Sunday, August 02, 2009

Economics @ Home © Volume 1 Issue 2

The Lean and Mean Machine

For those of you who have been visiting my blog regularly in search of updates, let me assure you that my Economics @ Home project will be a weekly deal. I will try my best to post an interesting topic (with practical applications, hopefully) every Sunday unless circumstances do not permit (i.e. death, illness, orgy invitation and similar activities).

More and more people I know have talked about trying to invest, or at the least, trying to learn how to pick stocks. Investing is a great idea. As for speculating... I am not so sure. I will skip explaining the difference to you because not only is it trivial, but it is also easily found in any other website. Plus, c'mon... if you're visiting my website, shouldn't you already know this?

The discussion today is about money. I am going to assume that everyone wants money. That goes a bit further than saying everyone needs money. I don't care if you're the Dalai Lama, but did you know that the Dalai Lama flies First Class? Yeah... changes your perception a little bit doesn't it?

So why do we want money? Hell, money buys us all our wants, desires! Why would we NOT want money? Are you insane? Hear me out. We want more money so that we can acquire more goodies. When we get the money to acquire goodies, we would have very little money left. Then we want more money? So how do we end this vicious cycle? For most people, it never ends. That's what makes most of us dependent on money. That's why we work so hard. Or is it?

I have always worked to defy this norm. Saying it is one thing. Albeit I am a huge saver when it comes to money, I am going formalize my practice. I did try to take account of all my expenditure to keep my spending in check. While many people spend money on shopping and liability acquisition, I feel like I spend a lot of money on food. I know that some of you will relate to this. In the past, I told myself that it's OK to treat myself once in a while. It's not that I have changed my mind and going to live like the Dalai Lama (he does fly first class!). I do spend unnecessarily at restaurants. I am going to put an end to that.

I am going to try to start a lean company (not a real company). I am currently the 100% shareowner. Every cent I earn or spend will be published in this blog. I honestly have no idea what my current net worth is. I will find that out and report it tomorrow. I will start preparing my accounting statements and publish it here as often as I can. For humor purposes, you may even invest in me. I might even draft up some terms for that.

My goal will be to maximize profits for this company. In this coming weeks, I will do a forecast of my earning and growth potential and see how I fair against some yet to be determined benchmark.

My company will be called "The Lean and Mean Machine Pte Ltd". The goals of this company is to minimize cost in order to maximize profits. Hence, spending will be monitored tightly. The target for each month would be to limit the monthly expenditure to necessities being at least 80% of total expenditure. Necessities include, rent, bills and food. Now food will become debatable because I may "overstate" the necessary food spending. So to maintain integrity and objectivity, I define necessary food spending to be RM150 per week. That is to allow for RM20 and some change per day. This limit may be adjusted in the future. I will try this for the month of August and see where that takes me.

Miscellaneous spending will be properly defined and stated as and when I do have them. My only source of revenue is my paycheck.

My complete monthly cashflow projection will be provided tomorrow.

The ultimate goal of The Lean and Mean Machine is to maximize net worth over the long run. Stay tuned for more updates on the Lean and Mean Machine.

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