Operate an efficient money production line
Imagine that your life was like an assembly line at a manufacturing company. Just like the person in charge of production, you would want to ensure that none of the raw materials were wasted and that you got as much finished product as possible out of your machinery time and employee effort.
Let’s review the Japanese words for inefficiencies — muda means idleness or wastage of resources when trying to complete a task; mura is the unequal or unbalanced use of different resources; while muri means the excessive or unreasonable use of a resource which could put it at risk.
In order to get the most out of the money you earn or have on hand to further your goals, you need to eliminate these types of inefficiencies. Your aim, like that of a profitable corporation, is to utilise your financial resources in ways that will allow you to get an optimal return on your money.
Don’t squander your money resources
One of the areas you may need to address is the wasteful use of money in your current spending. Do you try to find the best shopping deals to cut back on your grocery bills? Do you conserve on your usage of utilities such as light, water and petrol to get the most while spending the least?
Do you habitually use credit cards or payroll loans to finance consumer purchases? The interest you pay on debt actually represents money that has been inefficiently expended; you could have channeled those funds into productive use instead of making the financial institutions richer.
Another area of inefficiency is when you have money that sits idly in a non-interest bearing account, or funds that are not generating as much return for you as possible. You can get better interest rates on your money by simply switching from a savings account into a fixed deposit.
Try to maintain your money balance
You also need to determine if there is an imbalance or unevenness in your use of money. Are you putting too much of your resources into some areas while ignoring other important ones? Preparing a detailed budget will help you to see where you may be inefficient with your allocation of funds.
Use a budget calculator to itemise your compulsory bills and non-essential expenses over the course of a year. Are you satisfied that your expenditure items are all worthwhile, or do you need to eliminate some of your spending excesses?
Your money choices may help you with, or hinder you from achieving your goals. Consider if you could become leaner by directing more funds into savings and investments for your future needs such as buying a home, putting your children though college or planning for retirement.
Don’t overload your money capacity
You also need to assess if you’re putting yourself under financial pressure by having unreasonable expectations of what you can accomplish with the money you have. You need to be realistic about the kind of lifestyle you can afford based on the income you earn, and try to live within your means.
Let’s say that you want to buy a newer car to reduce your repair costs, but the loan repayment that would be required would jeopardise your ability to pay your other bills. Don’t think that you’ll be able to catch up if you stretch to get the vehicle; you’ll only overburden your budget with that debt.
You also have to make the right decisions when investing your money. You could lose your funds by trying to get improbable returns from get-rich-quick schemes or chancy business plans. Be practical about what you can gain given your level of experience and your ability to absorb risk.