The document outlines a Lean Six Sigma Black Belt project to reduce monthly expenses from $6,000 to within $2,000 through a Define, Measure, Analyze, Improve, and Control process. Baseline data from 2008-2010 tax records and credit card statements showed expenses exceeded income by $4,000 per month. Through analyzing spending categories and prioritizing solutions, expenses were reduced to the $2,000 goal, lowering stress for the individual and allowing focus on other opportunities. Ongoing monitoring and emergency funds were put in place to control the new budget.

1. Lean Six Sigma Black Belt
Project Certification
Financial Repositioning for
Retirement
Paul Kovatch 9/13/2011
11/28/2011
(714) 488-4350 1

2. Index
• Executive Summary
• 1 Define Phase page 3
• 2 Measurement Phase page 5
• 3 Analyze Phase page
• 4 Implementation Phase page
• 5 Control Phase page
• Appendix page
11/28/2011 2

3. Learn six sigma Black Belt Project
Operational Definitions
• Lifestyle- Current day to day spending habits based on
available income
• Budget- Spending limits based on reduced income
• Habits- Normal routines of living, both good and bad
• Assessment- Separating true (real) needs versus wants
• Routine- Establishing “new” goals and a focus on a
long range purpose
• Temporary Condition- Un-planned expenses and time
commitments, i.e., house fire, illness, car
repairs, family problems, etc.
• Normal- Lower living conditions “permanently”
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4. Executive Summary
• Project Wins! • Project Timing
• Improved <primary metric> from • Start Date: 5/13/11
$6K/mo to $2K/mo • End Date: 9/13/11
• Reduced stress, less worry
• Less time to focus on more • Graphs
important opportunity to share • A)Primary metric before $6k/mo
with others lessons learned VS. after ($2k/mo)
• B) Root cause analysis: fish bone
• Control chart- split before vs.
after
• Context
• Potential loss of control resulting
in possible foreclosure/ eviction
and homelessness
11/28/2011 4

5. 1)Define Phase
• Voice of customer
Operational definitions
• Baseline data and performance to customer expectations
• Problem and goal statement
• Project impact pro/con
• Project and communication plan timeline
(creditor/settlements)
• Tools
• VOC data analysis
• Project charter
• Timeline
High Level summary
11/28/2011 5

6. Project Charter
Problem statement: Total expenses exceed income Business Case & Benefits:
by over $4,000/ mo Expectations
Retirement requires establishing a budget reduction Less stress and more enjoyment of
of income from over $6,000.00 per month to within life with a minimal amount of
$2,000.00 per month. financial obligations
Goal Statement:
Reduce all expenses to $2,000.00/mo
Identify all subcategories of expenses Timeline: Competition 10/8/11
and brainstorm various possibilities Includes tax records from past three
for reduction years and to be completed within six
months)
Scope
Out:
Voice of Customer:
Excludes other income
Think “outside” of the box with a view of
Any rental income
ZERO BASED BUDGETING i.e., no income
Supplemental income
and No expenses (starting point)
Discretionary income
In:
Team Members:
All variable expenses
All fixed expenses evaluated
Paul Kovatch, self
Fixed income sources (recurring only)
Rick Ames, CPA
Kayvan Mozaffari, Partner
11/28/2011 6

7. Timeline: Estimated vs. Actual
Projected Define Phase Measurement Analyze Implementation Control Deliver to
Op Definition Phase Phase instructor
Activities Ex Summary Phase Phase
DMAIC
Approach
Root cruse Measure
Before /After
Pie chart
Bar chart
5/27/11
Month May 11 June 11 July 11 Aug 11 Sep 11 15 Oct 11
Actual Control Chart Plot
VOC
Activities SEPOC
& SWIM
Comments
11/28/2011 7

8. VOC: Voice of Customer
• Who? Me
• What? Monthly financial obligations “must”
be reduced to new levels of expected income
• How? Income driven
• Old data to new process to new data
• When? Six month
• Where? Smaller Home Living Conditions
• Why? Necessary Life Style Changes
11/28/2011 8

9. High Level Summary
Misc Transportation Housing
-Credit Cards -Car Payments -Utilities
-Entertainment
-Licenses -Insurance -Mortgage
-Gifts -Gasoline -Taxes
-Repairs -Insurance
-Utilities
Insurance Food N/A
-Health
-Life -In -Tithe
-Out -Income Taxes
11/28/2011 9

10. Cause and Effect
(Fish Bone)
• Location Ownership Square Footage
• City Tax #parking
• Condo? Insurance #Garage
• Apt? Rent #Bath
#Bedrooms
• Gas RV? (non op) Housing
• Electric No insurance Livings Room Requirements
• Water Kitchen
• Trash Dinning room
• Sewer Bedroom
• Cable Den
• Internet Patio/BBQ
• Satellite Storage Amount of Furniture
•
• Utility consumption
11/28/2011 10

11. • Insurance Tolls Repairs
• Tow
• Comprehensive Teaching
• Thief
• Fire Age?
• Liability Service
• Lease 4 cylinder Truck Local Transformation
• Finance 6 cyl Car Long distance
• Cash 8 cyl Hybrid
• Car Payment RV
Gas BusinessTravel (Vacation)
11/28/2011 11

12. • Part time Furniture Credit cards Clothing
• Business Laundry
• Advertize Used Cash Replacement
• Cell Phone New Payments Seamstress
Misc
License Birthdays Books
coins Self
Shots Karaoke Others
Food
Pet Gifts Hobbies Entertainment
11/28/2011 12

13. • Life Heath Home Insurance Fire
• Term Eye Liability
• Accident Dental Earth Quake
• AD + D Long Term care
• Disability ADA
• Mal Practice Search Car Rental Insurance
• Mail Tow
• Business Phone Comprehensive
Copies Collision
Umbrella Loss of Job Liability
Auto Insurance
11/28/2011 13

14. • Others In
• Business Prepared
• Family cook
• Friends Fast Food Food
• Diet Buffets
• Exercise Casual
• Medicine
• Diabetes OUT
11/28/2011 14

15. Insert Process Map Here
• Swim Housing
– Food Flow Chart
– Transportation Value Stream Map
11/28/2011 15

16. SIPOC Template
Supplier Inputs Outputs Customer/Stakeh Requirements
olders
Procces
Step 1
Process
Step 2
Process
Step 3
Process
Step 4
Process
Step 5
Process
Step 6
Process
Step 7
11/28/2011 16

17. Swim Lane
Process Map
• Paul Kovatch (Self)
Customer
Dept. 1 Housings
Dept .2 Food
Dept. 3 Transportation
Dept. 4
Insurance
Dept 5
Miscellaneous
11/28/2011 17
Lean six sigma Black Belt /Kovatch

18. Process Level Map
11/28/2011 18

19. Value Stream Map (VSM)
11/28/2011 19

20. Measure (Phase)
• Approach to data collection (Tax returns from
2008-2009-2010 36 months current sample
period May 2011-Aug 2011 (weekly)
• Approach taken to validate that data was
accurate (snapshot) 4 months
• Data collection sheet sample (All credit cards and
cash receipts )
• Baseline Measure 2008
• Comparison of baseline measure to the goal
• Past (2008) Future (2012)
11/28/2011 20

21. Exercise: Baseline Data Capture
Since 2008 Tax Records
• All- Cash Receipts
Checking Accounts
Credit Cards
Barter (Excluded)
To difficult to quantify
Actual/Not projected
11/28/2011 21

22. Sample Measure Chart
11/28/2011 22

23. 3)Analyze (Phase)
11/28/2011 23

24. Exercise: Hypothesis Statements
Graph to Display or
Potential X Hypothesis Statement
Result (True or False)
• Mortgage/ Housing • Need 2,000 Operate
Expense Capital
• Utility consumption • Luxuries
• Food In/Out
• Cooking for self
• Transportation
• Job search only
• Insurance
• Minimum Required
by Law.
• Miscellaneous
11/28/2011 24

25. Exercise: Hypothesis Statement
• Null:
• Income and Expenses are Equal
• Alternate:
• Income and Expenses are “Not” Equal
11/28/2011 25

26. Sample Analyze Chart
• State Conclusions Here
Difference of $4,000/mo is Mostly;
-Housing
-Utilities
-Credit Cards
-Food out
-Gasoline
-Excess Insurance
11/28/2011 26

27. 4) Improve (phase)
• Likely topics are
• Approach to prioritizing and selecting
solutions that eliminated root causes (By
needs only (Amount) not revelant)
• Forced lifestyle changes (new habits)
• Best (Only) way to avoid spending=keep out of
store
• Avoid dollar stores and Thrift stores
11/28/2011 27

28. Root Cause and Solutions Matrix
Solution 1: Solution 2: Solution 3: Solution 4: Solution 5:
Housing Food Transportation Insurance Miscellaneou
s
Solution
Owner(s)
Root Cause 1:
Root Cause 2
Root Cause 3
Root Cause 4
11/28/2011 28

29. Insert Baseline and Improvement data comparison
• Baseline Data
– 8K/mo
• Improvement Data
– Goal ($2K/mo)
11/28/2011 29

30. 5) Control (phase)
11/28/2011 30

31. Next Steps
-Continue New spending plan
-Pay bills first when income arrives
-Use shopping lists, coupons, save news paper
-Rotate food, especially frig/freezer and
boxed/processed items
-Keep busy/exercise
-Less TV/Less snacks
11/28/2011 31

32. Appendix
11/28/2011 32

33. Lesson Learned
11/28/2011 33

34. Project Team
• A Project team was formed to help in the entire project to follow each
phase of the project.
• The Project team took part in defining the goals, determining hypothesis,
brainstorming, cause/effect and possible solutions
• Spare Down
Position Name % Allocated
Lead Paul Kovatch 80
Core Team Kayvan Mozaffari 5
Core Team Rosy Lorenzo 10
CPA/ Advisor Rick Ames 5
11/28/2011 34

35. Threat vs Opportunity Matrix
If we “Don’t” Threats Do If we Opportunities ‘Do’ Take
Short Term something Action
(Less Than 6 -Accumulation of short term -Balance Budget
Months) debts. -Reduced Stress
-Increased stress
-Loss of Financial Control
Long Term
(More than 6 -Unable to Help others -Improved Lifestyle
months -Forced change of Lifestyle -Financial Liberty
-Foreclosure -Potential Residual
-Possible Bankrupcy discressionary money
-Eviction
-Home lessness
11/28/2011 35

36. Business Case
Scenario
• While retirement is inevitable; the date was a moving target
and seemed to continually be moving farther into the future.
• A Series of events starting with being outsourced (Laid Off)
• -Cancer
• -Totaling a New Car
• Divorce
And finanlly
• House Fire.
This Prompted the decision to take retirement at age 62.
11/28/2011 36

37. Problem/Goal Statement
• Problem Statement:
Over the past 3 years my income has been constantly going
down throught NO fault of my own. My constant efforts to
reverse the trend have, at best, slowed down the inevitable.
The current expenses are over $6,000 /mo.
• Goal Statement:
The Future income is only expected to be approximately
$2,000/mo. Therefore, the budget must be reduced by more
than 66%
11/28/2011 37

38. Project Scope
100%
Inscope Out of Scope
-All Variable Expenses -External Income
-All Fixed Expenses -Rental Income
-Recurring Income -Discressionary Income
-Credit Cards -Tithe/Taxes
-Unexpected Expenses
11/28/2011 38

39. Measure Phase
• -All Records were collected:
-Credit Card Statements
-Bank Statements
-Cash Receipts
• -Data for baseline is 2008 taxes
• -Data collection is three (3)months
(June-July-August 2011)
• -Five major categories were identified totaling over 90% of the total budget.
1.Housing
2.Food
3.Transportation
4.Insurance
5.Miscellaneous
• -Monthly expenses vary approximately 8% of annual budget.
11/28/2011 39

40. Baseline Data Chart
11/28/2011 40
2008 2009 2010

41. Root cause and solution matrix
Solutions
Need (necessity) Reduce Demand Shop Around Status Quo Want (Luxury) Eliminate
Housing * * * *
* * *
Food
* * * *
Transportation
* * * *
Insurance
* * *
Miscellaneous
11/28/2011 41

42. Impact vs Effort
Low High
-Reduce Driving -Reduce Insurance coverages
LOW
EFFORT
-Change Eating Habits -Renegotiate Home Loans
-Reduce Petty Cash spending -Negotiate Credit Card
Settlements
HIGH
11/28/2011 42

43. Improvement Process
• Choices:
1. Eliminate Expenses
2. Reduce Expense
-Reduce consuption/demand
-Negotiate Alternatives
-Change Provider/source
-Reduce Expectations
3. Status Quo
-Acceptance as Necessity only
11/28/2011 43

44. Improvement Data
(Before and After)
Before
After
Housing Transportation Food Insurance Miscellaneous
11/28/2011 44

45. Control Plan
• Monitor plan:
-Daily Cash Register
-Weekly Bank Reconciliation
-Monthly Credit Card Statement
• Response Plan:
-Emergency recovery requires funds transfer from
other categories
-Reserves Only as a last resort, ie;
IRA, Savings, Credit Cards and Loans
11/28/2011 45

46. Lessons Learned
• -A Real Desire must be present whether self-
imposed or driven by circumstance
• -Extreme goals limits must be set and effort and
determination cannot wait
• “Zero-Based” budgeting is very helpful starting
with No expected income
• -Do Not use current monthly payment contracts
as a reference point (while they are commitments
they are a negative goal)
• -”True” success brings residual cash along with
peace of mind and true financial fredom
11/28/2011 46

47. Summary Statistics
11/28/2011 47

48. DAMAGE CONTROL
• UNPLANNED EXPENSES • CONTINGENCY PLAN
-Hospital Illness -VA
-Major appliance breakdown -Alternate Transportation
-Natural disaster -Landlord
-Loss of Income -Government assistance
-Family support
-(prayer for wisdom)
11/28/2011 48

49. Pie Chart total (Before-After)
Percentages
>$6,000/mo <$2,000/mo
Housing
Housing
Transportat
N/A ion
Food
Misc
N/A
Insurance
Misc
Food
Insurance
11/28/2011 49

50. Pareto Chart
100
90
80
70
60
50
40
6000
30
2000
20
10
0
11/28/2011 50

51. Data Collection
• -While most expenses occur annually ie.
(Insurance, taxes, etc) the expenses are averaged
monthly.
• -Major decisions/changes were required in order to
implement drastic cost reductions(i.e, renegotiation
mortgages , settle credit card accounts and/or cancel
contracts,etc.
• The most difficult financial decisions required
assessing lifestyle habits and truly separating needs
from wants.
• -Ownership of only object brings additional related
expenses (i.e, automobile, home, pet, etc.)
11/28/2011 51

52. Summary
• The elimination and/or reduction of debt
obligations brings much more than financial
satisfaction. The budget burden relieves stress
and anxiety and may, in fact lead to a
longer, more healthy life. Priceless!!
11/28/2011 52

53. Major Milestones page 1
• -Housing
-2008 1st TD from $3,900/mo to $2400/mo Foreberrance
2nd TD from $450/mo to $230/mo
-2009 -Default on 2nd TD (Equity Neg 25%)
-Loan wrote off but not released
-1st TD refinanced (Neg 200%)
$1879/mo 35yr fixed 2.2% APR Rewrite
-2010-Major House fire/Insurance limited
-2nd TD accepted $14K payoff
(reconveyance received) Sep 2011
-Rented unfurnished room $350/mo plus $200/mo
-Purchased large motor home From IRA
11/28/2011 53

54. Major mile stones (cont’d) page 2
• Transportation
• 2008- Totaled new car-insurance paid
(stopped car payments)
- Purchased used truck from IRA
• Food
- Reduced restaurant meals out
(limited to coupons once per week)
11/28/2011 54

55. Major Milestones Page 3
• Insurance
2008- Canceled umbrella insurance
-Canceled health insurance for VA
-Intensive care (8days)
2009-Reduced auto insurance to liability
only.
-Cancel term life (hold whole life paid)
2010-Fire Insurance is paying house insurance
Miscellaneous
2008-Cat missing
-Canceled extra phone and satellite TV
-Lost Job
2009-Dog Missing
-Reduced Internet
-Divorced
2010- Reduced Cell phone bill (50%)
11/28/2011 55

56. Major Milestones (cont’d) page 4
• N/A Items (no change)
• -Tithe 10%
• -Taxes 10%
• -Personal Items
• -Entertainment
• -Gifts
• -Clothing
• -Furniture
• -Education
• -Savings
• -Membership/Subscriptions
11/28/2011 56

57. Contingency Plan
• If the fire insurance funds are enough to cover
the rebuilding and all permit upgrades the
rental income ($500x6) $3000/mo should
more than cover the mortgage payment and
extra utilities.
• Added bonus=free housing for my self and
90% tax write off.
11/28/2011 57

58. Before After %Decrease
• Housing $4400 • $400 90
• Food $600 • $300 50
• Transportation $450 • $100 80
• Insurance $150
• $80 40
• Misc $400
• 200 50
• Credit cards $500
• Other N/A $1000 • $40 95
• $800 20
>$6,000 Employed <$2,000 Retired (under budget)
(over budget)
11/28/2011 58

59. Expenses
Fixed Variable
-Satellite/Cable -Phone
Controllable -Inernet -Food Out
-Water/Gas/Electric
-Mortgage -Food In
Un-Controllable -Taxes
-Insurance
-Trash
11/28/2011 59