What Toyota Can Teach Us about Personal Finances

A very interesting piece is appearing in the May 12 issue of the New Yorker. It's about Toyota, and what's behind its rise to the #1 in terms of auto sales. I really liked this article because Toyota's philosophy can teach us something about personal finances:

The answer has a lot to do with another distinctive element of Toyota’s approach: defining innovation as an incremental process, in which the goal is not to make huge, sudden leaps but, rather, to make things better on a daily basis. (The principle is often known by its Japanese name, kaizen—continuous improvement.) Instead of trying to throw long touchdown passes, as it were, Toyota moves down the field by means of short and steady gains.

This quote deals with Toyota's efforts to innovate, but it can also be applied to principles in personal finances. Toyota's approach is a corporate lifestyle. And that's how you need to approach personal finances. We're not talking about an event; we're talking about a lifestyle. Many people take the approach that they have to have some sort of big earnings in order to find success. They want $5,000 to put into an investment account, or they don't think it's worth it to save just $25 every couple of weeks. This is the wrong type of thinking.

Instead, set attainable goals that help you steadily improve your personal finances. You can't give yourself a financial makeover all at once. Instead, focus on what you can do daily to improve your financial situation. Put a little more toward paying down debt. Skip the lunch out and save that money instead. Use dollar-cost averaging for your investment account instead of lamenting that you don't have enough money to invest. Small, consistent changes to the way you do things with your personal finances will add up -- and possibly yield better results that you thought.

Toyota slowly worked its way to the top of automotive sales. GM may have had flashier products, but in the end it was Toyota's steady determination to do something a little better a little at a time that won the day.