Three Lean Six Sigma Tools to Help Your Finances

Three Lean Six Sigma Tools to Help Your Finances

In this day and age, debt is inevitable. However, to be enveloped by debt – from mortgage loans and car loans to credit card debts and personal liabilities – can be quite financially and emotionally distressing. Financial stress brought on by debt can even lead to mental health issues. It can result in depression and impair your overall quality of life.

For this reason, it’s best for individuals to not only learn to deal with debt but to also confront their financial issues and come up with a budget to help resolve the problem. This is where the concept of Lean Six Sigma comes in. In a nutshell, Lean Six Sigma helps to find defects in a process and correct them. It involves eliminating waste and unnecessary steps. Although it is generally associated with management, utilizing this concept can help address issues involving finances as well.

A Value Stream Map used in Six Sigma, for instance,  involves the visual evaluation of an entire process. It identifies the eight areas of waste, such as defects, overproduction, waiting, non-value-added processing, transportation, inventory, motion, and unused employee talent. The same logic applies to your finances where it’s important to evaluate how much money is coming in and where it is being spent, thus eliminating waste or those that aren’t necessary for spending.

In the next section, we will further discuss and expound on three Lean Six Sigma tools that can be used to address your financial problems. Here are some important tools that can help you manage your finances.

The Concept of 5S

The concept of 5S is to sort, set in order, shine, standardize, and sustain. To define, 5S is a philosophy focused on sorting out items and removing clutter in the workplace, putting everything in order and keeping it clean, setting up standard practices, and sustaining a higher level of organization.

This concept can be applied to your finances, as well. The idea is to sort out the items you need to spend money on and to identify the items that are not necessary; to set the important things in order; to standardize this financial practice across all debt; and to stay within your financial budget in the long run.

Lean Six Sigma, Financial Issues. Budget, Kaizen, DMAIC

Kaizen

Kaizen is a Japanese term that means “improvement.” It is another Lean Six Sigma tool worthy of consideration when looking to manage your personal finances better. The process involves having a thorough examination of your finances – essentially assessing how much you are earning and where your money is being spent. The process has a timeline over which you record all money coming into and out of your account.  The idea it to focus on small, continuous changes that can have a huge impact in the long run. For instance, you can specifically cut out expenses on expensive restaurants, lower or eliminate utility bills at home, spend less on entertainment, or set a fixed monthly allowance that covers all your major expenses.

DMAIC

Finally. DMAIC is a potent Lean Six Sigma tool. It is an acronym that stands for Define, Measure, Analysis, Improve, and Control. So how does the concept of DMAIC translate into your finances? We’ll look into the following ideas:

  • Define – The first thing to do is to define the areas in your finances that have “defects” in your spending, and from there, set a new goal for financial improvements.
  • Measure – The next thing to do is to collect data on the defect and measure its impact on your overall finances.
  • Analysis – Once done, you must look at the data and try to dig into the root cause. This entails a thorough analysis of how much you are earning, what you are spending, and what seems to be wrong in your expenses.
  • Improve – After having determined the root cause of the financial problem, you are now ready to come up with an action plan. You can go ahead and cut the spending on unnecessary items and focus on budgeting for the important ones.
  • Control – Finally, you should gain control of your finances based on the aforementioned list. This time around, you follow a monthly financial budget and sustain this in the long run. You’re sure to see significant results in the end!

 

Interested to know how lean six sigma tools can help your business, from quality control to your finances?  Contact Leanoveering today!

If you’re looking to learn more about the Six Sigma Green Belt program, or the Six Sigma Black Belt program get in touch with us today to see how we can help.

 

 

 

 

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