Eliminate The Muda!

5 Ways People Waste Money

By The LeanLifeCoach

As routine readers of Eliminate the Muda know, I often focus on opportunities to increase wealth by eliminating waste and wasteful activities. Friends and family routinely flush money down the toilet unnecessarily or fail to take advantage of opportunities to save. Reflecting on my own life I realize I have made the same mistakes. In my past, I have identified 5 major sources of this waste:

Ignorance – Lack of knowledge has probably been the greatest cause of wasted money in my life. I would start with my first 30 years of existence and roll them all up into one giant ball of financial failure! While many lay blame on their parents or schools for their lack of finance related skills I think this is a cop-out.

As a parent I do believe we have a responsibility to provide our children with guidance and education on all things related to money. Frugality to financing should be a part of every child’s upbringing. Schools too should see the societal benefits of educating our children to be financially competent.

But when our parents fail or our schools fail we have a responsibility to ourselves, our families and our country to take the necessary steps to learn what we must.

Stupidity – Even after you learned to ride a bike there were times that you experience momentary lapses of intelligence. You knew you should have been looking in front instead of that cute girl passing by in a car, but you slammed into the wall anyway!

Complete with an education and understanding of personal finance we may still make stupid mistakes. We may fall for a poor investment following the herd into technology or oil. We may misjudge the risks and rewards of a whole-life policy over a term life policy.

With every financial decision, be it an minor expense or major investment we should take time to be prudent. Avoid hasty decisions and make the effort to gather as much information as reasonably possible before moving forward.

Laziness – Not taking action may be as or more detrimental than taking the wrong action. Laziness when it comes to building wealth seems largely to fall upon us when we are younger. We have difficulty thinking long-term and envisioning a future where our only support may come from what we have saved ourselves.

Lucrative opportunities may fall into our laps that we let slide because we are already worn from a full work week.

Providing for our future is a job that must be done. You fundamentally have 3 choices:

1) Do nothing and pay for it big-time in the future.
2) Do it too late and be forced to work extra hard for smaller benefit.
3) Spend a lifetime of reasonable effort for what should be substantial return.

Impatience – The best explanation for this would be how we pay a convenience tax provided by fellow Yakezie member Engineer Your Finances. The very first time my wife and I began tracking our expenses we found we were spending over $800 per month on dining out! We paid huge profits to restaurants for the convenience of not having to cook, clean dishes or wait a little be longer while preparing our meals.

People pay vendors to replace a light switch or repair their leaky faucet because they are too impatient to take the time to learn how to do it themselves.

We are impatient often because of our perceptions that we lack time. We don’t lack time; there is no less time today than there was yesterday. We are simply not using the time we have effectively.

Consider what you do each day; everything. Then consider what it truly necessary to accomplish your goals and maintain a fulfilling life.

Materialism – At least as far back as the late 1700’s Adam Smith recognized the civilized man’s desire to accumulate at the rate with which his income increased. With the added advantage of debt and our ability to leverage what capital we have, our desire to consume and accumulate has only increased.

No sooner than we buy a new flat screen TV do we see a bigger and crisper picture on another. No sooner than we drive home in a new car might we begin dreaming of a faster or larger one for the next purchase. And if not large and expensive purchases many of us must have the name brand from the right store for fear that our friends will think differently of us.

Breaking down the concepts of what is needed as being unique and separate of what is wanted will provide significant opportunities to save.

I’m sure that you are not guilty of any of these mistakes , but your neighbors on the left and on the right probably are. Certainly I have made each and every mistake.

Readers: Reflecting on your financial or spending decisions can you share how you overcame one of these habits of waste? Certainly this is not a definitive list, can you provide another common example of how people waste money?

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Financial Filing Systems

By The LeanLifeCoach

Today’s post is from Mr Credit Card from www.askmrcreditcard.com. Though his site reviews credit cards, today, he is going to share how he organizes and files his financial statements. If you are looking for a credit card, please check out his thoughts on the best credit cards

One of the most forgotten but important factors in keeping ahead of finances is organization. An unorganized person misses payments, loses receipts and has no idea which bills have or have not been paid. It may seem daunting, but this checklist may aid you in getting things in order and in the end, saving you some cash. In this post, I am going to show you how I organize my files. But first, why even organize your files?

The Purpose of Organizing Files

As stated in the introduction, there are a number of reasons to organize personal finance files. Here are just a few:

Helps to make sure bills are paid on time.
Aids in keeping proper and accurate records.
Helps to track your monthly budget to assist in cutting excessive spending.
Helps to track monthly bills and expenses that are used in filing taxes which can make year end filing a lot easier.

Organize bills and statements by either due date or by interest rate, preferably highest to lowest to ensure that the highest interest rate is paid off quickly, thus saving you money.

What Needs to Be Organized?

Gather all of your bills and statements from monthly cable bills all the way to checking account statements. Everything that involves money needs to be organized and accounted for and since we’re organizing we may as well include it all now. It is also helpful to grab a bunch of those cheap folders and a Sharpie. I get mine from staples BTW. Some of the bills and statements you need to gather are the following:

Personal Finances

Monthly Bil

ls – utilities, cable, cell phone – I tend to lump under one file because these are bills that we pay every month. If it is all in one file, then filing it becomes much easier. I used to have separate files for each but they were really cumbersome. This works for me. My comcast, Verizon FIOS and AT&T bills go into this file.

Mortgage, estate taxes and auto loan – This goes under a separate file from my utilities etc because these are loans that will eventually be paid off anyway. The thing I watch out for in the mortgage bill is the escrow account and I make sure that I keep the year end statement that list the annual interest that I have paid. This amount is tax deductible. The auto loan is just there so I do not have to set up a separate file. Presently, our mortgage is with Wells Fargo and the auto loan is with Toyota.

Bank accounts – savings, checking, retirement – Next file is the bank account. I put all the statements in this file including Mrs Credit Cards’ statements. Presently, we bank with Bank of America, so there are just a couple of statements every month. The most important statement (all are important) is the annual statement that shows how much interest you have earned (reportable to the IRS).

Credit Cards – I keep a separate file for all our credit card statements. They are important to keep in case there is any disputes. Presently, I use cash back credit cards (have two and have one for our business) and it is important for me to keep track of my rebates that I earn. Like all my other files, I keep the statements for 12 months and once the new year starts, I just file them away in a separate box and use the same file again for the following year.

Insurance – This file is complicated – auto insurance, home insurance, life insurance

Medical File – While you could actually file this under the “insurance” file, I think a separate file for medical expenses, medical insurance policies make sense. This file is huge and complicated. But you really want to keep every receipt and statements here.

Frequent Flyer accounts and memberships – You simply gotta keep track of all these miles and frequent flyer points you have accumulated because they have monetary value. You do not want them to lapse. Because I have flown so many airlines, and stayed in so many hotels, both Mrs Credit Card and myself are members of lots of programs! This is the file which we keep track of our points status from Starwood, Delta Skymiles, Virgin etc.

Coupons, rebates file – This is a little coupon folder that Mrs Credit Card has.

Warranties and Big Ticket Purchases – This is the file or box where we put any instruction manuals or warranties from any appliance or big ticket purchases that we have made. I feel that it is important to have them all at one place so that you know where to find it if anything breaks down

Personal tax information – Always have a separate file for this. Not much else to say

Investment File – I have a separate file for my investments. They include statements, portfolio reviews, K1 statements from some ETFs that I’ve bought! I guess if you have kids 529 plans, then I would put them in this file too

Business Finances

I keep my business finance totally separate from my personal finance files (just to keep them clean). But these are the files that I have.

Business Checking Account statements – at present we only have one bank account with Bank of America

Business Credit Cards – We used to use one of our personal cards for business expenses, but we have now gotten a dedicated business credit card

Payroll Records – We use paychex and this one requires a huge box since they send lots of statements!

Receipts for expenses and purchases – We have a folder that has 12 or more slots and we simply put receipts there according to month

Notes and Other Helpful Hints

There are some things to keep in mind when organizing that will make the process even easier. For instance, I set up autopay to automatically pay bills from my bank account which helps to not only ensure that bills are paid on time, but it saves money in late fees and interest. I do, however, still receive the actual statements in the mail so I have something tangible for filing purposes. There are some areas like our webhost or internet services that simply do not send mail statements that I have to print them out myself.

We use Quicken as well to keep track of both personal and business expenses
I mentioned a coupon and rebate file because whenever you have a rebate or a coupon, it helps to have it where you can find it quickly. What good is having a coupon if you can’t find it when you need it?
It is also helpful to jot down information inside the folder such as contact numbers. This way when you need to give customer service a call, you can just grab the appropriate file. This is also where I note things like passwords, though some people may not be comfortable with that.

Feel free to experiment and switch things around. Try out different filing systems, for instance and find things that work for you, personally.

In the end, you’ll feel much better about having your personal finances all organized and in one place. You’ll find yourself saving tons of time looking for stuff as well as saving money and the frustration that is inevitable when you can’t find something. It may seem like a daunting task, but when organizing is completed, life is a lot less stressful. This is what I do and my methods. Please share you methods with us.

Lead photo by BLW Photography
Content photos by AskMrCreditCard

Ban Antibiotics and Save Money

By The LeanLifeCoach

Blasphemy is what my wife will say when she sees this blog title. We have long had the debate regarding the value and safety of vaccines and drugs. Of course she is on the side of the doctor knows best and I am on the side of we need less.

There is an old saying “a happy wife is a happy life.” So it won’t take much to conclude that I have, mostly, yielded to her desires to run to the doctor anytime this sniffles, sneezes and temperatures have become worrisome.

Not only am I not a professional financial consultant, I am also not a trained physician nor biologist, scientist or other ist. Science however is fascinating to me and as a result I’ve spent a lifetime absorbing whatever comes my way.

In the course of my life a number of studies, theories and suppositions have been presented that suggest when it comes to bacterial diseases we are fighting the fire with gasoline. Unless you have been living under a rock you have heard concern that consumers incorrect use of antibiotics are actually enabling germs and bacteria to build resistance to the medications we have created. I’ve always wondered if it is our use or simply nature. After-all life has been adapting for millions of years; why stop now?

So here I would like to present not just the musings of a self-described science nut but the first concrete evidence I have ever seen:

OSLO, Norway — Aker University Hospital is a dingy place to heal. The floors are streaked and scratched. A light layer of dust coats the blood pressure monitors. A faint stench of urine and bleach wafts from a pile of soiled bedsheets dropped in a corner.

Look closer, however, at a microscopic level, and this place is pristine. There is no sign of a dangerous and contagious staph infection that killed tens of thousands of patients in the most sophisticated hospitals of Europe, North America and Asia last year, soaring virtually unchecked.

The reason: Norwegians stopped taking so many drugs.

I came across this information from one of my favorite science blogs, the Curious Cat. The article quoted above comes from The Miami Herald: Norway Conquers Infection By Cutting Use of Antibiotics.

In particular the paper notes that the Methicillin-resistant Staphylococcus aureus [MRSA] bug kills about 19,000 Americans every year. That is more than the swine flu, avian and even AIDS! What makes it really crazy is that we are spending millions for the privileged.

The World Health Organization says antibiotic resistance is one of the leading public health threats on the planet. A six-month investigation by The Associated Press found overuse and misuse of medicines has led to mutations in once curable diseases like tuberculosis and malaria, making them harder and in some cases impossible to treat.

Now, in Norway’s simple solution, there’s a glimmer of hope.

In our family of four it is well known that I am the healthiest of all. This is ironic considering that I rarely take any medications, even aspirin and I travel at least 30 weeks each year meaning I am exposed to literally millions of people and all of their illnesses. Throughout my career I have missed less work (and therefore earned more) than my counterparts and I have always attributed it to having a strong immune system. My belief is that by exposing myself to illness and allowing my body to fight it naturally, like exercising a muscle, it has gotten stronger.

Many times when the kids were sick my approach is to let it run its course. This is surely difficult for a worrying parent. More than half the time when my wife overrules me and goes to the doctor she has been told the same thing. I recall a number times however our doctor being left unclear of the cause and prescribing medicine “just to try.”

No doubt, there are times when we all need the assistance of drugs and doctors. However, when evidence such as this comes out you have to ask… The answer, it would seem, is simpler than the problems we face.

“It’s kind of a no-brainer,” he said [Dr. Robert Muder]. “You save people pain, you save people the work of taking care of them, you save money, you save lives and you can export what you learn to other hospital-acquired infections.”

“So, how do you pay for it?” Muder asked. “Well, we just don’t pay for MRSA infections, that’s all.”

Readers: Believe me, my wife would love nothing more than if you all disagreed with me. Even if you do, I am interested in your opinion. Do you believe our population has been over-medicated?

photo by due.chiacchiere

Aldi - My New Favorite Store

By The LeanLifeCoach

Aldi – If you have not heard of it, you will. This company is taking a new frugal America by storm. It is a fascinating business model with a unique history that I won’t bore you with, mostly. Aldi applies many of the Lean Management principles that Eliminate The Muda aims to share. Their roots date back to 1913 when the mother of Karl and Theo Albrecht opened a small grocer in Germany. The sons took over after the war and quickly expanded to 300 stores in just 14 years. At that point they had a falling out and split the company in two. Aldi Sud (South) is the organization that operates stores in the U.S.

Interesting maybe for a business buff, for you what’s important is that their lean approach translates into lower cost products. This is not a conventional grocer; they focus on the staples and few impulsive items except when they can offer an exceptional value.

Great things about Aldi include:

Sticker Shock – but this is the good kind because of their low, low prices. Do yourself a favor before you ever go into an Aldi for the first time; put together a price list of your common purchases. Then walk through, don’t shop, an Aldi. By the time you finish your trip you will be ready to shop with vigor!

Odd Brand Names – This is a European company and they buy many products from European suppliers. For many other products they purchase in large quantities to keep prices low and then private label them. My son says it is like walking through a parallel universe where the products are the same…. but then again they are not. They may seem a little odd, but try them; in most cases you will like them!

Bulk Purchases – Hey, check this out, you don’t have to! Aldi buys in big lots so that you don’t have to!

Aldi is a different experience – Aldi has a different business philosophy and it shows in the experience.

Skeleton crew – This is not like other grocers. They have just enough people to put the merchandise out and ring it up. Everything else is self-serve!

Bring a quarter – Aldi doesn’t even want to waste a dime paying an associate to chase the baskets in the parking lot. You have to have a quarter to deposit into the carts to release them from storage (think lockers at the airport). When you return the cart you get your quarter back!

Take a box – While shopping if you happen to need a box to organize or carry your purchases, grab one. They usually have a few empties in strategic locations but feel free to unload the last item or two on the shelf to free up the good ones.

You’re the bagger – Did you bag groceries when you were a kid? If so, it is time to reminisce. Bring your own recyclable bags, it green too. If not they will sell you some bags or see the box tip above.

No Credit! – That’s right they are working on thin margins and every penny counts towards keeping your prices lower. They are not paying the credit card fees. Cash and debit or get out!

Readers: Have you ever shopped at an Aldi? Do me a favor and give your honest impressions in the comments below!

photo by whgrad

Combat the Closing Techniques - The Power Of Suggestions

By The LeanLifeCoach

Combating the Closing Techniques is a new series at Eliminate the Muda! This series explores the tactics companies and salespeople use to separate us from our cash. For background, you may want to read the post that originated this concept, Marketing or Manipulation, featured on Financial Samurai.

Jimmy was driving down the road in his new convertible, happy as could be, the wind blowing though his hair. He was among the first in town to drive a new iSport. What a sweet car this was with 18-inch chrome wheels and a sexy pinstripe down the side.

He had just turned off the highway on his way home as he began to consider how excited his wife was going to be when she saw the converti…. ooops! Wait just a minute, how is his wife going to feel about this new car?

When he left for the dealership he had assured his wife he wasn’t actually going to pull the trigger on the purchase. Suddenly Jimmy was trying to figure out how a quick trip to just look at wagons ended up with him behind the wheel of a totally impractical red sports car.

This article was featured in the Carnival of Personal Finance hosted by CreditCards.com. Please check out this carnival for many other great articles about personal finance.

Enter The Power Of Suggestion

Unfortunately, this morning Jimmy did not take the time to consider the fact that he was entering the enemy’s territory and prepare a strategy. We all know that home field always has the advantage.

When the conversation began with the salesman it was innocent enough. Jimmy quickly complied with requests for name, rank and serial number. This easy compliance was a signal to the salesman that Jimmy was open to suggestion and ready to be played like a Stradivarius.

Johnny, the salesman, made a point of asking several questions to get an idea of what Jimmy’s values and desires are. Johnny learned that Jimmy is a white collar employee working hard to get noticed and move up the corporate ladder. He also inquired about Jimmy’s past vehicles and learned that most were mid-sized sport cars and coupes, and always silver.

In the course of the conversation Johnny found opportunities to comment to Jimmy that “being young and professional, Jimmy, you have picked the right brand. Your colleagues will be impressed when you arrive at the office in your new ride.”

As the conversation continued, Johnny made several other comments like “successful people drive successful cars”, “smart money buys smart cars, the cars with high resell values” and “all the executives I sell cars to want two-door coupes and convertibles.”

The Suggestions Have Been Planted

Eventually came time to go out and look at the cars on the lot beginning with the wagons. Johnny wants to give Jimmy lots of time for the suggestions to sink in. They look at the wagons for awhile before Johnny steers Jimmy over to the trucks and SUV’s. Johnny knows that Jimmy doesn’t want these but he does want Jimmy’s mind off of the low profit wagons. Once they spend a few minutes with the trucks Johnny steers Jimmy over to the newly introduced, high margin iSport model.

Jimmy, we know already, has an affinity for sports cars. His eyes open up with dreams of the old days when he was single and the joy of driving a car with a tight suspension and good handling.

Johnny seizes the opportunity and goes in for the kill sell, among the statements he makes he includes:

“Jimmy, this is the newest car on the market and it is H-O-T hot, you said you wanted a car that reflects success and this one is it!”
“When you pull this new car into the parking lot at the office, you know everyone will be so impressed.”
“Jimmy, you wanted to make a smart purchase. You are right, these automobiles have the highest resell value on the market today”
“This car is it, all the executives are lining up to buy this car.”
“The convertible is the most prized of them all, just imagine how envious your coworkers and neighbors will be when you drive up in your new iSport. You will be the talk of the town. “

The last statement seals the deal, “Jimmy today is your lucky day, there are very few of these available but just before you walked in I learned we obtained one extra unit from the factory, a silver iSport convertible.

Fighting Back

To prevent falling for the Power of Suggestion Close the best defense is a good offense. You must walk in with the understanding that you are competing with a salesman. With this technique knowledge provides the power.

In the early stages of the sales process many salespeople are trained to get key information to “qualify” you as a legitimate customer. It is a desired process but it is not a law. They don’t need any personal information to provide you with the features, benefits and pricing of any product.

What you want to hear from a salesperson is factual information. What is the cut, color, clarity and karat weight of the diamond; how long will the aluminum siding last or what does the warranty cover.

What you don’t want to hear is how good you will look or feel with their product or how the perceptions of your neighbors or co-workers will improve your life. If this is what you get, you are being set up.

Use The Power Of Suggestion To Your Advantage

Inform the salesperson how their time will be rewarded if you are treated fairly and your needs are met. Let the salesperson know early that when you are taken care of you become a loyal customer. Advise them that you like providing referrals when you know that your friends will get competitive pricing.

After you have negotiated everything you can, unleash the power of suggestion. Tell them; “This is a really good deal and I am tempted but this doesn’t quite meet my needs, can you shave 2% off or give me _______?” Express your willingness to commit to a long-term relationship if they can show you how committed they are. Show the salesperson your phone list of hundreds of friends and suggest how much more business they may get.

Readers: Have you ever arrived home with a purchase you never intended on making? Where else in life could you use the Power of Suggestion technique to your advantage?

For more, read: Combat the Closing Technique – The Puppy Dog Close

photo by The Car Spy