How To Keep Those Pennies In Your Pocket

download (82)These ideas I have learnt through personal experience, and surfing the internet:

  • Instead of buying brand new computers and gadgets such as cables, mobiles and tablets, you can buy them refurbished. No, not badly damaged, but showroom pieces such as a computer with a small scratch or chip on the corner of the casing, or buy from a stock clearance sale, or even a used mobile that is still up to date. You can buy cables from the Sunday markets for mobiles and computers, and save there too.
  • Don’t purchase appliances too cheap, such as microwaves, as they tend to need a lot of repairs and get replaced more regularly than good quality ones. Find a brand that is reputed to be enduring, but is also good on the pocket. One such example is a Dyson Hoover which if looked after can last five times longer or more than a cheap Hoover that fails in six months to function. It is worth paying that bit more on buying the item, than forking out for expensive repairs and replacements such as washing machine drums and electrics. Shop around various stores for price differences on the same item before buying as this will save you more.
  • When celebrations come around, they can be very expensive. Why not give a small present on Xmas or Eid, and save the rest of the money till the sales that always come a couple of days after the celebration? This will not only save you money, but will spread out the fun of the occasion for the family.
  • Many people may remember to turn off their lights at night but not many unplug. Did you know that electric is still flowing into your appliance even when it is turned off at the wall switch or appliance switch? The switch on the wall does not turn off the electric. It only neutralises the current to make it safe. Therefore the only way to save your money is to unplug all unnecessary appliances directly from their sources, before going out, or going for a safe sleep. Many fires are started overnight as a result of things left plugged in overnight. This is usually caused by the electrical charge building up in appliances.
  • Shutting your doors throughout the house, not only is a safety feature at night against possible fires, but through a whole 24 hours can cut your heating bills down.Teach kids this from a young age, and you will be rewarded in your pocket, as that way you can turn the heating down.
  • Learn free courses online, and at social groups, about how to do D.I.Y, or recycle old clothes and fabrics into new items and clothing. You can even learn how to cut your family’s hair and save the expense of hairdressers, or learn to repair every day tools such as lamps. Some courses are free at colleges that teach these things. There are Council tenant groups that teach things too. I found a few free courses on Futurelearn and at the local college.
  • Having a car nowadays when you have kids can work out cheaper than public transport, if you have the knowledge. Don’t buy a brand new car, but don’t buy a scrap one as that would need regular expensive repairs. The best places to get a car are from private owners selling on Auto Trader and the like. A car should run economically to make it worth it, so look online for cars that are the most economical in petrol consumption and are about 8-10 years old. A Nissan Micra was bought about a year ago for £1000, a very economic model, and it hasn’t had any repairs or problems so far. Yet a car bought for £750 needed repairs every six months and ended up as scrap. Do be careful and examine it for rust and weaknesses. Make sure you test drive it for any faults. Ask its fuel consumption rate and price of any recent repairs. All these will reduce the cost of running it.
  • You are probably thinking ‘what about the insurance?’ Yes car insurances are expensive but use a search engine such as to find the cheapest insurance. Some companies will ask you to put a tracker under your car to reduce the insurance. You can save about £100 a year by attaching a tracker alone.
  • Printing your photos and printouts can be expensive when done in libraries and shops, especially if you print a lot like me. Buy a printer and use photo paper bought in a pack from stationers to print your photos. For printing don’t use the same brand ink as your printer. It would cost you a fortune! Buy online and in some shops where you can buy a different brand worth £60 if the same brand as your printer, but for £7.50 if different. That is the cost of not just one cartridge but 4! Individual cartridges can be as low as £2. They have the same ink. If a sign comes up on your printer that the unrecognised ink could degrade print quality or damage the computer then ignore it. You will find evidence online to prove that this is just the printer manufacturer’s way of making you give more money to line their pockets with instead of your own!
  • Finally. How many days a week do you eat meat and potato of varying forms and skip the vegetables? Vegetables should for a healthy diet take up 1/3 of your plate in each meal. They help nutrients from other foods to be absorbed and balance moods. Try having a vegetable meal three times a week to reduce the meat bill and increase your well-being. Fried vegetable rice made in a little oil, or homemade quiche are examples. Another tip is to cut down takeaways and junk food as they are not only unhealthy, but also costly. Eating in more days a week will cut those food bills too. When out for a meal ask for tap water as bottled is expensive as are alcoholic drinks that damage your liver.

I hope you enjoyed learning these tips and apply them. Try for every saving action that kids do such as closing the door, or unplugging, by putting money in a piggy bank. Have one yourself too. If you are a smoker you can reward yourself with 10 pence every time you skip a cigarette. It soon mounts up. Then go and spend it on special day/days out, or that item you or the kids have longed for. Enjoy!


Maximize Your Income With 1 Tool

images (27)Having a steady income is fantastic, especially after university. As it turns out, after receiving anything several times we begin to ignore the teeny-tiny changes. We go on autopilot and enjoy champagne with our guests until we feel the turbulence and have to sprint back into the cockpit to take control, and do it again.

I used to reach a point where I’d look at my accounts and say, “What do I have to do?” and “How long until my next paycheck?”

Historically, budgeting has worked in every case by giving every dollar a name before we spend it, so you, and the cash know where the heck it is going.

Then again, historically, we’ve never been accessible 24/7 to everyone we know, thanks to the Internet and almost feel like time has dwindled, or we may have dawdled.

As individuals, we have three general directions for our money: Needs, Wants, and Saves.

These are true for every dollar you’ve earned, or found. However, these three categories look different for everyone.

With a simple system, you can teach yourself to hog-tie your spending, and find room for fun and pay down debt. It is a ratio to funnel your money in the three directions they will go but with you in the driver’s seat.


Take your net income, whether you calculate it daily, weekly, bi-weekly, or monthly, and work to slice it into the ratio of 50%, 30%, and 20%, that is an IDEAL situation.

TIP: Make this fit your current scenario by moving 5 or 10% into another category. Again, we are all different.

The ultimate goal here is not to fix everything overnight; it is to use your time and money wiser moving forward, by quickly combing through everything you spend on.

Your first category the on the Bills you MUST pay. For example:

  • Rent/Mortgage, Groceries, Credit card minimums, Transportation, Loans (student/auto), etcetera.

When you examine these payments, you’ll notice NOT paying on time WILL get you into a slew of trouble.

Next, are the luxuries, or “bills we want!” Also known as the part where you organize the joys of life. Calculate 30% of your income and examine the expenses. Sum up your:

  • Date nights, Starbucks, Netflix, Clubbing, Retail therapy sessions, Gym membership.

By now you should be able to predict all of your inevitable outgoing charges, and should have no surprises. You have all of the power and need only to see it work for you to stay in control. With that said, we’ve covered the first and second part, not the final part, and there’s a reason for that.

Saving or “managing” your savings, is not easy. To save well, and save often it takes some thought, for a couple of reasons: You want to save for the things that will satisfy you, and you need to keep for when ‘life’ happens.

Four Money Saving Hacks – How Do You Stick to a Budget?

download (81)There was a candy store on my walk back home, and my weakness was a local, oversweet jelly like candy called jujubes. I used to buy them every chance I got if I had spare pocket money.

My grandfather would encourage me to not ‘waste my cash’ on that ‘junk’. All the things he said were true – it was bad for my teeth, it was probably full of chemicals. He made some very good arguments. But I didn’t stop.

We all have weaknesses we spend our money on. We have a hard day, we think we owe ourselves the treat of a nice dinner, or a vacation after a tough year, or a new flatscreen TV, or that pretty outfit in the window. The temptations are many. It’s hard to walk down a brightly lit cheerful shopping street and not buy something. But there are some saving hacks you can use to get over the temptation.

Some of these hacks actually work. Take it from a former jujube lover: eventually as I got older, I tried to get over my candy addiction by taking a different route home. I still wax nostalgic over them but they no longer have a hold over me.

Here are four great hacks that are easy to adopt and turn into habits.

1) Make a list. Every time you go out, make a list.

This is easy to do and has an effect, simply because when something is not on the list you have to think about buying it, and that moment is death to the impulse buy. Keep the list in hand and refer to it, so that when something is not on it, it’s a lot easier to ignore.

2) Don’t go shopping hungry.

This matters – studies show that hungry shoppers buy more, sometimes as much as 40% more, compared to people who are shopping on a full stomach. When you’re hungry you are swayed much faster by not just the smell of the caramel popcorn at the other end of the store, but also by those cute wineglasses you are just certain you urgently need.

3) If you are married, make a plan at the start of every month.

Planning your monthly spends is pretty useful for single people too, but it’s an especially powerful exercise if you are married. No matter what, no two people are entirely alike in their financial behavior. Sit together at the start of every month and plan out the monthly spending – essentials, the fun stuff, the kids’ expenses, and so on. Once that is done, take the leftover cash and move it immediately to your ‘long term savings’ account. This takes away the temptation to touch it at all.

Doing this regularly at the start of every month brings down the tension couples often have around money. And done right, brings you closer together.

4) What are the savings for?

Debt can often come up un-announced, from a medical emergency, or a job loss, and so on. Be clear to yourself, and if you have a partner, reach an agreement on what part of the savings constitute an ’emergency fund’ and cannot be used for expenses, etc. Remember, bad things happen to everyone. It’s how we manage these, that make financial tragedies and horrible events short term ones, not life-changing ones.

Optimal Cost Structure and Effective Scale Economies

download (80)How do firms choose their cost structure? What is the nature and function of scales of operation? What are sources of functional and dysfunctional scales of operation? These policy questions relate to the optimal overhead of a business enterprise-the appropriate mix of expenditures that maximizes the return on investment and shareholders’ wealth while minimizing the cost of operations, simultaneously.

Clearly, effective economies of scale (MES-Minimum efficiency scale) are correlated with optimal cost structure and critical to sound business strategies designed to maximize the wealth producing capacity of the enterprise. In these series on effective expenditure management, we will focus on the pertinent strategic overhead questions and offer some operational guidance. The overriding purpose of this review is to highlight some basic cost theory, strategic expenditures relationships, and industry best practices. For specific financial management strategies please consult a competent professional.

As we have already established, the optimal cost structure and appropriate scale of operation for each firm differs markedly based on overall industry dynamic, market structure-degree of competition, height of entry/exit barriers, market contestability, stage of industry life cycle, and its market competitive position. Indeed, as with most market performance indicators, firm-specific cost structure position in insightful only in reference to the industry expected value (average) and generally accepted industry benchmarks and best practices.

One of the most important contributions of economic science to management science is the principle of optimality-derivative of Bellmann Equation-the dynamic programming method which breaks decision problem into smaller sub-problems and early applications in economics by Beckmann, Muth, Phelps and Merton, and the resultant Recursive model. In practice, any optimization problem has some objectives often referred to as the objective functions such as maximizing output, maximizing profit, maximizing utility, minimizing total cost, minimizing cycle time, minimizing distribution cost, minimizing transportation cost, etc.

Types of Cost Structure:

Cost Structures consist of a mix of fixed costs, variable costs and mixed costs. Fixed costs include costs that remain the same despite the volume of goods or services produced within current scale of production. Examples may include salaries, rents, and physical manufacturing facilities. A number of high capital-intensive businesses, such as airlines and manufacturing companies, are characterized by a high proportion of fixed costs which may constitute effective barriers to entry for new industry entrants. Please note that effective exit barriers are effective entry barriers. When firms cannot easily exit unprofitable markets due to high exit barriers, they should not enter such markets in the first place.

Variable costs vary proportionally with the volume of goods or services produced. Labor-intensive businesses focused on services such as banking and insurance are characterized by a high proportion of variable costs. In practice, variable costs frequently factor into profit projections and the calculation of break-even points for a business or project.

Mixed cost items have both fixed and variable components. For example, some management salaries typically do not vary with the number of units produced. However, if production falls dramatically or reaches zero, then attrition may result. This is evidence that all costs are variable in the long run.

Finally, a firm with a large number of variable expenses (compared to fixed expenses) may exhibit more consistent per-unit costs and hence more predictable per-unit profit margins than a company with fewer variable costs. However, a company with fewer variable costs (and hence a larger number of fixed costs) may magnify potential profits (and losses) because revenue increases (or decreases) are applied to a more constant cost level.

Most business enterprises define cost structure in terms of costs incurred in relation to a cost object or activity. And because some expenditures can be difficult to define, we often implement an activity-based project to more closely assign expenses to the cost structure of the cost activity or object in question and use activity-based accounting. Note that time required to complete any given activity is the critical factor in cost management. Therefore, to minimize the overhead of any activity or project it is critical to minimize the time required to complete the activity or project. The following are examples of key elements of the cost structures of various expenditure objects:

Product cost structure: Under this structure there are fixed costs which may include direct labor and manufacturing overhead; and Variable expenses which may include direct materials, production supplies, commissions, and piece rate wages. Service cost structure: Under this cost structure there are fixed expenses which may include administrative overhead; and Variables costs which may include staff wages, bonuses, payroll taxes, travel and entertainment.

Product line cost structure: Under this structure there are fixed costs which may include administrative overhead, manufacturing overhead, direct labor; and Variable costs which may include direct materials, commissions, production supplies; and Customer cost structure: Under this structure: Under this cost structure there are fixed costs there are administrative overhead for customer service, warranty claims; and Variable costs which may include costs of products and services sold to the customer, product returns, credits taken, early payment discounts.

The optimal Cost Structure is the combination of fixed and variable costs that minimizes the total operating overheads while maximizing net operating income simultaneously. The Cost Structure describes all costs-(fixed and variable) incurred to operate a business model. Further, Cost structure refers to the types and relative proportions of fixed and variable costs that a business enterprise incurs. In practice, the cost concept can be classified by region, product line, product item, customer group, department, or division, etc.

In cost-based pricing strategy, cost structure is used as a technique to determine effective prices, as well to identify areas in which expenses might potentially be reduced or at least subjected to better management control. Therefore, the cost structure concept is a useful management accounting tool that that has many financial accounting applications.

All business models have costs associated value creation- which occurs with the addition of actual or perceived value to a customer for a superior good or service; value delivery-creating and maintaining effective mutually beneficial and satisfying customer relationships; and value capture-which occurs through changes in the distribution of value in the good or service and production chain. The objective function is to minimize total operating expenditures. Such overheads can be calculated relatively easily after isolating cost drivers, key activities, key inputs; key resources, and strategic partnerships.

It is our experience that operating costs can be minimized in every business model. Additionally, low cost structures are more important to some business models than to others. Therefore it is useful to distinguish between two broad categories of business models: Cost-driven and Value-driven (many business models fall in between these two extreme categories).

The DuPont model demonstrates that Return on Investment is calculated as the product of Profit Margin (Net Income/Sales) and Turnover Rate (Sales/Total Assets). DuPont analysis indicates that ROE is affected by three factors- Operating efficiency, which is measured by Profit Margin; Asset Use Efficiency, which is measured by Total Asset Turnover; and Financial Leverage, which is measured by the Equity Multiplier: ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity).

Types of Business Models:

Cost-driven business model-Most Cost-driven business models focus on minimizing overheads wherever possible. This approach aims at standardization and least cost method by creating and sustaining the leanest possible Cost Structure, using low and dynamic price value propositions, maximum automation, and strategic outsourcing.

Value-driven business model– Under this business model most companies are often less concerned with the cost implications of a particular business model design, and instead their main focus is on value creation. Premium value propositions, customization and a high degree of personalized service often characterize value-driven business models.

Some Operational Guidance:

In practice, firms seeking to optimize cost management must optimize time management. One of the most significant revelations of Activity Based Accounting is the impact of time and activity in firms’ overall operating cost: Cost structure is activity driven and activity is time driven. Therefore, time is the most critical factor is effective cost management. Simply put, firms must reduce time required to execute specific activity to reduce cost associated with the specific activity, ceteris paribus.

Additionally, firms seeking to leverage and optimize scale economies must optimize cost savings derivative of specific scale of operation. Please note that scales of operation may be functional and log-run-cost reducing derivative of experience curve; learning effects; scope economies; division of labor; specialization; horizontal as well as vertical differentiation or dysfunctional and long-run-cost increasing derivative of reactive and entrenched management with musty and personality-driven vision; organizational inertia; adaptive and abusive supervision; increasing bureaucratic cost; lack of innovation; increasing internal and external transaction costs.

In sum, firms optimize cost structure through effective time management and optimizing scales of operation. Therefore, firms seeking to maximize the profit producing capacity of the enterprise must formulate and execute dominant efficient and effective cost management strategies based on appropriate combination of costs that maximizes the return on investment and shareholders’ wealth while minimizing the cost of operations, simultaneously. As we have already established, there is growing empirical evidence suggesting firms that opt for scale and volume tends to outperform those that opt for premium, ceteris paribus.