Mother: (with a cheeky look and voice) Mr. Chinmay, have you seen my engineer son?
Me: (I knew where my mother was heading) hmm… tell me what needs to be fixed?
Mother: the tap in the kitchen is leaking Mr. Engineer
Me: So, you are asking a civil engineer (me) by qualification to do the plumbing work.
Mother: why not?
Last week you wanted your mother who is an agriculturist with a Bachelor of Art’s qualification to stitch the button of your shirt, didn’t I do it immediately?
Me: ok ok ok… I will fix it
Mother: good boy
(My father saw me fixing the leaking tap and said)
Father: Chinmay, the water bill for the last few months has increased. Maybe you should check if we have more leaking taps?
Mother: it must be because of the new maid who wastes a lot of water when washing the dishes and watering the plants.
Father: why don’t you tell her to use water wisely?
Mother: you are the head of the house, you tell her.
Father: Chinmay, I will send you the water bills. You show your mother how much it has increased.
Mother: Chinmay, see see see, your father only wants to give orders.
Me: (I wanted to change the topic) Ma, why are the dogs barking? Maybe someone might be outside? I think it could be the Amazon delivery boy.
Mother: I will check…
(after 15 mins, I went to our living room where my mother was watching TV)
Me: Ma, the tap is fixed. I replaced the washer. It’s all good now.
Mother: good boy!
Me: Ma, do you remember when we were in our previous house there was a tap that was leaking that you noticed before going for a weekend holiday?
Me: as we were in a rush you decided to keep a big bucket under it.
Mother: yes, and when we came back after two days the bucket was almost full.
Do you know what was that crucial thing?
Mother: I keeping that bucket?
Me: no, you identifying the leaking tap.
The first step in solving any problem is recognizing there is one!
So, the crucial thing according to me was you recognizing the leaking tap.
Mother: I always do that before going out. I make sure all the electric switches are off and taps are closed properly.
Me: hmm… I wonder if you are doing the same at our farm from a finance perspective?
Mother: what do you mean?
Me: do you know how much are the recurring fixed costs, variable costs, miscellaneous costs we incur?
Mother: I kind of know the total monthly cost.
Me: It is like saying we know how much is the monthly water bill but we do not know why it is increasing? Or the better question would be, where is it getting consumed the most? is it because of the new maid or because of the leaking taps?
Mother: so, are you suggesting to keep a track of it?
Me: YES, definitely!
The famous management guru – Peter Drucker said, “what gets measured, gets managed.”
If we can measure the water that is getting consumed in each floor to start off with, then we can narrow it down to each room, and then each tap. After that, I can confidently say we would have addressed the problem.
Mother: how to do it?
Me: do you know how many taps we have in our house?
Me: even I do not know.
So, let me start counting the taps on each floor. Then, I will figure out how much water is consumed in each floor, meanwhile, why don’t you start categorising the total costs in to three categories – fixed, variable and miscellaneous.
Mother: I will have to go through the book where I enter all the expenses.
Me: that is a kind of old-school way of bookkeeping.
Me: nothing, I will aim to find – out of 100% how much percentage of water was consumed on each floor and you can aim to find – out of 100% how much are the fixed costs : variable costs : miscellaneous costs?
Do you think it will be 40:40:20 or 30:40:20 or 50: 25:25 or 20:30:50?
Mother: not sure, but I am getting curious. No doubt you love numbers!
Me: you bet 😉
Whether it is personal finance or business finance, we can broadly categorize costs as – fixed costs, variable costs, and miscellaneous costs.
The question is – do you know the percentage of each?
If yes, then I do not think you need someone to tell you where’s the leaking tap?
If not, then the costs might be increasing but you may not know where and how to control them?
Remember, a dollar/rupee saved is a dollar/rupee earned!
#savings #financemanagement #bottomline #financeacademy