Count the cost

I have a friend -- let's call him "Mark" -- who is the cheapest guy that I know. This guy pinches pennies so hard that he has a permanent imprint of Abraham Lincoln on each thumb. He's the kind of guy you want at a party, though, so you can make sure that the caterer didn't overcharge you. I've never known anyone else who could calculate the difference between the charge per guest and the estimated cost of food, drinks, and wait staff, to the penny. Truly, it's a sight to behold. And he loves to tell the story about the time that he crawled inside his trunk in a New Hampshire blizzard to try to fix a tail light on his Passat, because he was darned if he was going to pay some dealer $50 to change a $2.30 part.

But we're not here to talk about Mark's legendary frugality (he buys his poker cards used, you know, and dips them in Fantastik to make them look new). We're here to talk about cost baselines. A cost baseline can be an extraordinarily useful tool, and should be used in the management of every project. Some ways that a project baseline can be useful include:
  • Developing a Statement of Work for a new project
  • Helping a department through a major budgeting effort
  • Setting reasonable expectations with your business counterparts
  • Tracking project management performance on a project or portfolio of projects (best applied when your projects are under budget and on schedule)
  • Managing an annual planning or project portfolio management effort
You can even use these tools, as Mark does, to manage your family finances. Rounding to the nearest hundredth of a penny may be excessive, though.

As useful as a cost baseline is, it is not a panacea (that means "a remedy for all problems," for my slower readers), especially in the personal sphere. Here are some situations where it might not be useful, and could even be hazardous to your health:
  • Deciding whether or not to visit your in-laws for the holidays
  • Creating a cost/benefit analysis for getting braces for your child ("Well, sweetie, if you learn to smile with your lips closed, then we can probably get through junior high, and then your basketball skills should distract everyone from your looks anyway. If not, we can revisit the issue at that time.")
  • Monitoring your wedding plans, especially if you are the non-planning partner. I knew a fellow who tried that once, and his last words were, "Honey, according to the plan, we agreed that you were going to spend no more than $350 dollars on your wedding dress. Now, I know that you said that all of the others made you look like a giant cream puff and that this was the dress of your dreams, but if we run overbudget here then we're going to have to either change the honeymoon plans or invite fewer of your parents' friends to the wedding. Honey, what are you doing with that letter opener? That was a gift from Mother! Honey?!! What are you-- Erk!!!"
So don't go crazy here. Sure, it's a useful tool, but is it worth your life?

Here are some links to get you started:


Other sources:

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