The household budget?

Some cash-strapped households in the Commonwealth are getting clobbered financially, and decisions can be hard to make. Have you ever noticed that it’s easy to budget when you’re rolling in the clover, but it’s an emotional drain when times are lean?

I think a lot of folks simply ignore budgeting altogether in bad times because they feel so hopeless. After all, at some point, it costs what it costs to live. You really can’t do anything about it. Rubbing the jagged details into your raw eyeballs every month isn’t going to solve anything.

If you’re paying, say, $900 a month to rent your Saipan love shack, you can, if you want, write this number down on a sheet of green ledger paper. You can stare at it. You can scribe little diagonal lines through the zeros so they look more like definitive integers and not like stray vowels. You can multiply $900 by 12 and then announce to your spouse, in a self-congratulatory tone appropriate for discovering cold fusion, “Honey, we’re spending ten-point-eight grand a year on rent!”

After all those contortions, do you know what your rent will be? It will still be $900 a month, pal, same as it always was.

I’m not pooh-poohing the virtues of quantitative analysis, budgeting, forecasting, or whatever. And I’m certainly not deriding cutting expenses intelligently. But I get a little confused when I hear bromides like “households should be run like a business.”

Says who? Did your marriage vows specify a minimum Internal Rate of Return for the commitment? Can you do a tax-deferred exchange of families if yours doesn’t meet your return on equity criteria?

The theory of the firm and the theory of the family are pretty much opposites. You can sell off your company’s assets to raise cash, but would you sell your family photo album? You can issue equity in your company, but would you sell shares in your spouse? You can merge your firm with a competitor, but are you going to merge your family with the neighbor’s?

A firm is rational to be highly leveraged, since debt is cheaper than equity, but would you want your household to be as indebted as possible?

You can defer maintenance on factory machinery, but are you going to put off getting the kids’ teeth fixed?

The single, overriding issue in any business, every single day, is this: Should it continue operating, or should it be shut down. If the assets can be employed more productively elsewhere, then it can make sense to dismantle everything and to cash-out. (That’s what corporate raiders often do). Households don’t have this choice, as such. You don’t eyeball your family over the breakfast table every morning and ask yourself if it’s time to liquidate them. Well, not if you’re normal. However, if you’re being served runny oatmeal or weak coffee, it might be sufficient provocation to reconsider things.

When times are tough, families that are strapped for cash have to endure all sorts of cockeyed “advice” from the chattering ether about how they should manage their money. That’s how pop-culture operates. Well, true, many families are wildly irresponsible financially, since most people don’t think about tomorrow as long as their bellies are full today. Even from Saipan, you can see that the U.S. is proving this fact, big time, with its debtors’ pity party. Suffice it to say that fools and their money are soon parted; the same thing applies to fools and their freedom.

Still, not every household that hits lean times got there by being irresponsible or foolish. There’s a weird paradox at work: If you haven’t been squandering money, you’re already running so lean that there’s less fat to cut when the time for cutting arrives. I know a lot of people in Saipan in that position.

Some things can’t be solved by analysis. If you tracked every cent you spent, what good would come of it? For some people, maybe a lot of good. But for most folks I know, who are responsible to begin with, it would just be a wasted exercise in bean-counting.

Sometimes, you’ve just got to shrug your shoulders, hunker down, and hope for the best.