Where Has All The Money Gone?
A lot of us find ourselves asking “Where has all the money gone?” Mostly it’s at the end of the month when there are still bills left to pay, gifts to buy or groceries needed.
Sometimes it’s at the end of the year when we’re doing taxes and see how much money we earned. But the most frightening time is after decades of work and you realize that you have little to show for the grind and time away from family.
If you really knew how much money had slipped down the drain, you’d be shocked. Sadly, most of us don’t have a clue how much we’ve actually earned during our lifetimes so the truth of how much we’ve let slip through our fingers is hidden.
Are you brave enough to find out?
Here are four actions you can take to wake up to the truth, begin to plug the drain and grow your wealth.
#1: Find out how much you’ve earned in your lifetime
I first learned of this idea years ago when I read the book Your Money or Your Life*. It’s a telling exercise and worth your time.
Start by finding out how much money you’ve made in your lifetime. This is important because it’s impossible to fully appreciate how we’re doing with money until you know how much you’ve earned compared to your net worth.
One way to get this information is to go back through all your tax records and tally up the reported income, but an easier way is to get the information from the Social Security Administration’s web site.
- Go to the My Social Security page and create a log in. You will have to enter some personal information but for what it’s worth, I felt comfortable enough with their system that I created an online account years ago.
- Open your personalized Social Security Statement. Look for the section titled Your Earnings Record, which lists your reported income from the first year your employer reported your income to the IRS. It will look something like this…
- Make sure you are sitting down first, then total up all of your reported earnings under the heading Your Taxed Medicare Earnings.
Most likely you’ll find out that you’ve earned hundreds of thousands of dollars over your lifetime…maybe even a million or more. And what do you have to show for it?
#2: Calculate your net worth
Basically, this is a tally of the value of what you own minus the debt you carry. Many people consider certain things as an asset that I don’t.
For example, I don’t consider a car an asset (it’s a depreciating lump of metal) nor do I count jewelry or furniture as an asset because you rarely get its appraised value. And when you’re selling, you’re usually desperate and will sell for much less than it’s actually worth. Of course, it’s really only worth what someone is willing to pay!
Anyway, tally up the value of all of your assets:
- Savings accounts
- Checking accounts
- Retirement accounts
- A very conservative value of your home
Tally up all of your debts:
- Credit cards
- Auto loans
- Personal loans
Subtract your debt from your assets to get your net worth. If this is the first time you’ve done this, you might find out that you have a negative net worth. Don’t panic! You have to start somewhere and now you have the information to begin to gain control.
#3: Take a “Regret Test”
Think back to all the things that you have spent your money on and then run the list through a “regret test.” Here’s a sample from my list so you get an idea:
#4: Resolve to make some changes…
Don’t beat yourself up. Nothing can change the past. You have what you have and the drain has the rest. But today you can resolve to make changes that will have a profound impact on your life going forward.
Most of us have some regrets about the way we’ve handled our money in the past and if we pay attention to our spending patterns, we might be able to stop some “habit” spending that really doesn’t fit our values and start building wealth.
If I had been smarter with my money earlier, and saved and invested just a fourth of the money I blew, my net worth would be more than double what it is today and I could retire right now without a worry. Alas, I’m the type that learns the hard way so I’ll have to put off retirement for now.
Do you know where your money has gone?
Have you done an exercise like this? Were you shocked at how much money you’ve made and how little you have to show for it? What did you do after the shock wore off? If you haven’t done something like this, are you willing to give it a try?
Your contributions to the conversation here enrich the lives of all who read the post so I thank you in advance for being brave and speaking up!
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