Anyone who has the goal of improving their financial situation should at least be tracking their spending. Without knowing where the money goes once it gets into your accounts, it becomes extremely difficult to set realistic goals for yourself and build wealth over time. We use a combination of Mint and Excel to track all of the money coming into and going out of our lives, and it’s proved extremely powerful in helping us work towards our goals.
Now this post isn’t about tracking your spending, but rather one of the important things that happens as a result of tracking it in the first place. It comes down the idea behind a popular business quote, “What gets measured gets managed”, but can very easily be applied to our everyday lives. Once a personal goal has some kind of measurement attached to it, there are a ton of little things that happen almost automatically in your mind that will help you reach the goal. I’ve found that there doesn’t even have to be a specific number or target that you are trying to reach, it’s simply the act of tracking it that leads to improvement.
Once the metric you are tracking has entered your mind, your brain will begin to subconsciously take it into account for almost every decision you make related to the measurement. Some decisions will have a straightforward influence (choosing to buy a new gadget will increase my spending, lower my net worth, etc.), but there are hundreds of other decisions that you make daily which may have a much more subtle impact. As long as you have an understanding of what moves the metric up and down, your brain will do a lot of work for you without you even realizing it in some cases.
It obviously doesn’t make sense to optimize every decision for any given metric because that never works (optimizing ONLY lowering spending would cause you to not spend anything!), but letting a bit of your subconscious (or gut feeling) help guide some decisions you’re on the fence about is much easier if there’s a number somewhere that is being tracked consistently.
In addition to our spending, let’s look at several other things I track on a consistent basis and how that is helping us reach all of our goals, financial and otherwise.