Take Your Measurements.
I solo-parented last weekend for the first time in a little while. I count myself incredibly lucky that Al doesn’t have to travel much for work (he never has). He is currently getting his surf fix in Costa Rica.
So I turned into a “soccer Mom”. Will, our seven year-old, had football matches on Saturday and Sunday morning so I found myself spending quite a few hours by the side of the pitch.
There were a couple of things that surprised me. One, it is VERY serious business playing U7 football. And two, I found myself jumping up and down and shouting a little more than I was comfortable with, particularly when the match went into penalty kicks.
On the sideline I got into a conversation with a friend about the benefits of team sports versus solo sports. He has older daughters, one of which is a swimmer. He had initially questioned whether swimming was a sport that he wanted to encourage. However, as he watched his daughter flourish he realized the benefit of a sport that is easily measurable on a personal level. You swim a race, you get a time. The feedback loop is immediate. Did you get a personal best? You know the answer. You have something tangible to be aiming for – goal setting is easy.
In a game of football, it’s not so clear-cut. Yes, you win or lose, but for the individual it’s harder to assess and measure performance. It’s not just about scoring a goal.
It made me think about other things we measure in life. Some things are easy to measure, others are hard.
James Clear wrote about this recently in a blog titled ‘What Are You Measuring In Your Life?’. He is a fitness enthusiast, and I believe particularly loves weight lifting. He tracks his weight and repetitions, aiming always for 1% gains (that compound over time). In his blog post he writes about the ‘non-trackers’:
“Someone walks into the gym, warms up, does a little bit of this exercise, does a little bit of that exercise, bounces around to a few machines, maybe hops on the treadmill, finishes their workout, and leaves the gym.
This isn’t a critique of their workout. In fact, it’s quite possible that they got a nice workout in. So, what is notable about this situation?
They didn’t measure anything. They didn’t track their workout. They didn’t count reps or weight or time or speed or any other metric. And so, they have no basis for knowing if they are making progress or not. ”
James asks the question – what are you measuring in your life? Because the things that you measure are the things that you improve.
Sport, health and fitness is an obviously measurable area of our life. Our personal finances are also easily measurable.
What’s interesting though is that in my experience, most people have never measured their personal finances or their money life. The only measurement most people tend to know is their earnings (and even that can be a little bit fuzzy). And sadly, income tells us very little about our financial health.
When I start working with a new client, the first thing we do is measure where they are today because as the old saying goes, you can’t manage what you don’t measure (this definitely doesn’t apply to everything, but it does apply to our money). Carl Richards defines this measurement as our ‘current reality’. It’s harder than you would think because where we are today is a story and the story can be full of shame, blame, resentment or fear. “I should have more, I should have done this, if only I hadn’t done that”.
Carl writes:
“In its most simplistic form, planning is the process of charting a course from where you are today to where you want to go. The first step is to become crystal clear about what I call your current reality, or where you stand now.
I used to think that being very clear about your current reality was the easy part of planning. Once you did that, the hard part started: Making guesses about other things, like where you want to be in 20 years.
Defining your current reality should indeed be the easiest part of the process. It’s certainly a matter of fact. But apparently getting this clear is harder than I thought.
Many of us may not know where we stand with respect to our goals.
In fact, we may not want to know.”
You may not want to know, but you need to know. You need to know your net worth, that is, you need to construct a family balance sheet. Your net worth is the best possible gauge of your financial health. It’s what you own less what you owe. It tells you what you have been doing with the money you have been earning. Your net worth is what you want to grow.
You also need to have a clear picture of how cash flows in and out of your life. You need to understand your income and expenses. You need to know what your life costs to live.
These measurements are important in every stage of life - it doesn’t matter if you are just starting out in your career or whether your career is over and you are retired.
Good financial planning is all about making deliberate decisions to move you closer to where you want to go. It’s about awareness and tracking (it’s not about budgets and spreadsheets).
My question to you is do you want to be the sort of person who ambles into the gym, bounces around a few machines, hops on the treadmill, finishes your workout and the leaves the gym? Or do you want to be the sort of person who strides into the gym, armed with a purpose, clear on what you are there to achieve, continually working to get a little bit stronger and a little bit fitter?
It’s a difference in mindset.
But be warned, many people spend their lives measuring the wrong thing. In the words of Seth Godin:
“Measurement is fabulous. Unless you’re busy measuring what’s easy to measure as opposed to what’s important.”
Georgie
georgie@libertywealth.ky