=Why is Self-Observation Important?=
In our everyday life, we always look outwards into the appearance of things and get trapped into the surface ignorance and rarely turn inwards. Amongst other things, this comes with ignorance, unconsciousness, egoism. If we wish to overcome these limitations and discover & utilise our potentialities beyond the surface appearances, we need to observe ourselves.
Through self-observation, one learns to distinguish different parts one from another, so that one may become clearly aware of the origin of the movements that occur in oneself, the many impulses, reactions and conflicting wills that drive one to action.
utilise one’s full potential==
Man must know himself and discover and utilise all his potentialities: but to know himself and the world completely he must go behind his own and its exterior, he must dive deep below his own mental surface and the physical surface of Nature. This he can only do by observing oneself.
=How to Observe Oneself?=
cultivating the inner attitude of witness==
To observe oneself, first & foremost is cultivating an inner attitude of witnessing. Witness attitude is not the same as introspection. In introspection, one looks with one part of the surface mind at what happens in another part of the same surface mind. Whereas when we have the witness attitude, our consciousness frees itself from habitual entanglements in thoughts, feelings and sense-perceptions and becomes peaceful, silent, and capable of watching whatever happens in nature as a pure witness, sakshi, without bias, reaction or involvement.
Look at oneself objectively as a third person engaging in the surface level activities. One need not like or dislike the activity but sincerely observe the movements of nature.
developing the contact with the Psychic Being==
The mental being within watches, observes and passes judgment on all that happens in you. The psychic does not watch and observe in this way like a witness, but it feels and knows spontaneously in a much more direct and luminous way by the very purity of its own nature and the divine instinct within it, and so, whenever it comes to the front it reveals at once what are the right and what the wrong movements in one’s nature. 
Secondly, vigilance helps in self-observation. If one remains vigilant, not fearful, then with the increase of the Force upholding oneself, a power of seeing and self-observation comes. The power of seeing is accompanied by the power of self-control and the power to reject the wrong turn or the wrong reaction when it comes. 
developing a quiet mind==
Thirdly, quietude and detachment of the mind helps in self-observation. If the whole mind remains quiet and detached, then to observe the vital movement without giving assent and rejecting it becomes more easy. 
By putting each element that enters our consciousness before the will to change while remaining awake, comparing, observing, studying and slowly acting, we are able to hone our ability at self-observation and make interesting discoveries within oneself.
educating the senses==
By the education of the senses the growth of one's general education is aided. The senses can, in particular, be used as instruments of observation, control and knowledge. For instance, the way one keeps one’s room is often a reflection of where one is in one’s consciousness. Taking this feedback, and consciously trying to use the sense of colour and form, order and organisation helps develop the ability to use one’s senses a logical, rational, useful way. Going further, it also helps discover who one is in the conscious way of designing one’s room.