"A Minimum Viable Product (MVP) is: "[the] version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort" — Eric Ries." Google
In simpler terms, an MVP is a product, for example, a mobile app, that is developed quickly and released to the customers before there is time to put on the finishing touches. Releasing the product to the customer quickly lets you learn from feedback and fail fast if you are going in the wrong direction. This process allows you to spend minimal funds on a progressively better product. You can know the biggest needs of the customer (or if the product is needed at all) before you spend money on the final logo of the application, for example.
Viable is a key term in this phrase. Viable means that the product might not have all the features, but it is useable by the intended audience.
The idea is that this process is efficient. No money or time is wasted, no resources are misused or idle. I love lean management and believe that efficiency is key to running a smooth machine that is a business.
I look at myself and my money management as a small business. I have a resource (my own potential), a revenue source (my income), and expenses (rent, food, etc.). Thus, I translated the lean management techniques into personal finance and am piloting and learning from my experience.
What does that mean? Firstly, I have decided that my job is stable enough and my paychecks are large enough that I do not need an emergency fund at the moment. I don't own a home or a car and I planned to keep $5K in my saving account for emergencies. I might not have that money at any one moment, but I can gather it within a 2 week period. Thus, now while I am trying to attack my student loans with everything I have, why keep $5K in the account idle? Remember that viable for a product means useable and for a process: doable, which means you have to be careful not to be so lean as to miss payments on credit cards due to a low cash balance.
Secondly, I've always cleared my credit card with regularity. I would sometimes pay the card off once or twice a week just so I know the true amount of cash I had left and for simplicity purposes. Now, for simplicity in calculations, I might pay a small amount on my cards to round the amount down at any one time, but I no longer pay the full amount until the actual due date. The reasoning for this method is that if there are two paychecks between today and when a credit card payment is due, then instead of paying my credit card today (which accumilates no interest) and my student loan in a week (which does accumulate interest), I can prioritize whom I pay first from each paycheck based on the interest %. It sounds complicated and will require you to calculate how much you will have to dedicate from your paycheck that is paid out on the closest to the credit card due date towards that credit card payment, but it will save you in interest costs. If you have automatic payments set up on your student loans (or a mortgage), you can pay the amount due earlier and, usually, a second payment will not be automatically deducted on the due date. Do check with your loan provider. Why wait for the due date when you have the money today and when the money will be idle in your bank account until the payment date?
Thirdly, I'm delaying putting anything in my Roth IRA until right before April 15th. I'm generally risk averse, thus, I want to put the money in my Roth IRA because it is a smart move. Yet, instead of putting a little away every month, I'm going to stash a lump sum before the deadline from my March and April paychecks. This method allows me to put funds where they are needed today - student loans. This choice might be contentious for some. Yes, I loose out on the benefit of dollar cost averaging and of possibly making a good return in the market. Yet, the greatest value for me right now comes from decreasing my debt. That piece of mind is worth this move.
I am also in need of a credit card that is not an AMEX, so I'm looking at options with the best rewards, but I am also seeking a 0% APR introductory offer so I can put one of my student loans that is $6K on a credit card. The reason for this move is that I would pay a small fee to pay that student loan off with a card, yet, I can focus on paying higher interest loans off with those funds instead of paying the $6K one down monthly. Overall, calculating the return of being able to snowball money intended for this loan into a higher interest loan and returning to this $6K one on the credit card before any credit card interest is due will save me close to $300, even after I pay the service fee for paying the loan off with a credit card.
I have also raised my deductions for my paycheck. I am used to receiving a refund and because the refund is never significant, I never played around with my withholdings. Well, now I have and now I am plowing more money towards - you guessed it - student loans. I can calculate the refund or the amount due by the end of January and save up if needed through April 15th.
Overall, I've become more conscious of giving away "free money." In the past, I've paid for rent months in advance or pre-paid on other services I know I would be using like insurance. However, now, unless the service will benefit me via a discount that is greater than the interest I am paying on my student loans for not directing those funds to loans, then I do not pre pay anything. I also withdraw my Venmo and PayPal money from eBay after each transaction instead of transferring when I remember. Why give my landlord or eBay an interest free loan?
There are many more strategies where you can make the dollar work for you. It might be tedious, but if you are looking to save money on interest - these strategies could be useful and will become routine after doing it for some time. Something that has kept me motivated and swung my decisions has been an Excel I have been keeping that keeps track of the interest savings from paying down my loans first then my credit card on its actual due date. Overall, I've saved several hundred dollars in interest from a combination of these strategies.
Comment to share any of your strategies for Minimum Viable Money Management.
