What do you measure in your life? Do you count calories? Do you count how many visitors check out your website everyday (or every hour if you are me)? You should be counting things in your life.
Counting implies that there is a goal in the end that you are counting towards something in the end. Thos with a goal have been shown in studies to ultimately be more successful in life.
A study of Harvard MBA students in 1979 who were followed for ten years found that the 13% of the class who had made goals for themselves were earning, on average, twice as much as the other 84% who had no goals at all.
In fact, 3% who had written down those goals were earning, on average, ten times as much as the other 97% put together. What you measure in life matters. It draws our focus to it like a laser. So, what are you focusing on with your money?
Measure Your Finances With Two Numbers
You Should Measure Your Net Worth
You should know how much you are worth. You should keep track of this number every month. You should have it written down and should compare it to the previous month’s outcome. How did your investments do? Did you add to your credit card debt last month? Are you on track to save for retirement or your children’s college educations? How do you know if you are not tracking how many assets you have and how much you owe in debts? You need to know your net worth so you know where you stand, where you need to be, and if you are headed in the right direction.
You Should Count Every Dollar You Spend
I am constantly blown away by Krystal’s weekly spending recaps on her awesome blog, Give Me Back My Five Bucks. You should definitely check out her blog!
Every week, Krystal details exactly what she spent for that week. This is a critical step to budgeting. It is very important o know where all of your money is going each and every month (or every week). Knowing where your money goes helps you when are you just starting out budgeting. One of the hardest things to do is know where you cash especially goes.
We all typically have automatic payments for things like our mortgage and car loans. But, do you know where that $100 from the ATM goes? We think we know where it disappears to, but that is just the thing…it disappears. We don’t monitor our cash expenditures as well as we should, and this is a spot where we see our budget start to slip away from us because we cannot account for that money.
One great way to tackle this is to carry a little notebook and pen with you and write down everything you spend money on. Try it for just a week and you will be blown away when you see where your money really goes.
We value what we quantify. We value what we track. You should track your net worth and your spending each month, especially your cash spending. These are the two most important numbers you should use to measure your finances. Knowing where your money goes is the first step in setting up or maintaining your monthly written budget.