Imagine your finances as a messy office where you have no idea where each item is placed, if the computer is working, if the things you need even are in that room at all. Through this method you will end up with a clean, organized room, where everything has its own place, can be easily retrieved to serve you and there is even a way to maintain this state of mind on the long run.
After the WWII the Japanese industry was rebuilt using process optimization methods, you can rebuild your financial strength using the same principles. One of the most simple and powerful ideas in Lean is the 5S organizing tool, a philosophy and a way of working that can be successfully implemented in managing personal finances, getting you out of debt and helping you start the journey to financial independence.

Source: http://www:safetyscience.be/
The 5S originally stand for 5 Japanese words that can be translated in English to sort, straighten, shine, standardize and sustain. Some specialists even add an additional S, for safety.
1. Sort
In the original context, sort meant just putting everything in the middle of the office or warehouse and dividing them into piles that would be properly labeled and stored later. In the same way, just take out a piece of paper or a spreadsheet and start thinking about your money. Your big piles are Income and Expenses. Divide the income pile into regular income, occasional income and identify potential income sources. Next, divide your expenses into vital (living expenses, food, debt repayment, insurances) and trifles (leisure, clothes, concerts). Try breaking down the list for a month in weekly sub-lists and arrange everything in a chronological order. Of course you can make as many small piles as needed for your lifestyle.
2. Straighten
This is the step when each item is transported to their new place, in a way defined by the ease of access rule. In the case of a financial straightening, this means making sound decisions on which cards to keep and which to cancel, opening new economy accounts, merging existing debt or re-financing. Decide on one debit card you are going to keep in your wallet and put away all the credit cards to minimize the temptation to use them. Take out the money and use cash. Give yourself a weekly spending allowance and even divide it and put it in different envelopes, to see how it disappears when you spend it. The psychological problem with cards is that you don’t see the money going away.
3. Shine
The shine step is about mopping all the dirt away, making everything look like brand new. In your personal finances the dirt is made of things you buy and never use, they just lie around gathering dust or you just pay for them and never enjoy the benefits; yes, I am talking about that gym membership. This is a good moment to re-negotiate all your agreements, cancel unnecessary subscriptions and memberships, or at least go to the cheapest plan. If you have done your homework accurately in step one, when you needed to list your expenses, just identify and eliminate. If you are unsure of your spending go over your bank statement and check for any automatic payments you don’t want any more. Revise expenses a few times and be as drastic as possible. Try replacing paid options with free substitutes: read online, go to the park instead of the gym. Throw away any coupons that only work if you need to buy more.
4. Standardize
Standards ensure quality and when it comes down to your finances, standardizing mean automating payments for utilities and repayment of credit card debt. Standards are predictable. Try to be predictable in your consumption and your spending and to set aside some money for the less predictable. In fact, the best idea is to standardize even the unpredictable: think about your last minute spending from the past year, try to evaluate the amount and save for this kind of situations in advance. If nothing bad happens, use the money to spoil yourself for being so thoughtful.
5. Sustain
You will most likely feel a sense of accomplishment after performing these steps. Don’t let the momentum go to waste and your new actions have the same impact as most New Years’ Resolutions. Establish a habit of planning your finances every week-end. Play your personal accountant and check if your spending and earning are going according to plan. As soon as you fall in this routine raise the bar a little and set yourself new goals, such as saving more. Motivate to do so by establishing a much desired end point, like a holiday, a new car or whatever makes you feel motivated. This step shouldn’t take longer than 10-15 minutes a week, but you should do it consistently.
6. Safety
Safety was not considered a different step initially because it was believed that it should be part of each previous step. However, as a review, it does not hurt to think about it. Safety means identifying risks and managing them. Sometimes we are in need of instant cash, make sure that when you’re borrowing money online the lender is a legit one like 365 Credit. Here are a few questions to ask ourselves, but this is just scratching the surface:
- Sort: Do we risk losing our income stream? Do we risk more expenses? How likely are these risks?
- Straighten: Did we make a budget generous enough to cover our needs? Is it thigh enough to help us repay debt as soon as possible?
- Shine: Did we cancel everything that was unnecessary? Do we have the necessary mechanisms in place to stop us from making new useless subscriptions?
- Standardize: Can you make your predictable expenses even smaller? Did you automate everything that was possible? Did you automate savings too?
- Sustain: Did you take the time this week to think about your finances? Are you on the right track?
The 5S (or 6S) tool is amazingly simple and this is exactly why it works. If you want to bring financial freedom try to use it in different areas of your life to remove clutter and bring in structure. Try this technique to clean up your house to eliminate unnecessary items, try it in your personal relationships to remove toxic people. More importantly don’t forget that this is a continuous process, not a one time action.