Applying the Kaizen Method to Your Life and Finances

About a month ago, I wrote a piece about using first and second order thinking to improve your financial state by using the simple prompt of asking “and then what?” about your major decisions.

In response, a reader named Darren contacted me and said that this sounded a lot like a system they used in his workplace. He said the system was called “kaizen” and that it was popularized by Toyota in its manufacturing process, and he recommended the book One Small Step Can Change Your Life: The Kaizen Way by Robert Maurer.

This intrigued me, so I’ve spent quite a bit of time in the last month diving into kaizen through a bunch of books and articles and seeing how it applies to modern life and modern personal finance.

Let’s start from the beginning.

What is kaizen?

Kaizen is the Sino-Japanese word for “improvement.” In the business world, it refers to a principle of continuous improvement that involves everyone in the organization, and the same concept has spread to a lot of different industries.

Having said that, the exact meaning and application of kaizen into both lives and business organizations is a little vague. In all my reading, it never seemed to me that there was a strict exact definition of what kaizen was as a process; rather, it referred in a nebulous way to a number of systems of continuous improvement where everyone involved in the system can contribute to that improvement.

For example, you might see kaizen in a workplace where everyone is told to keep their eyes open for things that don’t work efficiently and to report them if they discover them. A maintenance worker notices that the process they use to clear waste from an assembly line could be more efficient if they did it in pairs rather than having one person do it. That person shares their idea with their boss and they try doing it in pairs sometimes as a side by side test, and discover that it is in fact a more efficient strategy for keeping the line clear, so the company moves to that protocol, freeing up a little extra time per hour for each maintenance worker so they can devote more time to other tasks. That’s kaizen at work.

In a personal example, you review your bank statement each month and you notice that there’s a pattern of a particular fee showing up each month for reasons unclear to you. You call your bank and ask what the fee is and if it can be removed, and you find that it can be if you switch to a different checking account with them, which you do. This keeps money in your hands rather than the bank’s hands. That’s kaizen at work.

Basically, whenever you find yourself doing things regularly in your life and often thinking about whether this is the best way to do it and then testing out any new ideas you have, you’re practicing kaizen in your life. It’s not about radical change, but continuous improvement in what you do.

I see it in things like my own process for doing laundry, which I’ve often thought about and honed over the years as I’ve done it. Practicing kaizen in that aspect of my life has resulted in constant time and money savings, because it’s both cheaper and faster to do it with my current procedure than with my old one. I see it in my work practices, as I’ve gradually become more and more efficient at the process of organizing article ideas, writing, storing drafts and uploading the articles.

The truth is that, for most of us, we practice kaizen in small amounts in an almost subconscious way, particularly when we’re trying a new thing that we’re going to be doing regularly going forward. I think of kaizen when I compare how I changed diapers when our first child was an infant compared to how I did it when our third child was an infant — that process had continually improved through our first and second child and right into our third, making it way more efficient and cheaper, too.

However, kaizen as a conscious part of our life can be really valuable, too. When we keep trying to apply that sense of continuous improvement to everything we do, trying to make it more efficient in terms of money, energy and time, we end up with a life where we’re able to easily handle more than we ever thought possible.

Kaizen is centered around ten key principles.

In various writings about kaizen and how I’ve observed it at work successfully in my own life, there tends to be a handful of principles that remain consistent no matter what it is that you’re trying to continuously improve. In articles and books, these lists vary in number and in description based on what they’re trying to describe. In terms of my own life and particularly my finances, I find that these ten principles are really at the core of the idea.

Don’t assume that the way you do things is the best and most correct way of doing things. There is so much in modern life that we take for granted and simply assume is correct without thinking about it. For example, for many years, I thought that the way I was taught to do laundry was simply the “right” way to do it. I took that whole procedure for granted. It was only when I stepped back and began to realize that the way I do things isn’t always the best way to do things and that I could easily improve my standard practices that I began to shave time and expense off of tons of ordinary things in my life.

Don’t just let problems and inefficiencies you notice slide by. If you feel like there’s something that can be done better, even if you don’t quite see how to do it yet, you’re probably right. Trust your gut. Don’t let something that you feel or think is inefficient just slide by. Be observant about what you’re doing, and if it seems like it’s a waste of time or energy or money, it probably is and you should look for a better way of doing that thing.

Just because everyone does it a certain way or you learned it a certain way doesn’t mean it has to be done that way. “It’s how we’ve always done it” does not mean it was the best way to do it then, and it certainly does not mean it’s the best way to do it now. Times change. Your life changes. Technologies change. Your own abilities change. The best way of preparing family meals 20 years ago might not be the best way now. The best way to do your day-to-day tasks at work 10 years ago might not be the best way now. Don’t lazily fall back on “that’s how I’ve always done it” or “that’s how everyone does it” for anything in life. You’re not everyone else, and it’s not the past anymore.

You aren’t perfect and your processes aren’t either, but they can be improved gradually over time and become better. Nothing in life is perfect. Everything can be improved on. The problem is that we always either assume something is “plenty good enough” and ignore it or we look for the big win, the big improvement that will solve everything. The best approach to almost everything in life is to not assume everything is “good enough” and instead assume everything can be gradually improved over time.

When you notice problems, start looking for solutions. It’s not enough to merely notice that something’s not quite as good as it should be, or that something can be improved. Rather, when you hone in on something, you need to take the next step and look for a solution. Don’t just accept that an obvious inefficiency is okay.

Don’t feel like the inefficiencies you notice and the solutions you come up with aren’t good enough. Even if you notice something minor, it’s still an improvement. Even if your solution isn’t perfect or barely improves things, it’s still an improvement. Not every improvement has to be a life-altering change.

Ask “why.” A lot. When you’re digging into something that you think can be done better, ask yourself “why” when it comes to each part of it. And when you answer that “why,” ask it again about that new answer. This often reveals the core problem, and that often reveals an obvious solution. For example, simply noticing that the dryer isn’t as fast as it used to be isn’t enough. Why isn’t it fast? Why would it not run as efficiently as it once did? That’s a question you can answer – the reasons that a dryer might run less efficiently – and that can lead you to some solutions to your problem.

Don’t be afraid to look for ideas from others and ask their opinions. You don’t have to come up with a solution on your own. Use the internet. Ask your friends. It’s likely that others already have solved the issue you’re looking at – or at least have a more efficient way of doing it.

Small low-cost improvements to things you do frequently are much bigger than you think. It’s really easy to overlook a change that saves you $0.25 or shaves a minute off of a common task, but what if you do that every day? Shaving $0.25 in cost off of something you do daily saves you $90 a year and $900 over a decade. Shaving a minute off of a task you do daily adds up to over six hours a year.

Never stop improving. This isn’t just a one-time thing. Rather, kaizen is something you can and should practice as a normal routine for the rest of your days. There’s always some aspect of your life that you can improve.

You should treat kaizen as a normal cycle in your life.

I like to look at kaizen as a continuous cycle in my life. After all, even though I never really had a name for it, it’s something I’ve practiced for many, many years. Here’s how I see kaizen as a normal life cycle that moves me gradually toward a better life.

Always be on the lookout for things that could be done better. This means that you’re thinking regularly about your life and the things that you regularly do. There are always things that can be improved. There are always steps you can take to make things better. Keep your eyes open.

I tend to do this in several ways. I do a lot of “after-action reviews” when I’m doing something mindless. For example, when I’m driving somewhere, I’ll often think through something I recently did and I’ll ask myself if I could have done it better. I also have a daily journaling practice where I basically just “brain dump” for 30 minutes, and I also do a “weekly review” each Sunday morning where I look for undone tasks from the week past and plan a bit for the week ahead. I also try really hard to be “in the moment” with things I’m doing so that I recall them better and do them in a more detail-oriented way as I go.

Identify a specific issue. Eventually, I’ll notice something I’m doing — or some aspect of something I’m doing — isn’t quite going right. I’ll recognize that surely something can be done faster or done with less expense without losing quality, or maybe I can get better results with the time and money I’m spending. I try to narrow down this problem as cleanly as I can.

Come up with a potential solution for that issue. I usually turn to the internet for help with this. I’ll look for ways others have approached this problem by doing Google searches and reading the results. Almost always, someone else has thought about this problem and has found something that works pretty well, usually better than what I’m doing.

Test that solution. I’ll usually give that solution a run-through to see whether it at least makes a little sense, then I’ll usually commit to a “30-day challenge” where I try to use that new solution every time.

For example, I might note that my laundry folding process is slow. I go online, learn a new way of folding laundry, and then challenge myself to do it only that way for 30 days.

Look carefully at the results. After I’ve done it for thirty days in the new way, I’ll take a careful look at the new way of doing things. Is it definitely better than the old way? Does it save time without costing more money? Does it save money without costing more time? That’s usually what I’m looking for.

If the results are good, make that the new standard. If I conclude that the new way of doing things is better, that’s the new standard. If it’s not – and that does sometimes happen – I go back to the old way of doing things, and that’s perfectly okay! It usually means that the old way was better than I thought.

Repeat this cycle. This just repeats, over and over again. I observe, I note a problem, I look for a solution, I test the solution, and if the solution is better, it becomes the new standard practice.

Kaizen applies really well to improving one’s spending habits.

You can take that exact cycle above and apply it wonderfully to improving your spending habits.

Always be on the lookout for things that could be done better. You could, for example, make it a habit to look at your bank statements and credit card statements every month and categorize all of the expenses in some fashion that makes sense to you.

Identify a specific issue. Let’s say, hypothetically, that you notice that you stopped at Starbucks and swiped a credit card nine times in the last month. That’s… a lot.

Come up with a potential solution for that issue. Perhaps you could cut your Starbucks visits down to once a week instead, or maybe even go on a 30-day break from Starbucks. As an alternative, maybe you could try making equivalent coffee at home using the coffee pot you already have.

Test that solution. You take on that 30-day challenge. You don’t stop at Starbucks for a month and you end up figuring out a really good recipe for making delicious coffee at home.

Look carefully at the results. A cup of your homemade coffee that you love costs about $0.80, while buying the equivalent at Starbucks costs $5. If you just stick to making it at home a few times a week, you’ll save $40 a month.

If the results are good, make that the new standard. The coffee is good and the savings are real, so you stick with this new pattern.

Repeat this cycle. You pick up the next month’s credit card statement and look again for bad spending habits.

It also applies well to professional advancement.

Kaizen works really well at work, too.

Always be on the lookout for things that could be done better. One way that I do this is that I write down “standard operating procedures” for the things that I frequently do. I did this at my old job and I still do it now, even though I’m self-employed. Doing this not only helps me make a “checklist” to make sure I’m doing things right, it also often reveals ways where I may not be doing things perfectly efficiently.

Identify a specific issue. Let’s say you notice that the method that people use for filling in timesheets is really inefficient. Everyone uses a spreadsheet, but it doesn’t automatically total up hours and you have to add them up manually.

Come up with a potential solution for that issue. You decide to spend a couple of hours revising the spreadsheet so that it automatically adds up hours so that people just have to type in the absolute minimum information. You find a tutorial on spreadsheets and get to work.

Test that solution. You start using the new spreadsheet yourself for the next few pay periods.

Look carefully at the results. The new timesheet works really well. No issues come up that you can even conceive of and now you spend a lot less time even looking at the sheet.

If the results are good, make that the new standard. You share the sheet with everyone at work and it saves everyone time, too. It quickly becomes the new standard timesheet. Your boss notes that you’re “on the ball with this stuff.”

Repeat this cycle. You keep your eyes open for new little inefficiencies that pop up at work.

It also applies well for optimizing one’s time and work-life balance.

This is yet another area where the kaizen cycle shows up. It can help you maintain a good balance between your work and your everyday life.

Always be on the lookout for things that could be done better. As I note above, I use a daily journaling practice and I find that by just dumping out what’s on my mind, problems like work-life balance concerns come right to the forefront. If I start to sense something’s out of whack on a subconscious level, it’s not long before it shows up in my free writing. That’s how I look out for a lot of personal issues.

Identify a specific issue. Over time, you might start to notice that you’re spending too much time focused on work and you’re getting a little out of touch with your family and your home life. You mostly notice that you’re often missing family dinner.

Come up with a potential solution for that issue. How can you be at home more often for family dinner? Why are you missing it? You start looking at what’s going on at work and you find that you’re mostly doing daily wrap-up tasks at the time when your family is eating dinner. Can those tasks be done later in the evening, at home, on a laptop connected to work via a VPN?

Test that solution. Try doing those end-of-day tasks at home after dinner using your laptop. You start maybe an hour and a half later, but does it make any difference to anyone? Aim to do it this way for thirty days.

Look carefully at the results. Is that simple change at work causing any work issues? Furthermore, is it allowing you to be at home for family dinner more often?

If the results are good, make that the new standard. If this change lets you both have a nice family dinner at home most nights while also keeping everyone happy at work with your daily reports, then you’ve found a new best approach at doing things.

Repeat this cycle. Keep a continual eye on your work-life balance and dive back into this cycle if something is out of balance.

Kaizen should be a part of your life and financial toolbox.

The core of kaizen, in my opinion, is being observant and not taking anything for granted. If you open your eyes to the fact that you’re not doing things perfectly, you’ll begin to see that there are lots of ways to improve things just a little so that you’re able to spend less time and money on things you don’t care about so that you have more time and money for the things you do care about.

Apply a methodical mindset to that truth. Try tweaking the things you’re unhappy with in your life to see if you can make them a little better, then move on to tweaking other things.

Life isn’t perfect, but it can always be a little better, and sometimes that little change makes all the difference.

Good luck!