Measuring Stick

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One of the reasons that economics is so interesting is that it really gets at what makes us tick as human beings.As far as I can tell, this science is the study of human incentive.

Now I am not saying that human beings are motivated only by money . We are motivated by sex, and by the desire to feel like “good people,” and by our drive to experience pleasure, and to avoid pain, and to be accepted socially and by a million other things.

But money ends up being a pretty good measuring stick for all of that stuff.

For example if you want to see a successful director of a nonprofit, just look for the one who raises the most money.

Money can represent our own time, or our ability to take risk, or our willingness to delay gratification. In this way it is merely a substitute for our own human efforts. But it ends up being a very useful substitute for drilling down to the essential factors which drive us towards action.

And I think there is an important lesson in this; Money, in and of itself, is not that valuable.

You cannot eat money. And while I suppose you could make a roof out of money it would not be terribly effective at keeping out the rain (or cost-effective for that matter.)

Money is merely a way for us to keep score. Which implies to me that keeping score is very important to us as humans.

One of the interesting things that I’ve noticed in my own behavior during my recent evolution towards the pursuit of financial independence,  is that I have become very much more conscious of keeping track of where I stand.

Within the travel hacking game, I routinely look up my credit score, my credit card balances, my miles balances, and my spending patterns on each of my different credit cards.

And within the early retirement game, I frequently find myself checking on the balances in all of my accounts, my debt, my assets, my investment performance, and my net worth. (Personal Capital is a nice website for keeping track of all that stuff.)

And this constant checking of my progress, acts not only as a feedback mechanism, but as a motivator.

If I see I am getting towards a credit card bonus deadline and have not met my spending requirements, this spurs me into action to put some “spending” on the card in question.

Similarly, if I do not see a constant upswing in my net worth, I become ever more motivated to save more of my income.

And the crucial insight here is that the act of recording or becoming conscious of reality pushes me forward towards some pre-specified goal unconsciously.

Which I think can probably be strategically flipped on its side.

I am beginning to believe that if there is some change that you desire in your life, the first step towards your desired outcome is to begin systematically measuring and documenting where you stand relative to this change at each moment in time.

As an example, if you want to get out of debt, then measure and write down your total debt at the end of each week. Better yet plot your total debt on a graph so you can see whether your debt is going up or down. In this way your debt will stop being an emotion or a nebulous discomfort that resides somewhere in your stomach or chest, and it will start being a cold hard number which is subject to your own future decisions. (Which is empowering.)

Or let’s say you want to lose weight. Start measuring your weight every day. And maybe invest in a pedometer so you can see how many steps you’re taking. Here is a nice piece by Brad at Richmondsavers.com on that very intervention.

In terms of getting a hold of your spending patterns, signing up for a service like the mint.com can be very useful.(Sadly this application is not quite as useful for manufactured spenders like me as it will often say that I spend 50% of my income at drugstores because of Visa gift card purchases)

And if you want to track your net worth (which is a great idea if you’ve already figured out your number,) why not use this excellent application from mad fientist? He was good enough to do the work for you. You just need to plug in some numbers.

Or if you want to exercise more, why not hang a calendar in your room and make a big X on it each day that you exercise. As your string of consecutive days exercising gets longer and longer, you will find it more and more difficult not to exercise.

And in all of these pursuits having a smartphone in your pocket can be a great tool. Never before has it been so easy to measure and record and graph your data and in so doing to get constant feedback on how you’re doing.

If our own cultural obsession with money tells us any one thing it is that measuring is not just a sideshow, it is often the main event of our lives.

Which means we should probably be very careful about what we measure. And we should make every effort to train ourselves to be conscious enough to measure those things which are most central to our own happiness and health.

Which raises the question: how does one measure consciousness?

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14 Responses to “Measuring Stick”

  1. Eric June 8, 2014 at 6:08 am #

    Nice post, Alexi. With respect to the utility of mint.com for manufactured spenders, it just requires a little more proactiveness to manage your account to keep everything properly accounted for. When I buy Visa gift cards, I categorize that transaction as a “transfer.” And when I use the gift cards to make a purchase, I enter that as a cash transaction and categorize it under the appropriate category. And I find Mint essential for keeping track of my dozens of card accounts and tracking minimum spend threshold progress. (While Personal Capital is better for investment accounts, I find Mint better for tracking spending activity.)

    • Miles Dividend M.D. June 8, 2014 at 9:40 am #

      Eric,

      Thanks for sharing your approach. The downside, of course, it that Mint is not automated for those of us who choose to manufacture spend.

      But it’s good to know that there is a workaround, which requires some data entry. And I can imagine how valuable it is to have all of your information right there on one app.

      AZ

  2. Robert June 8, 2014 at 10:26 am #

    I like using Quicken. As a desktop application, I have total control and can use it offline as well. I’m a bit archaic in my approach, I suppose, because I like to manually enter transactions. I download automatically brokerage account information, but for all other transactions (cash, checking, credit cards), I enter transactions manually from receipts I collect throughout the day. I like this because I do occasionally catch credit card errors, but mostly I like it because somehow the act of manually entering each transactions helps me process in my brain the overall spending and financial situation in my household. When I did it automatically for awhile, I found I was less aware. Especially doing the mileage game with lots of credit cards to track, I find the manual entry to help me stay on top of things. I guess my manual entry is analogous to creative writers who sometimes insist they prefer to write in a journal by hand, vs. a keyboard.

    • Miles Dividend M.D. June 8, 2014 at 10:33 am #

      Robert,

      That’s an even better method of keeping track of finances in that it is more active and more likely to enter your consciousness.

      Unfortunately, for lazy people like me with limited time, it is not very realistic.

      Alexi

      • Robert June 9, 2014 at 8:34 pm #

        Ah, but you are missing the other benefit of manual entry. If you dislike entering lots of transactions, you are motivated to quit spending! :-) sounds silly, I suppose, but it is a factor. I think Robbins and Dominguez pointed that out in their book long ago, and they were using paper and pen, not Quicken!

        • Miles Dividend M.D. June 9, 2014 at 11:03 pm #

          Good point. I’m pretty cheap, but never cheap enough!

          AZ

  3. Kat J June 8, 2014 at 6:06 pm #

    What is by expansion of awareness — Alex(i)?

  4. Miles Dividend M.D. June 8, 2014 at 6:15 pm #

    Cat,

    I don’t understand the question. I’m probably being dense, but please elaborate.

    Alexi.

    • Kat June 9, 2014 at 5:43 am #

      Alexi , sorry I was just being funny by answering the question you posed at the end of your post as a Jeopardy contestant would…. in the form of a question with also a play on your name. Sometimes I am funny , sometimes not. Happy June!
      Kat

  5. Kat J June 9, 2014 at 4:21 pm #

    Hi Alexi,
    I posted a comment here many hours ago and I don’t see it.? Anyway, I replied to you that my post was my warped sense of humor as I was answering your question that you posed at the end of your post as a Jeopardy contestant would — by giving my answer as a question with a play on your name. Some times I am funny, some times not.

    Thanks for what you do and share,
    Kat

    • Robert June 9, 2014 at 8:35 pm #

      Alexi, you may want to check the WordPress spam folder. Maybe the same thing is happening to Kat’s posts that happened to some of mine.

    • Miles Dividend M.D. June 9, 2014 at 11:10 pm #

      Kat,

      Found it and approved it. Not sure why it wasn’t auto-approved..

      Oh and I was being dense. My first instinct is always to look for the error in my post and correct it. You know, erase the evidence. It’s one of my many blindspots.

      Keep the humor coming…

      AZ

  6. Robert June 12, 2014 at 10:20 am #

    Off-topic, but today I bit the bullet and had the timing belt replaced on my car. They found a couple other issues while they were working on it. All in all, a $1700 hit to the pocketbook. Ouch! I had to smile, though, because they take American Express at the dealership where I had the work done. So I got a huge contribution towards my $5000 spend on the SPG Amex bonus. Isn’t it warped when earning points makes you feel somewhat better about spending thousands?!!

    • Miles Dividend M.D. June 12, 2014 at 12:35 pm #

      Not warped at all.

      This was money already spent and you got additional value because of your own clever strategy.

      This is why I have loved paying bills ever since starting to play the miles game.

      Value added!

      AZ

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