Challenge

Day 10 – Your Earnings Statement (30 Day Financial Wellness Challenge)

Requesting your Social Security Statement

The article may contain affiliate links from one or more partners. Learn how we make money to continue our financial wellness mission.

Day 10 – Your Earnings Statement (30 Day Financial Wellness Challenge)Welcome to Day 10 of the 30-Day Financial Wellness Challenge.

Each day will comprise of financial exercises, some short and others a bit longer, to help you become financially fit. The goal is to tackle different aspects of personal finances one day at a time.

After the 30 days, you’ll have a stronger understanding of your financial health and an action plan to improve your financial wellbeing. Review Day 9: Financial Health Check

To recap, in the past 9 days I had you perform a financial health check to see how you’re presently doing with money and finances. Your financial vitals show us your current situation. Now, you might be eager to move onto improving those numbers. But I want you to hold on for a second.

Welcome to Phase 2: Financial Evaluations

In Phase 2 of the challenge, we’re going from measuring your vitals to reviewing the details of your financial past and money relationships. I call this phase, the Evaluation period.

As important as your present vitals are, they’re the result of past financial decisions. A key to moving forward is knowing a bit more about your history. We’ll address your past to understand financial relationships, uncover successes and challenges, and identify habits and behaviors that support or hinders your financial wellbeing.

On Day 10, the first day of the Evaluation Period, we’re going back in time to review your earnings statement.

What is an earnings statement

It’s a statement to reflect the money you’ve earned from employment. This can help you understand the primary way money flows into your life. And it may lead to asking the question, “where did it all go?” and “how can I earn more?”

Difference between earnings and income

Income and earnings are often confused. In reality, earnings are just one kind of income. It’s money you’ve earned from wages but can also include nonwork income. But for this challenge, we’re going to focus on earnings from wages paid by employers.

One Million Dollars

Do you think you’ll ever earn a million dollars? For many of us, it doesn’t happen all at once. But in time, one million dollars could flow into your life without even realizing it.

Growing up I dreamed of being a millionaire. I didn’t know how to go about making that happen aside from getting a job and climbing the corporate ladder. It was all about earning a six-figure salary. In my mind, money was made by exchanging my time for a paycheck. Therefore the more I worked the more money I earned. And the higher my hourly rate the faster it will flow into my life.

Now, that I’ve earned income since I started working in my teens, I can verify that $1 million has flowed into my life. And for the longest time, before my financial awareness, I had no clue that I was a millionaire. Okay, only by earnings made stretched across two decades. But still, this kid that dreamt of being a millionaire but unsure of how to make it happen, earned a million dollars.

The graph below illustrates my thoughts:

Years Worked & Salary$30,000$60,000$90,000
10 Years$343,916$687,833$1,031,749
20 Years$806,111$1,612,222$2,418,334
30 Years$1,427,262$2,854,525$4,281,787

*Assuming a 3% merit base increase.

In time, you too can earn a million dollars. Of course, there’s a lot of variables at play. The point I want to stress is how possible it is to earn a million dollars in your lifetime.

Why is it important to know this?

One of my main goals with this challenge is to have you understand that earning does matter and impacts a key retirement benefit too.

First, it’s helpful to show that the size of your paycheck does matter in reaching financial goals. Although some “experts” argue pay raises and promotions don’t create wealth, I want to show how it can help.

Learn more: How to ask for a pay raise and get it

Second, I want you to reflect back on your earnings growth and think about the career moves you’ve made or the challenges you’ve faced.

Learn more: Career Tips to Become More Valuable in Your Profession and Employers

And lastly, reviewing your Social Security Statement for accuracy ensures you’ll receive the correct amount of benefits upon retirement.

How to review your past earnings

Do you keep track of your earnings from previous years? I didn’t until I realized how important it was to do so each year. On Day 2, we calculated Your Income Number for last year but this isn’t enough to uncover a pattern of earnings. Fortunately, there is a way to review your previous earnings through the Social Security Statement of Earnings and Benefits.

Social Security Statement

The Social Security Statement shows your record of all earnings received during your work history. It’s kept by the SSA to determine your eligibility for Social Security benefits upon retirement or disability.

There’s another benefit in reviewing your Social Security Statement. It helps you with retirement income planning. We’ll discuss on another day of the challenge.

One thing to keep in mind

There might be income or money that entered your life that was never reported. But this is useful data to help you understand how your earning grew (or didn’t) and what to do about it going forward.

Day 10 Assignment

It’s time to request one of your financial records.

  1. Access your Social Security Benefits online through SSA.gov.
  2. Read the step-by-step guide in requesting your Social Security Statement of Earnings and Benefits

Current Lifetime Earnings

 

YearsExample
Social Security Statement Reported Total Earnings$What are your earning years?

Ex. 2003 – 2018

Average Yearly Earnings$What’s your average yearly earnings?

Ex. $875,450 total earnings / 15 years = $58,363

Does this surprise you?

*Assuming a 3% merit base increase.

What knowing your past earnings reveal?

By knowing how much money you’ve earned in the past helps you understand how much income entered your life. Gaining a better understanding of how your earnings have grown allows us to address some underlying money beliefs. These money beliefs inform your financial behaviors and create habits that promote or hinder your ability to earn more and create wealth.

Gain insights on your relationship to money

I want you to take the time to answer these questions. This will help you uncover patterns in your thinking about earning money.

Do you think money is only made by exchanging time?

Have your earnings grown year after year?

Do your assets (Day 1) reflect your earnings?

How can you earn more? What ideas come to mind?

Additional Reading:

Resources:

  • Personal Capital is a free personal finance app with a 360-degree view of your money. With Personal Capital, you can see all your accounts in one place with planning and analysis tools.

Next Daily Challenge: Day 11 – Credit Report Review

Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.