time doing what she truly loved. She liked to joke that she was “cheap” labor.
On top of Mom’s volunteer contributions, she also supported the non-profit financially, buying gifts for all of us at Christmas from the non-profit run shop and donating money to special programs.
Mom assumed her job would always be safe. She was sadly mistaken.
Her employer, the non-profit, held a meeting one day where they told their shocked and dismayed staff that all part-time help and some full-time help would be “separated.” Mom tried to negotiate even fewer paid hours via her supervisor, who told her that the “powers that be” were not interested. She was told to pack up her personal things and collect her last pay check.
“But, you’re welcome to continue volunteering,” said the receptionist who handed her the check. “That’s the plan – to shift most of the work to volunteers to save money,” she said.
“Humph!” said Mom as she boxed up all the materials she had purchased with her own money and not sought for reimbursement.
Mom wasn’t upset that there was no warning. She was upset that the decision to lay her off was all done out of her control; that the method seemed cold and inhuman; and more importantly, that it seemed unnecessary. She loved her company, loved her job, and would have gone right on putting in tons of hours for free if she’d felt respected. However, she felt she was being treated as a Social Security number, just another “part time” status employee sent to the slaughter house – and not treated the way she saw herself – as an intelligent and important, incremental part of the non-profit’s operation.
Mom decided she would eventually go back to volunteering, but at the competing non-profit instead.
I told my mother that her old employers are idiots.
On March 20, 2003, after several months of threats to invade Iraq and take down Saddam Hussein, President G.W. Bush ordered the “shock and awe” bombing of Iraq. We were now going to war.
Just like so many Seattle-based businesses around me, my own business came to a screeching halt. Since I extended credit and billed my clients after the work was done, I relied on them to pay me in a reasonably timely manner so that I could pay my own businesses’ bills. Usually, there were a few stragglers: about 10% of customers on average paid late and some never paid at all and had to be sent to collections. However, in April of 2003, only 25% of my clients had paid for services provided for them from January through March. In other words, 75% were late with their payments. I began to panic.
I had always paid myself last out of whatever was left after paying my staff and the bills – it seemed the fairest way to operate. It also helped me gain the respect of my employees and those in the business world. If there was more money leftover, I stashed it away for a rainy day. When revenue fell short, I made up the difference with savings and never took out business loans, so that I had no business debt.
Despite having done everything correctly, I was now faced with a serious cash flow deficit. I sat down my employees to tell them the bad news. “We’re running out of savings. Old customers aren’t paying their bills. New customers aren’t placing orders. Due to the lack of demand for work, we’re going to have to lay off production workers if money doesn’t start rolling in very soon.”
I did not expect the amazing transformation that occurred within my own staff. Sabrina, the office assistant who was usually quite obstinate, suddenly became quite helpful and got on the phone calling customers to remind them to pay their bills. The sales staff who had whined about the bad economy suddenly began to make sales again, and also were able to personally collect many of the unpaid bills. I had tears in my eyes – I was so impressed with all of their contributions to save the business.
Sabrina later came to me. “I took another job at night so you can cut my hours if you want,” she said.
“Why would you do that? You know your job is safe,” I asked.
“Because,” she said, “I don’t want to see Mitch get laid off.” Mitch was her friend and unfortunately, the first on the chopping block due to his low seniority.
In the end, the business was saved. Everyone got to keep their job. However, Mitch and Sabrina, young and inexperienced in the work world, both left soon after since they were concerned about their job stability. The business began to do well again and flourished and prospered better than ever before as new staff members, some who were seasoned experts laid off by my competitors, filled Mitch’s and Sabrina’s former positions.
Looking back on the experience, I realize that the reason my staff rallied together to save the company was because they viewed it as their own company, not a business which I technically owned. Their pride in their jobs, their sense of ownership, their camaraderie and friendship among each other was their motivation for keeping the company intact. The long hours and hard work I invested was an example to them. My openness showed my sincerity.
I gave them the power to save their own jobs and they came through.
Monday, December 15, 2008
Budgeting by carrying only cash —
An experiment in self-controlled spending
For the first time in about twenty years, I went on vacation with just cash in my pocket: $500 for 5 fun-filled days in New Orleans over the Thanksgiving holiday. I picked the amount of $100 per day arbitrarily out of a hat. I had no idea if it would be enough for both my husband and myself, and if not, if I’d be able to resist the urge to pull out the “plastic.” We had a free place to stay at my Cousin Carla’s house, so we only needed to cover meals, entertainment, and souvenirs.
I haven’t lived on a cash budget since college in the late 1980s, when I took $20 out of the ATM every week and spent it until it was gone. My boyfriend at the time took up the slack, treating us to dinner out at restaurants with his weekly allowance of $40 from his parents (I had to work for mine).
In those days, neither of us had a credit card and couldn’t have gotten one even if we wanted. Credit cards weren’t given out nearly as readily as they are now, which was a good thing. I didn’t qualify for a major card until I was out of college, working full time, and only after building my credit score by successfully managing an account from a major department store (JCPenney) for a little over a year.
The cash method is a tried and true method of budgeting, still practiced by those who don’t trust putting their money in a bank. I’ve known many a man who turns his paycheck into cash every Friday, then pays any bills that are due before blowing the rest by having fun going out over the weekend. By Monday, he’s nearly broke and living off a tuna fish, frozen vegetable and macaroni and cheese casserole until the next paycheck arrives.
My husband and I loosely follow the cash method of budgeting with our weekly lunch allowances. However, this was the first time either of us had tried to follow a budget on vacation, a time when I tend to live high on the hog, then pay the price when I return home after racking up hundreds of dollars on my credit card.
To make the budget work, we didn’t include filling up the car with gas. First, there was no telling how much gas would be since prices yo-yo up and down like a bungee jumper from day-to-day and vary from station-to-station, as well as from city-to-city and state-to-state due to locally imposed taxes. Second, we had to have gas, so running out of money to pay for it was not an option.
The first road block to staying on budget occurred on the way to Louisiana. My car overheated in Tallahassee and my husband and I and the nice man at the Costco gas station couldn’t find any busted hoses, mostly because it was raining buckets and water was everywhere. Everyone we surveyed expected that the thermostat had gone bad, a cheap fix. I had to get a tow, but expected it to be free through my new AAA membership. It wasn’t — only the first five miles were free and the rest were charged at $5 per mile.
Cha-ching! Tow at $20.
I have a reasonably new car, still under partial warranty, and only felt comfortable getting work done by a licensed dealer. The repair shop found the problem right away – critters eating the hoses, probably squirrels – no kidding! Although many gnawed hoses could wait, the one to my radiator had to be replaced. (I got to keep the old hose with the gnaw marks for proof — knowing no one would believe me.)
Cha-ching! Dealer repair at $267
Unfortunately, the repair shop didn’t keep parts in stock and had to order them. It would take a day to repair, so we had to stay overnight at a hotel where the dealer got us a discounted room.
Cha-ching! Hotel room at $44.
Including meals, we had now spent $378 of our $500 budget and we hadn’t even made it to New Orleans, yet. Bah humbug! We had no choice but to break the budget and go to the ATM for more cash, a small portion of which we would use to pay for meals on the trip back home. This left us roughly $65 per day for two fun-filled days in New Orleans.
The details of how we spent the money will completely bore you. However, the attitudes of the people around us who we informed of our “daily budget” were both surprising and unexpected.
My cousin Carla watched with amusement our regular habit of pulling out our cash to see how much we had left. It didn’t sink in that we were serious about following our budget until we were nearly out of money that first night. “I would just use plastic,” she kept saying.
“Normally we would. But, that’s what gets us into trouble,” I explained. “I just paid off the credit card with my non-FDIC insured money market, since I had to close it out anyway.” Although there was nothing to stop us from racking up the credit card again, we decided we’d rather save the “plastic” for emergencies.
My cousin’s boyfriend, Ricky, was disturbed by my husband’s public display of cash. “You’ll get robbed. I know this town,” he warned. “Promise me, you’ll never do it again.”
“Okay, I won’t,” my husband promised and agreed to count his money inside his wallet, under the table. He wasn’t used to paying with cash and is very trusting.
“I’ll pay for it. Don’t worry about it,” said Ricky.
“Save it. You’ll need money tomorrow,” said my cousin Carla.
However, our goal was to spend all our money by the end of the night. The next day, we would start fresh with our next day’s budget. I didn’t want to be a leech, but agreed to let my cousin’s boyfriend pay for dinner because he really wanted to impress us and treat us to something nice. We would make up for it by buying their drinks the rest of the night until the money ran out.
The next day, when my cousin called her boyfriend to discuss the plans for that night, we heard her sigh and say, “They’re doing the money thing again.”
The money thing? Since when is budgeting with cash considered unusual and odd?
That afternoon, we met up with one of my husband’s friends from work with his wife, also in New Orleans for the holidays. We treated for brunch at the Café du Monde, which sells an affordable small cup of coffee for $2 and a decadent pastry called a beignet. The total cost for the five of us, plus a souvenir mug, was only $25. We mentioned to Carla that we had $40 left of that day’s budget, enough to pay for her parking and for the three of us to eat dinner at a sandwich shop we’d passed the day before.
What we didn’t anticipate was that my husband’s friends, who overheard us, assumed that we are hard up for cash. “We aren’t,” my husband tried to explain. “We’re just on a budget.”
At work the next week, the friend insisted on buying lunch for my husband, still under the impression that because we are limiting our spending, we must be in financial trouble. The friend is in his mid 20s and has carried a credit card since his teens. The concept of voluntarily limiting spending has never occurred to him and his young wife, who buy nearly everything on credit.
Although our budget did cause some awkward moments, we’re laughing all the way to the bank. I just balanced my checkbook and we actually saved a small amount of money last month despite going on vacation (a challenge after grocery prices and utilities went up this summer).
I only wish I’d used the same method of paying in cash to buy Christmas presents — I’m already over budget!
I haven’t lived on a cash budget since college in the late 1980s, when I took $20 out of the ATM every week and spent it until it was gone. My boyfriend at the time took up the slack, treating us to dinner out at restaurants with his weekly allowance of $40 from his parents (I had to work for mine).
In those days, neither of us had a credit card and couldn’t have gotten one even if we wanted. Credit cards weren’t given out nearly as readily as they are now, which was a good thing. I didn’t qualify for a major card until I was out of college, working full time, and only after building my credit score by successfully managing an account from a major department store (JCPenney) for a little over a year.
The cash method is a tried and true method of budgeting, still practiced by those who don’t trust putting their money in a bank. I’ve known many a man who turns his paycheck into cash every Friday, then pays any bills that are due before blowing the rest by having fun going out over the weekend. By Monday, he’s nearly broke and living off a tuna fish, frozen vegetable and macaroni and cheese casserole until the next paycheck arrives.
My husband and I loosely follow the cash method of budgeting with our weekly lunch allowances. However, this was the first time either of us had tried to follow a budget on vacation, a time when I tend to live high on the hog, then pay the price when I return home after racking up hundreds of dollars on my credit card.
To make the budget work, we didn’t include filling up the car with gas. First, there was no telling how much gas would be since prices yo-yo up and down like a bungee jumper from day-to-day and vary from station-to-station, as well as from city-to-city and state-to-state due to locally imposed taxes. Second, we had to have gas, so running out of money to pay for it was not an option.
The first road block to staying on budget occurred on the way to Louisiana. My car overheated in Tallahassee and my husband and I and the nice man at the Costco gas station couldn’t find any busted hoses, mostly because it was raining buckets and water was everywhere. Everyone we surveyed expected that the thermostat had gone bad, a cheap fix. I had to get a tow, but expected it to be free through my new AAA membership. It wasn’t — only the first five miles were free and the rest were charged at $5 per mile.
Cha-ching! Tow at $20.
I have a reasonably new car, still under partial warranty, and only felt comfortable getting work done by a licensed dealer. The repair shop found the problem right away – critters eating the hoses, probably squirrels – no kidding! Although many gnawed hoses could wait, the one to my radiator had to be replaced. (I got to keep the old hose with the gnaw marks for proof — knowing no one would believe me.)
Cha-ching! Dealer repair at $267
Unfortunately, the repair shop didn’t keep parts in stock and had to order them. It would take a day to repair, so we had to stay overnight at a hotel where the dealer got us a discounted room.
Cha-ching! Hotel room at $44.
Including meals, we had now spent $378 of our $500 budget and we hadn’t even made it to New Orleans, yet. Bah humbug! We had no choice but to break the budget and go to the ATM for more cash, a small portion of which we would use to pay for meals on the trip back home. This left us roughly $65 per day for two fun-filled days in New Orleans.
The details of how we spent the money will completely bore you. However, the attitudes of the people around us who we informed of our “daily budget” were both surprising and unexpected.
My cousin Carla watched with amusement our regular habit of pulling out our cash to see how much we had left. It didn’t sink in that we were serious about following our budget until we were nearly out of money that first night. “I would just use plastic,” she kept saying.
“Normally we would. But, that’s what gets us into trouble,” I explained. “I just paid off the credit card with my non-FDIC insured money market, since I had to close it out anyway.” Although there was nothing to stop us from racking up the credit card again, we decided we’d rather save the “plastic” for emergencies.
My cousin’s boyfriend, Ricky, was disturbed by my husband’s public display of cash. “You’ll get robbed. I know this town,” he warned. “Promise me, you’ll never do it again.”
“Okay, I won’t,” my husband promised and agreed to count his money inside his wallet, under the table. He wasn’t used to paying with cash and is very trusting.
“I’ll pay for it. Don’t worry about it,” said Ricky.
“Save it. You’ll need money tomorrow,” said my cousin Carla.
However, our goal was to spend all our money by the end of the night. The next day, we would start fresh with our next day’s budget. I didn’t want to be a leech, but agreed to let my cousin’s boyfriend pay for dinner because he really wanted to impress us and treat us to something nice. We would make up for it by buying their drinks the rest of the night until the money ran out.
The next day, when my cousin called her boyfriend to discuss the plans for that night, we heard her sigh and say, “They’re doing the money thing again.”
The money thing? Since when is budgeting with cash considered unusual and odd?
That afternoon, we met up with one of my husband’s friends from work with his wife, also in New Orleans for the holidays. We treated for brunch at the Café du Monde, which sells an affordable small cup of coffee for $2 and a decadent pastry called a beignet. The total cost for the five of us, plus a souvenir mug, was only $25. We mentioned to Carla that we had $40 left of that day’s budget, enough to pay for her parking and for the three of us to eat dinner at a sandwich shop we’d passed the day before.
What we didn’t anticipate was that my husband’s friends, who overheard us, assumed that we are hard up for cash. “We aren’t,” my husband tried to explain. “We’re just on a budget.”
At work the next week, the friend insisted on buying lunch for my husband, still under the impression that because we are limiting our spending, we must be in financial trouble. The friend is in his mid 20s and has carried a credit card since his teens. The concept of voluntarily limiting spending has never occurred to him and his young wife, who buy nearly everything on credit.
Although our budget did cause some awkward moments, we’re laughing all the way to the bank. I just balanced my checkbook and we actually saved a small amount of money last month despite going on vacation (a challenge after grocery prices and utilities went up this summer).
I only wish I’d used the same method of paying in cash to buy Christmas presents — I’m already over budget!
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