HOW TO: Plan An Effective Budget

If you're currently spending more than you earn, it's crucial to find a way to balance your budget. Those who don’t address the situation could find themselves in a downward financial spiral that’s difficult to escape.

Here are tips to help you balance your earnings and outgoings.  

1.   Boost your budget by saving on essentials

If your budget doesn’t balance or you’re looking to free up some extra cash, the first thing you should do is try to cut the cost of essential household goods and services. The changes you make aren’t likely to make you feel deprived – but they will help to keep more cash in your pocket.

2.   Cut the cost of your debts

If you have existing debts – particularly on credit cards – these are likely to be an expensive drain on your budget. However, taking out a new or a Life of balance transfer card could cut your interest costs dramatically, allowing you to pay off your debt more quickly. In turn, this will speed up the process of balancing your budget.

If you’re thinking of applying for a loan to consolidate existing debts, you should ensure you have a plan to pay off what you owe. Sometimes people who try to bring all their borrowing together in one place continue using their credit cards, ending up in a far worse situation than before.

3.   Assess the 'extra spending' in your budget

If your budget still doesn’t balance, it’s time to cut back on non-essential spending. This means prioritising the activities you get most enjoyment out of, and spending less on those that aren’t offering you good value for money. Spending less on going out and buying new things isn’t easy – but not cutting back now might mean you’re in an even more difficult position later. Remember, if your budget is out of balance in the long-term you’ll end up with debts that could be expensive and may take a long time to clear.

4.   Generate extra cash where you can

Alternatively – or to complement cut-backs in your spending – you could consider new ways to increase your income. First and foremost, if you have savings and investments that you’re relying upon to generate part of your income, make sure they are performing as well as possible.

In addition, consider freelance work if your employment contract allows it. Are there ways you could use your skills to generate a little extra income by working in your spare time? You could also sell unwanted items via eBay, could consider renting out your spare room or could even sign up to rent out your car when it isn’t in use.

5.   Get debt help if your budget won't add up

If you’re still struggling to balance your budget after cutting back on spending and are concerned about the amount of money you owe, it’s important to seek help as soon as possible. Spending more than you earn each month isn’t sustainable in the long-term, and will push you further and further into debt.

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Keys For A Happy Financial New Year

For many people, the New Year signifies a fresh start. The mental and spiritual batteries are recharged after the drain of the hectic holidays. We’re more optimistic. We’re open to new possibilities, new strategies, and new aspirations. New Year can be a time to think about personal and financial goals and the “new” commitments you plan to make. Yet, for all the initial enthusiasm, keeping yourself motivated, committed and moving toward the accomplishment of those goals is often tough. Here are personal finance tips that can help you toward a happier new year.

1.   Set clear goals. 

We’re talking any goal you’d like to work toward or achieve in the New Year that has financial consequences. For example, perhaps you want to work less so you can spend more time with your family, or you want to change to a career that excites you more but that pays less.

Setting specific, realistic goals—and writing them down—is such a powerful financial tool for realizing them. It not only clarifies what you have to do financially to achieve the goals, it motivates you to achieve them within a specific timeline. Saving for something provides much more financial incentive than merely following the standard advice to save 10 or 15 percent of your monthly pay.

2.   Discuss the goals with your family. 

They can help you clarify the goals, motivate you to make changes, and aid in their achievement.

3.   Create a financial plan. 

All financial actions (or inactions) affect other financial actions. If your financial left hand doesn’t know what your financial right hand is doing, one may undermine the other. For example, lack of adequate insurance for home, health, and other aspects of your life could decimate your retirement savings and investments if something goes wrong.

You may need professional advice at this stage, or you may feel you can do it yourself. Regardless, the key is creating and following through with the plan.

4.   Review the last year. 

Life is continually in flux and change can have a profound impact on your financial plans. For example, during the past year did you get married or divorced, have a child, change jobs, or change short-term or long-term goals?

5.   Establish a spending plan. 

Achieving financial goals is built on a single principle: spend less money than you earn. First, list your regular, dependable sources of income. Then track how much and where you spend money every month (including cash). Average out on a monthly basis periodic expenses such as car insurance or property taxes.

Subtract monthly expenses from monthly income and…do you have a surplus, are you in balance, or are you spending more than you’re taking in? Are you skimming 5 or 10 percent right off the top of your income for savings and investing? If not, what expenses can you reduce or income increase in order to save toward goals? Automate savings to make it less painful.

6.   Reduce debt. 

Resolve to lower debt this year. As interest rates rise, every dollar of accumulated debt becomes a heavier and heavier drag on your entire financial life.

7.   Diversify your household assets. 

You know not to put all of your investment eggs in one basket (such as high-tech stocks). Apply this advice to your overall financial household. If possible, working spouses should be employed in separate companies in separate industries in order to reduce the possibility of both of you losing jobs at the same time. Go easy on company stock and industry stock where you work. If your employer or the industry suffers hard times, you might lose not only your job but also much of the value of your investments. Avoid investing in a single business or industry that dominates the economy where you live. If the company or industry suffers, so might your home values along with your investments.

8.   Educate yourself financially. 

The more you understand about finances—from budgeting to investments to insurance—the more confident and motivated you’ll be to take the right financial steps this year.

With 2014 behind us, don’t feel pressured to make resolutions because you feel you should. Instead, open yourself to the possibility that setting concrete financial goals can be the start of some truly positive changes in your life. Remember, the clearer your goals are, the more confident and motivated you’ll be to take the right financial steps in 2015 and beyond. Best to you in the New Year, and happy goal setting!

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TQM - Total Quality Management

One movement that swept U.S. corporations in the 1980s involves maximizing quality and minimizing costs through total quality management (TQM). This refers to constantly improving the quality of products and the firm’s processes so as to consistently deliver increasing value to customers. TQM constantly asks, “How can we do this cheaper, faster, or better?” It involves worker teams and benchmarking. In its broader form, TQM applies quality improvement methods to all firm processes from production to customer service, sales and marketing, and even finance. By improving quality and reducing costs in all these areas Hewlett-Packard achieved spectacular results. Other companies that have successfully used TQM are Xerox, Motorola, Marriott, Harley-Davidson, and Ford.

Five rules determine the success of a TQM program:

1.   The corporate executive officer (CEO) must strongly and visibly support it with words and actions.

2.   The TQM program must clearly show how it benefits customers and creates value for the firm.

3.  The TQM program must have a few clear strategic goals; that is, it must ask, “What is the firm trying to accomplish?”

4.  The TQM program must provide quick financial returns and compensation – people need to see early and concrete result to continue to support the program.

5.  The TQM program should be tailored to a particular firm; that is, one firm cannot simply copy someone else’s TQM program.

Despite some glaring success from using TQM programs (e.g., Motorola was able to cut $700 million in manufacturing costs over five years), only about a third American corporations polled indicated that their TQM program had a significant impact in increasing the quality of their products, reducing costs, and increasing their competitiveness. The most frequent reason for failure for TQM programs is the failure of upper management to show a strong personal involvement and commitment to the program. Other reasons for failure were that TQM programs often were not strongly linked to the overall business strategy of the firm or aimed at delivering increasing value to customers. 

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BENCHMARKING

Benchmarking refers to the finding out, in an open and aboveboard way, how other firms may be doing something better (cheaper) so that your firm can copy and possibly improve on its technique. Benchmarking is usually accomplished by field trips to other firms. The technique has now become a standard tool for improving productivity and quality at a large number of American firms, including some of the best-known, such as IBM, AT&T, Ford, Du Pont, and Xerox.

Benchmarking requires:

1.  Picking a specific process that your firm seeks to improve and identifying a few firms that do a better job, and

2.   Sending on the benchmarking mission the people who will actually have to make the changes.

Benchmarking can result in dramatic costs reductions. For example, through benchmarking, Xerox was able to cut the cost of processing each order from $95 to $35 and, as a result, save tens of billions of dollars. Similarly, benchmarking allowed Ford to reduce the number of employees handling accounts payable from 500 to less than 200 in a few months. Through benchmarking, the Mellon Bank cut complaints by 60 percent and was able to resolve them on the average in 25 days instead of 45 days. Benchmarking has now become a standard tool to increase productivity and minimize costs at many U.S. and foreign firms. The explosion in interest in benchmarking has led to the formation of many benchmarking associations, councils, conferences, courses, data, and consultants. 

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Future Business Leader

Besides the traditional hard skills of accounting, marketing, and finance, the business executive of the future will be a leader and a visionary rather than merely a manager, he will have a global outlook and be knowledgeable of information systems and technology, he will capitalize on diversity and be a master of teamwork, he will be creative and show initiative, he will be able to discern patterns and opportunities in apparent chaos and have the ability to synthesize information rather than just analyze it, and, above all, he will be strong on interpersonal skills and be able to communicate effectively. In short, being smart and well trained in traditional business areas will no longer be enough for the business leader of the twenty-first century.

Specifically, the ideal business leader of the future must be cross functional, or have the ability to combine disparate skills to solve problems. He must be a visionary and a leader; that is, he must combine hard work and a deep understanding of the business in which he is in with the ability to inspire others to also work hard to make the vision a reality. He must work effectively on teams, be accepted by others as the person with the best sense of the challenge confronting the group, and be able to break problems into manageable, status-free tasks that others are willing to focus on. He must have a deep understanding of global issues and the ethical aspects of her business decisions. He must be familiar with and be able to use information technology and be comfortable with technology in general. He does not have to be a scientist, but he must understand in detail how the technology incorporated in the product or service that the firm sells works and avoid calling the experts every time he has to make a decision. He must have some experience with excellence – in whatever field – so as to recognize it and encourage it in others when he sees it.

Sounds impossible? Maybe it is, but those who come closer to this ideal will rise to the pinnacles of business leadership in the future. Having an M.B.A. from a good school is important, but in today’s world no one is automatically impressed. The business leader of the future must sell himself and above all must perform. Today’s corporations have enormous expectations from its newly minted M.B.A.s, often expecting them to have talents and abilities that few chief executives possess. Most of the 700 or so business schools, from Harvard to the most modest, understand this and are striving to reengineer the training of M.B.A.s to reflect the qualifications that the future business leader must possess for the new, competitive, dynamic world of the twenty-first century. The difficulty is that many of the new required skills are hard to measure and teach in the classroom, and that is why many business schools are taking in students who already have some business and real-world experience. 

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