ONE major lesson I learnt from implementing quality systems in the industrial world over the years is the mantra that what gets measured gets done. It is a mantra that can effectively be translated to personal finance.

We are now in November and ten months of 2012 have rolled by quite quickly. If you had specific financial metrics you have been following in 2012, then it is easy to assess your personal financial performance. Financial goals and targets demand action and performance.

For many people, the default position as human beings is generally the wheelbarrow position. If we do not purposefully push ourselves, we dont always get performance. That is why we harped on about having smart goals at the beginning of the year.

One way of accounting for income and expenditures is to have personal financial statements such as cash-flow or the personal balance sheet which provide you with an indication of your financial condition and can help with budget planning. A personal cash flow statement measures your cash inflows and outflows in order to show you your net cash flow for a specific period of time. It can also include money received from the sale of assets like houses, cars or even cattle.

Your net cash-flow position is the result you get by subtracting your outflow from your inflow. A positive net cash flow means that you earned more than you spent and that you have some money left over for the given period. A negative net cash flow position shows that you are living beyond your means. A personal balance sheet provides an overall snapshot of your wealth at a specific period in time. It is a summary of your assets (what you own), your liabilities (what you owe) and your net worth (assets minus liabilities).

If you wrote down your personal balance sheet at the beginning of the year this is the time to determine whether it has improved over 2012. If there is no measurement it is possible to blissfully go for five years without any increase in your net worth position. If there has been no change or even a negative change then it is time for introspection. Take personal responsibility for the situation and re-strategise for the future. The economic environment, work situation, fall stock markets are real factors but ultimately only you are responsible for those figures by responding appropriately to mitigate these factors.

Assets can be liquid assets that are those that can easily be converted into cash without losing value. Physical assets include houses, cars, boats, artwork and furniture. Liabilities are what you owe and include current bills, payments still owed on some assets like cars and houses, credit card balances and other loans. Your net worth is your measure of wealth because as it represents what you own after everything you owe has been paid off. It is then the difference between what you own and what you owe. To increase this net worth delta, you can increase your assets or decrease your liabilities.

Every year we purpose to have a positive defined delta through our annual financial goals. The only time it can be acceptable to have a negative delta is if we are investing in our own education. Ultimately it will reward you in the future to expand your knowledge base. For the majority of us who are not super innovators or have ground breaking entrepreneurial ideas like Econet, the increase in our net worth can only be incremental one delta a year. It is always important to plan for that delta.

Personal financial statements give you the tools to monitor your spending and increase your net worth. Your net cash flow from the cash flow statement can actually help you in your quest to increase net worth. If you have a positive net cash flow in a given period, you can apply that money to acquiring assets or paying off liabilities. Companies do the same thing. CEOs are reward by shareholders in relation to the degree they improve the bottom line, and the metrics used are very clear.

Compound interest should be a close partner working with you on your financial journey. Compound interest does not require vast amounts but it works better if we are consistent over a long period of time. Compound interest is effectively earning interest on interest on interest. Once you have put your savings aside, whatever the amount, you do not have to do anything, but watch your money increase. However it means the interest you earn must be more than inflation, for it not to eat into the value of the money youre saving. It is not the size of the delta increase that is important but a consistent set of deltas that are added continually. It is only then that the wonders of compounding will work for you. Make financial increase a part of your life style.

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What gets measured gets done