Managing Personal Expenses Using Six Sigma

Many people have experienced the pinch of money from time to time. As a Black Belt, I decided to use Six Sigma to aid in managing my money, and conducted a project to lower my expenses.

By Raman Pushkar

Many people have experienced the pinch of money from time to time. Despite earning more income, expenses, as well as inflation and cost of living, also seem to be proportionally scaling to the same heights. While being frugal can help minimize expenses, it is more important to properly manage money.

As a Black Belt, I decided to use Six Sigma to aid in managing my money – after all, Six Sigma is widely accepted and has been implemented across various industries for many years. Thus, I commenced a Six Sigma project on managing expenses. This project is based on my own experience; all the data, inputs and outputs are related to my life.


I began this phase by creating a suppliers, input, process, output [SIPOC] chart and a high-level process map. The process map showed how my income was received and how it was spent on various expenses; the map also showed when credit cards and loaned were used if there was a shortage of income.

Next, I created a critical-to-quality (CTQ) tree to categorize the expenses as fixed or variable. Fixed expenses included rent and equated monthly installments (EMIs); variable expenses included water bills, electricity bills, cell phone bills, traveling expenses and vehicle maintenance.

The problem statement, written in the project charter, was: “There is a high proportion of spending compared to the income received.” The scope of the project included monthly salary, loans and credit cards; perks, investment returns, compensation and lottery winnings were not considered as part of the income scope. The goal statement was to reduce personal expenses by 50 percent. I estimated the financial benefits of the project would be the saving of a few thousand Indian rupees every month. I also allocated a timeline for the project: one month each for the Define, Measure and Control phases, and two months each for Analyze and Improve.


During this phase, I collected data for all expenses incurred, income received, and credit card and loans received. I created a Pareto chart to compare the different causes of expense (Figure 1)

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Figure 1: Pareto Chart of Expenses

Out of the types of expenses, only seven causes were considered for improvement. These seven expenses were categorized as controllable or uncontrollable. Personal loan EMI and vehicle loan EMI were considered uncontrollable expenses because they needed to be paid every month without any change in the regular payment. The controllable factors were credit card dues, rent, food, traveling done to home and cell phone bill. I took these on for further study and prepared an I-chart that highlighted my average controllable expenses as 10,858 thousand rupees per month. Credit card dues were further drilled down by using a Pareto chart, from which interest charges, EMI and late-fee charges were taken into consideration.


In this phase I created a cause-and-effect diagram for credit card usage. Out of all the causes listed, only two were considered after making a control-impact matrix of these causes. They were:

1. Blindly believed the credit card statement
2. Buying unwanted stuff frequently

Analysis for the first cause was the rate of interest and charges that were charged were exorbitant; there were also a few unknown charges listed in the statement that I had ignored. The analysis for the second cause was that I bought unwanted dress materials from garment companies because of provoking advertisements, such as Buy 2 get 3 free and Stock clearance sale.

I conducted rent analysis by using a contour plot chart considering vital factors: the location of apartment, rent cost in Indian Rupees, travel cost in Indian Rupees to commute from apartment, and travel time in minutes to commute from apartment. I found that the farther the apartment is from my office, the more time is lost. This is depicted with the light blue color, getting darker from left to right as the location ranged (Figure 2).

Figure 2: Contour Plot of Location Range vs. Rent for a Room, Commuting Time in Minutes

Apartments considered near to the city (8 to 15 kilometers range) were pretty expensive, as the rent ranged from 2,000 INR to 3,000 INR. I used a failure mode and effects analysis (FMEA) to analyze rent. It showed that there was a high influence from friends in the selection of my pre sent apartment, which resulted in more dependency for a room within 8 to 15 kilometers of the city, leading to high rent payment.

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I also conducted food analysis using a cause-and-effect diagram, which showed that having office food, junk food and weekly parties were the major contributors to paying heavily for food. For these top three contributors, I conducted a five why analysis. I determined that office food was scantier and more expensive compared to the prevailing market price of the food. Junk food was often consumed due to mismanagement of time and peer’s influencing to skip lunch and go for snacks, which resulted in consuming more junk food – and heavy spending on medicines and the gym to compensate. Weekly parties was one more major cause for spending higher. The parties require going to the center of the city to go to a restaurant and paying for parking fees and charges.

Travelling to my hometown was the next-highest reason for spending on the Pareto chart. Uneven booking of travel tickets, taxi fare and unplanned shopping were the three top contributors to travel expenses. Five why analysis showed that the major reasons for these expenses were unscheduled booking of tickets, paying of high fare due to last moment booking of tickets, and last-minute gift shopping, which meant paying higher amounts due to shortage of time to search for competitive stores available in the market.

I conducted cell phone bill analysis using an interrelationship diagram (Figure 3). Office calls and girlfriend calls were the critical reasons for frequent calls. Office calls were made to a landline and calls made to girlfriend were not made to a local number; my current cell phone plan wasn’t designed for calling to landlines or calling a non-local number. My present plan was best suited for calling cell phones within the local province or state.

Figure 3: Interrelationship of Cell Phone Calls


In this phase I created the improvement plan. As part of the plan, credit card usage was taken into consideration as priority. I thought about clearing off the credit card dues by taking a personal loan, as this would reduce the burden of paying higher interest rates (interest rates for a personal loan are much more economical). I decided to go that route.

The next action item was to cut down high rent. In the root cause analysis, I found that I paid higher rent for staying in city and my location also caused time lost commuting to the office. I planned to move to an apartment with lower rent that was very near to the office.

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I also planned to prepare food at home and carry it to the office, as food near the office was scantier and uneconomical. Also, by making this effort to pack a meal, it made me less likely to skip lunch and buy snacks. I planned to move weekly parties to friend’s houses rather than rushing to a restaurant in the center of the city.

I planned to schedule travel home well in advance by keeping reminders and alerts in cell phones and calendars. This meant that tickets and gifts could be purchased at ease and at an economical price.

I also changed my cell phone plan to one with better rates for making calls to landlines and other states, as most of my calls were to office landlines and to my girlfriend who was staying in another state.

I planned to implement the improvement actions in a month’s time, and collect data again three months after the improvements were made.


In this phase, I compared the six months of pre-improvement expenses data with the three months of post-improvement data (Figure 4).

Figure 4: I-chart of Expenses Data Pre- and Post-improvement

After implementing all the action items, my average expenses shifted from 10.3 thousand to 4.4 thousand per month. I had successfully met the goal statement of 50 percent reduction in expenses, and have gone on to sustain it by building controls for each of the solutions using an FMEA.

About the Author: Raman Pushkar is a Black Belt and a consultant with Anexas Consultancy Se in Bangalore, India. Before this assignment he worked as Process Supervisor in Deutsche Bank Group in Bangalore and as Senior Quality Analyst in Ness Technologies in Hyderabad, India. He can be reached at [email protected].

Comments 29

  1. Smitha

    Must say impressively organised!

  2. Satish jadhav

    Outstanding one… All the Best !!!

  3. Vijay Kumar

    Hey Raman, good one . keep going.
    Also keep me posted on new developments

  4. Azy Fox

    Very informative and simple

  5. Tamara Abraham

    Wow Amazing, very helpful….keep going.

  6. Tamara Abraham

    Here’s ur rate 5 on 5

  7. Raksha Raman

    The article shows that Six Sigma can be effectively applied at the grass root levels. Apart from the Companies & firms, the technique can be used for personal purpose as well, to ensure right usage of the available resources.

    The article reiterates the fact that frugality is not the answer for effective utilization of resources but PRUDENCE definitely is!


  8. Shiva Hiremath

    well in this competitive world the best way to reduce expenses
    is applying something i can say that something is “Six Sigma”.really Raman has done excellent work.He has explained in such way that one can understand easily.I would extend my many thanks to him & i will adopt this cost cutting Article & many companies are thinking about reducing the expenses they can use this saying is there Single…Single drop of water makes a difference…like that small reduction in the expenses makes a big difference in future…so i believe it will help us to use available resources in much better way…thanks Raman.

  9. Aysha Mulla

    Indeed Raman a good job.

    But i personally believe one should be in the right frame of mind to understand the concept your referring above. While going through it, i was just wondering if you have considered the economy & people out here (u know where) also as you know things out here are alhamdullilah well managed by people and the economy is well maintained.

    I really wish you luck in your forth coming endeavour. Al de best. keep me posted.CHEERS!

  10. jeevankumar

    hey ram, the best thing about the ur project is with ur specialized skill and indepth knowledge u have put up in a simple terms which is very useful for a person reading this project, grt work done and keep it up. Hoping some more projects based on expense which will make u known .

  11. Harish Raju

    This article clearly shows how six-sigma can be applied to something as basic as planning one’s daily expeses. The clarity in thought-process and its flow is very impressive.
    Way to go, Raman!

  12. Mohammad Riyazuddin

    I feel this as very informative, I can give 10 on 10 for this article.

    Wish you all the very best..

  13. richestman

    you have done a great job keep it up

  14. Vittal Rao

    Wow good,

    Now I have got a clear idea, as to how to implement the six sigma.

  15. Padmaraj Venkatappa

    Great job Champ……….even before you acquired the lean mean theory, we all new that you were capable of managing money efficiently………with your added skills guess you have become more efficient.

  16. Moien

    That is a really good one sir.

  17. Ambarish Gupta

    Interestingly insightful.

  18. yateen.kulkarni

    Superb !!

    Good one Raman !

  19. Rajiv Kamra

    Very good!!
    This article will definitely help me.


  20. Mallikarjun

    Dear raman,

    Nice article very informative and its also nice to see and Anexas member has posted such a wonderful article

  21. smartdebater

    This is awesome!

    One question though, is it acceptable to use minimal data points (in this case, 6 data points) in your Control chart? I’ve read articles saying that it is more accurate to use at least 25 data points.

  22. Raman P

    Dear Domnic,

    Thanks for your review.

    With respect to data points in control chart, I have used month wise for clear picture, if I had used week wise it would have obviously meet the minimum data points

  23. Dr.Ahmad Al-Ani

    Excellent job. It’s nice to see how the originally industrial SS could be applied easily to our personal life .I wonder how it could work for other personal goals; weight reduction!

  24. devesh

    Though the heading / concept was interesting, I could not find anything substantial or exciting. It seems that the author has only tried to enumerate the number of techniques he knows rather than actually analysing the root cause. All the outcomes mentioned (after so called six sigma, FMEA, RBI, RCM, 5Ys, Fishbone n wat not) are already known if a little common sense is applied.
    The best way to control expenses is by having a realistic Budget (monthly / quarterly / yearly – preference is yours) and monitor regularly and effectively. Dont give in to impulse spending even though it is easier said than done.

  25. Raman

    Dear Devesh,

    Thanks for your review, in the initial statement I have clearly mentioned that this project relates to my expenses and income and how I have managed them using Six Sigma. And moreover this project is done so that even a layman who is unaware about six sigma, by reading this project he will understand and how and where he can use the tools and imply them in other Six Sigma Projects. And the tools discussed might be a cakewalk for a Green Belt, Black Belt & Master Black Belt but for the people who are new to this field it will at least give some thought on it. Rightly said that to manage expenses one can use his / her common sense that’s a known fact here I am just trying to say I used Six Sigma to minimize the same, any one can choose anyway to do so. Hope its clear now, if you want to discuss on this kindly mail me I can explain you in more detail.

  26. stefanusrantetondok

    Hi Raman,
    You’re right about trying to show that Six Sigma is quite applicable in many field including personal expenses. We can manage expense by making budget and monitor it in timely basis, however without a good control plan it potentially will fail (happen to me all the time). Appreciate your article but I believe you didn’t put your DMAIC process in power point presentation. Cheers

  27. Raman.P

    Hi Stefanus,

    Thanks for your review, yes very much Six Sigma is a methodology independent of any industries or businesses. All the controls were well implemented during control phase, but I didn’t add up much details here due to words limitation for article. About presentation I had made DMAIC ppt well before my article, my presentation was the only source which drove me for this article, which I have been presenting in many of the training programs and sessions.

  28. Kishor Kadiyala

    Hey Raman its really amazing!!!
    Very helpful for all….
    Keep going and please post me more articles….

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