Just In Time Purchasing for the Everyday Investor
A recent experience with selling my house has inspired me to begin the process of just-in-time purchasing.
What is Just in Time Purchasing (JIT) you might say? JIT is the act of buying a good or service only when it can be used immediately.
In actual practice, if the good or service isn’t something that I will utilize right away, I am going to delay that purchase as I can use those monies for better investment opportunities.
The Inspiration for JIT purchasing
I first became aware of the idea of just in time from taking business management courses in college. I always thought it was an interesting concept, but the way it was taught applied heavily to business functions, primarily the procurement of inventory for large conglomerates.
However, being that I am in the process of selling my own house, I am becoming much more aware of just how important just-in-time purchasing can be even in my own personal life.
Thus far in my moving process, I have donated upwards of 30 boxes to Goodwill in the process of decluttering my home. I also have a trailer full of furniture, boxes, and other items, many of which I have not touched in a few years time.
Overall, the cost of buying these goods add up. It can take various forms: the extra storage space needed to store these items, the sunk costs of not having the funds working in the market, and the real money that I utilized to purchase these goods can become significant.
All-in-all I estimate roughly $20-25k worth of purchased goods that I rarely used and were not wise purchases.
Minimalism meet JIT
About seven years ago, I became immersed in the idea of practicing minimalism. To me, minimalism means the idea of wanting and needing less. While it can take many forms, when we I write of it in this article, I will come from the financial perspective.
While in university I found the idea of JIT purchasing interesting, I did not I completely understand the applicability into my own life.
However, being someone who now embraces minimalism, I can see how advantageous practicing just-in-time purchasing will be for my life.
Moving forward I will be practicing these two general rules in regards to any purchases that I am looking to make:
- If I do not have an immediate use for this good, I will not buy it.
- If this good or service does not have a repeatable value, I will make sure that the one-time ROI is significant enough to justify the purchase.
Typically, for smaller I need to be able to use the item within a day or two and it will have repeated volume. This would mean that any item that I purchase would not be a one-off use, but rather would need to have value beyond a one-time applicability.
Shooting sleeve for basketball
Immediate use – Yes, prevent injury.
Repeated use – Yes, each time I play.
Immediate use – Yes, staying warm.
Repeated use – Yes, each time I sleep.
Immediate use – Yes/No, need to figure out how much I will utilize.
Repeated use – Yes/No, similar to above, need to figure out how much I will be drinking tea.
For larger items, the rule is the same with one caveat. I will still want the general ideas of immediate and repeated use, though I would add in any case possible, I want the asset to have high ROI.
What does this mean? If I am making a large purchase, I want that asset to meet the criteria of making me money.
Keep in mind that to make me money, the asset does not need to be income generating. It is really nice to have assets that generate money (think rental properties, businesses, etc.). Rather if the asset leads to more income generation or increased savings, then it can be considered as meeting the criteria.
New Vehicle Purchase
Immediate use: Yes, everyday driving.
Repeated use: Yes, everyday driving.
ROI: Possibly yes. If used for driving to a job where you earn more money, using for a ride-sharing service, etc.
Immediate use: Yes, living.
Repeated use: Yes, living.
ROI: Possibly yes. If used for renting out space or living closer to work, thereby saving driving expenses.
What Will I Do with the Savings?
Simple: continue to build my dividend portfolio. This is the one area where the idea of just in time purchasing does not apply.
Rather, the goal is to buy as much stock, at adequate values, as quickly as I can. I am taking my time in doing so, but the benefit of compounding investment principle cannot be overstated.
Just take a look at The Power of DRIP and see the math behind the #s.
Just In Time Purchasing Just Makes Sense
In practicing just in time purchasing in my personal life, not only will I experience an upswing in my financial investments portfolio, but I will also be much more Zen.
There is something so peaceful of having what you need, when you need it, and no more than that. Rest assured that I will be practicing JIT moving forward and will keep you updated on my progress in this journey.
Is Just In Time Purchasing right for you? Give it a try and find out!