Have you heard the saying, “You are what you eat”? It rolls off the tongue so easily, doesn't it? These are words to the wise if you are interested in a healthy lifestyle, however, they may not offer much help for your finances. But there is a similar thought — one of the truths I have seen so often in business as well as in personal finance — that could offer some help for your finances: “You are what you measure.”
What does it mean? It is rooted in another of my all-time favorite sayings: “Talk is cheap.” For example, how many times have you heard someone piously and self-righteously proclaim their frugality only to watch them go out and waste a boatload of money on an overpriced new car, financed with a ridiculous lease? Many people say they budget, save, invest, do this or that — but how many of them can actually prove it? More tellingly, are their activities actually helping them get rich slowly or does a different story unfold if you scratch the surface? Let's just say that not all who talk the talk walk the walk.
Success depends on follow-through
Budgeting is a favorite of the talk-is-cheap crowd. This type of person may start keeping a budget; but at the end of the month, they are the loud ones in the bar proclaiming how broke they are. What is the problem? Well, it may be something entirely different than how they set up their budgets in the first place. The reason they are broke could be that they are missing a key part of the process — they don't follow through.
They don't measure. They don't write down what their budget for March is and track how much they are spending as March progresses. Then, at the end of the month, they don't look back and see where they blew it and where they succeeded.
If you look at many of Holly's posts, you can see that that is what she and her husband do … and it is a big part of why they succeed financially.
Nine times out of ten, not measuring is a recipe for failure.
Think about losing weight: How will you know that passing on the cookies-and-cream ice cream is a sacrifice that is paying off or not? You get on a scale. Translation — you measure. If you lost a pound, you get all excited and motivated to change the Starbucks order to nonfat, order salad in place of fries, and eat fruit for dinner. The next day, you are down another pound, and that keeps you on track.
What would happen if you never got on the scale, though? Chances are that you will fall victim to that marvelous ability all humans have, that of self-delusion. You will wear the clothes that fit the loosest, and tell yourself that the creme brulee you ate last night had no calories. (It's true. I've heard it many times … and perhaps I have even said it softly under my breath a time or two when nobody was within earshot.) After a month, you justify buying a bigger size by saying it was on sale.
Document your success!
You get the picture. If you are halfway normal and you want to succeed at anything, including getting rich slowly, you need to measure anything which you have set as a goal, be it pounds lost, money saved, distance walked, sales calls made, or anything else you set as a target for yourself.
Goals and measuring go hand in hand. You will never know when you have met your goals if you don't measure your progress. And why wouldn't you want to compare the result against your starting point (even if you start out with a nebulous and unstated goal)?
I have met many people who have achieved far more success financially than I have. Not one of them got there without a goal (even if the goal was just to be around to collect an inheritance, as it was in one case). And most of the people who were broke, or barely getting by, didn't have financial goals and plans to reach those goals. Some people with goals were struggling; but none of the people without goals, or those who failed to measure their progress, were successful.
So, Dear Reader, what is your experience? Do you measure your progress, and does it help you reach your goals? Do you know anyone who succeeds without measuring their progress?
William Cowie spent 30 years in senior management (CFO/CEO) before retiring. He has a bachelor's, a master's, and a partial doctorate in management and strategy. Author of the book “The Four Seasons of the Economy,” William also assists medium-sized businesses in the use of the Four Season Strategy to help them capitalize on economic cycles. He runs two blogs: Bite the Bullet Investing (investing) and Drop Dead Money (the economy) and writes for several other blogs in addition.