Whats get measured gets managed...

While the above statement is generally said for a company, i feel that its also true for individuals.

Why measuring works:

There are several reasons why what gets measured gets managed:

1. When you measure something, you bring your attention to it

This is the first benefit you get by measuring. How can you manage if we don’t even pay attention to it? By measuring you direct your attention to it.

2. When you measure something, you know where you are

Sometimes we don’t realize the severity of a problem we have until we see the facts. That’s why measuring something is important. It helps you see the truth of where you actually are. In personal finance, for instance, it’s easy to think that you already live wisely. Only after you see your income and expenses by numbers might you realize that you have problem. This realization in turn gives you the motivation to do something about it.

3. When you measure something, you see your progress

Not only can measuring help you know where you are, it also helps you see your progress. You will see whether or not you have done the right thing and – if you do – whether or not you have done enough. Seeing how far you’ve gone also motivates you to keep moving forward.

How should we measure:

I think the biggest factor here is keeping it simple, we as a person cannot do complicated measurement for long. That’s why you need to keep it as simple as possible. The simpler it is, the more likely you will stick with it in the long term.

So keep it simple, and keep measuring your expenses.

What do you think? Do you have thoughts or ideas about managing personal finance?