Tuesday, 21 January 2014

Budgeting...and kaizen

Frightening word. Budget.

Money = sexy.

Budget = grim.

We'll think it'll be alright...earn some money, spend some money.

But will they balance? Who cares? Why should we worry about such things?

These writings are forming the back bone of a book I'm planning on writing once I have completed a current novel. I will be adding to these writings as I proceed closer to planning and writing the book.

Sometimes we let our expenditures run away with themselves - we dive into purchases for the sake of purchasing, we spend thinking that the money will sort itself out, we ignore warning signs, we fall back into habits that brought us into debt.

Kaizen, a Japanese method used in businesses, is about making small changes to improve productivity. For instance, if you place the bin closer to where you work, you save yourself a few seconds than if it is further away.

A few seconds? Who cares?

Well, a few seconds add up each day. Let's say, you saved yourself 10 seconds each time you put something in the bin. Five times a day = 50 seconds, five times a week = 250 seconds. You work 350 days a year, so that equates to 76250 seconds or 21 hours. Wow! That's three days of work. Just by bringing the bin closer.

I love this analogy and I love the philosophy.

I try to implement kaizen in many things that we do - keep things that I am currently working on close at hand and in the same place; but keep things that will distract me further away. (Closing the door on the kids playing, I've just found, cut their interruptions from once every few minutes to a twenty minute stretch of quiet writing!!)

I've been teaching this with pupils for years: you have a hundred pages to read in six weeks: that's 42 days, so that's 100/42 = 2.3 pages a day. Call it 3 pages and get it done in 33 days instead. 3 pages isn't much, I remind them. Next issue: when will you do this? We need more information. Timing the pupil, we find it takes them 5 minutes to read 3 pages. 5 minutes - that's all we require. 5 minutes a day for 33 days, or 42 days and have the weekends off, and you're done. So when will you put 5 minutes into your reading...get home from school, grab a drink, find a quiet space and read. Time yourself too!

If we can do it with reading or other tasks, we can do it with money too. It's all about getting good habits and driving away bad habits.

In his highly recommendable book The Happiness Advantage, Shawn Ancor relates how he changed his habits by making some things easier to - such as putting his guitar that he wanted to practise in the middle of his living room - and some things harder to to - such as taking the batteries out of his remote control. I love the image of the guitar in the middle of the room - okay, he was living alone so he didn't have children who could move it or get in the way of their play, but the image is really helpful.

We can do the same with our money. Put the money in the middle of the room...perhaps. Just make it easy for you to cut bad habits and get into good habits.

Let's imagine that each time you enjoy a lunch, you buy what you want and don't care or think about the cost.

It usually comes to say 11.95 because you buy a muffin with the sandwich and treat yourself to a second coffee...Next time just take 10 with you (£,$,€...whatever); that'll save 1.95 a day for five days, or 702 a year. Wow!!

Leave your cards at home. I've not used my debit card for over 6 months; I've forgotten its pin. This is part of a strategy we're currently using to minimise expenditures - only one of us has access to the current account when we're out. That means that I can't go play with money when out and about. For the odd lunch I need to buy, I use cash. Once or twice, I've hit the budgeted amount (10) and had to put something back. I'm still alive and smiling. And it's taught me to add up the purchases as I'm going along the aisles.

Keeping easy payment methods out of reach can save a small fortune.

The other thing - which is harder - is to check your balances daily. Why not weekly or when I feel like it? Because by then, my accounts may be in trouble - I won't be able to budget so easily, I won't know where I am.

If we're going to master life, we must master money.

Money is the great force of the human universe that motivates, intimidates, frightens, and empowers us. Yet most people (and many highly intelligent professional people I've spoken to) prefer not to think about it; they prefer not to worry about it.

Well, when we ignore it - it has a tendency either to avoid us like the plague (and keep us poor) or we end up in immature spending habits that perpetuate debt cycles. For some that can end in bankruptcy, for others it can end in middle class poverty - lots to show but not much to invest.

Each banking day of the week (I get the weekends off!) I sit down and go through our accounts. There are three that I need to assiduously check daily - business and two personal accounts, one used to pay all the direct debits and the other our current account. Three different banks. Sounds like a pain - well, make it fun!

Kaizen is all about saving time. So I time myself each time I sit down at the computer to check the online banking. I've downloaded apicmac timer which I clock my time spent on checking my balances and making any transactions I need. You can download free ones for the PC too. Simple idea  but it makes me accountable for my time.

Time is money remember. (How much to do you earn per hour? Use it as a gauge to assess the value of your time.)

But what about the guitar in the middle of the room? Okay, more difficult to do with the laptop - so I've put a sheet of tasks, in order of importance, to be done daily.

At the beginning of each fortnight, I set up an excel sheet that I then print out with my list of daily activities. Make checking the accounts and budget the first thing to do. That's the equivalent of putting the guitar in the middle of the room.

Lists are important - but they need to be tied into overall goals of what you want to achieve in six months, a year, two years, ten years, etc. I make a note of the times I take on the sheet (on the print out rather than on the computer, as then it is hidden and not visible - think of Ancor's policy of placing his guitar in the middle of the room! - my sheet is next to my laptop) so when I finish my banking, I jot down the time and check my 'score.' I've noted that it takes on average 10 minutes to do the banking.

This then gets put onto the excel template:

2) WRITING BLOG: 1 hour.

I keep a note of the times for about three weeks, after which it has become so automatic like brushing my teeth, which means it has become an habit.

These are good habits and kaizen techniques can help streamline our lives by making the good things more habitual and the bad things we do less accessible.

Of course, you have to implement the initial changes - hence I've found keeping an excel sheet with things to do and a check box next to them makes me accountable (to myself, sure, but you do feel bad when you've not done something.)

Writing this column is a once a week task. It's on the sheet. It's fun waking up and checking what blog I'm going to write, as I change the days on which I write - that removes a sense of 'oh, it's Wednesday, I'm going to write my Mastering Life blog' to 'hey! I wonder what it'll be today!' Shawn recommends removing the choices - and I agree: but the choice is already made on the day I set the timetable: I jot down a scheme of work, Monday = Economics Circle Blog; Tuesday Education blog; Wednesday Economics powerpoint for pupils; Thursday Mastering Life blog... I don't have a choice that I will write or not - I will write.

Each night, I  also write at least ten minutes on my current novel. Ten minutes can stretch to thirty, as I do it last of all when my boys are in bed, so it's open-ended. But ten minutes minimum each day, that's 70 mins a week...I'll be finished before the Easter deadline I've set.

Similarly with the budget - I take £10 into the supermarket to get lunch; what I shall get is dependent on offers, prices, and reading my body's needs. Hmmm, fish today! I've taken the choice away of spending more than my budget, thereby saving pennies but left some creativity for what I shall eat.

For some people, the range of choices may have to be further limited. If you're of the mind, "oh, I can't decide what to eat" then get a meal planner and stick to it. It's Wednesday, so it's mackerel, salad, brazil nuts and dark chocolate for afternoon snack. Thursday, it's chicken breast with mixed vegetables, pine nuts, and 9bar for snack. Friday... you get the idea: remove choice to help sustain the good habit.

So it goes with money. The hardest thing about budgeting is sitting down to do it. But with three accounts to juggle, I found it only took me ten minutes. I do it first thing in the morning, straight after breakfast. Doing it daily can save me a £50 bank fee if I happen to go over my overdraft limit - which has happened a couple of times in the last year - but not since I've been checking my budget daily, motivated in part by the pain of an unnecessary fee and in part by the need to save more, to build up investments, and to really know what's happening the accounts.

(Not knowing what your money's doing is like driving a car blindfold - a very dangerous practice!)

Several weeks into the discipline (discipline - to follow a principle), I feel much more confident about our monetary flows. When an unexpected expenditure comes up, it hurts. It's not in the budget! But rather than panic, I adjust the flows and work out what needs to give to pay for it. Accordingly, I'm building a fund. Our mentors suggest at least six months' worth of income to be put aside for such unexpected events. That can be a lot of money for some, but the pain of having to pay extra bank interest or fees is much much worse.

Kaizen can thus help. Say to yourself - right, what kaizen can I do today? What little thing can make life that little bit easier? Yesterday, I innovated painting door (I'm doing two to three doors a week so the whole house will be done in a month) while playing some investment videos - I get an education while I paint! Great use of my time.

Setting up the budget plan and and writing a basic excel sheet with your current balances and expected outgoings can take an evening or two. But once it's automated, you're off! Ten minutes a day. That's it.

But you need a goal. What are you saving for? What investment would you like to make? A really good notion is to find what is the basic expenditure you need to make monthly and stick to it rigorously. E.g., £1000 dead on. No more. When your income grows, keep the expenditure the same otherwise, you'll fall into bad habits and spend more money and not feel the improvement over time. That's another area of course.

This is a HUGE area - and I shall be adding to the file over time, as the goal (always have a goal) is to produce a book from this.


  1. Thanks - sorry it's been a while posting a return - I seem to have been inordinately busy setting up digital magazines. Soon Prosper Magazine will be available on Apple apps/newsstand, which will deal with a wide range of self-development issues.