Understanding Two Approaches to Saving Time and Money in Business and Personal Finance

When I teach my college students about business strategy, I start off with the question of “How you can make $1,000,000?” The answer that I'm trying to draw out of the students is that some students will say that they can make $1,000,000 by selling one thing for $1,000,000 and other students might say they can make $1,000,000 by getting one million backers on Kickstarter for $1 each. Ultimately that leads to a conversation about how businesses tend to make their money and the strategies they use to facilitate their pricing structure. These strategies boil down to selling something in larger quantities for a lower price (and lower margin) or selling something in lower quantities for a higher price (and a higher margin).  

Today I'm here to tell you that these same concepts can be applied to personal finances and optimizing your business processes. By looking at the situation and seeing the broad spectrum of ways to save time or money, you can make an informed decision on what options are available and work best for you. 

Let’s look at some examples:

Saving Money:

Suppose you needed to save and put away an extra $500 for an upcoming event. You can simply take $500 out of your next paycheck and put it in an account where you can't spend it. Alternatively, you can work on saving $25 a day for the next 20 days, or $10 for the next 50 days, or $5 for the next 100 days.  

Cutting Spending:

To reduce your spending by an extra $50 a week you can either cut out Starbucks from your morning routine, which will save you a little bit of money each day. Alternatively, you could rework your weekend plans so that instead of going out with your friends you stay home or go on a hike which would be free, which would save you all the money at once on a weekly basis. 

Business Processes:

For businesses, there comes a point where a new solution might be too expensive to implement or otherwise simply limited because of the number of staff available. When this happens it's important to look on the other end of the spectrum and see how things can be optimized given the current circumstances. If you can't afford to cut the budget of an apartment by $50,000, see if $10,000 can be from five departments to get the same result. 

Why Does It Matter?

While these concepts may seem obvious after reading through them, it's very important to identify them in your situation. Being able to identify these opportunities is important because at some point you will need to save money or build a better business and one of these two approaches is going to be more accessible than the other because the option of saving everything at once or making a drastic change just might not be in the cards when you are exploring your options. 

All the time you hear about personal finance guides and YouTuber saying make sure you cut out that coffee spending from Starbucks! This is because cutting out the incremental daily spending is harder to identify for most people and as a result a lot of the excess spending comes in the form of small increments. That advice might not apply to everybody because somebody else might just be spending an extra $300 or so on their more expensive hobby every few months, which may financially be similar to getting a cup of Starbucks a few times a week, but it is not viewed as such. Truly successful people and businesses need to identify both scenarios of small incremental spending and occasional larger spending and decide how improvements should be made. 

After looking through a few of these examples and experiencing some of them yourself you'll come to realize that the incremental improvements are the ones that are often overlooked and making those improvements to the processes that are executed on a daily or even hourly basis can add up over the longer term.

At the end of the day the advice that you get here is no different from what many other people are telling you: to make improvements and get better. The whole point of reading through everything that we've written above is to get you to realize that results can be driven both by small incremental improvements and often overlooked areas as well as large chunks. 

If you would like us to go into more depth on specific examples of these improvements for personal finance and business processes let us know by sending us an email or commenting below.