I was reading over at Five Cent Nickel about how two years ago Mr. and Mrs. Five Cent took stock of of where they were and where they were going. It wasn’t pretty, but I believe they’ve turned it around and then some. Sometimes it’s as simple an exercise at looking at what you’ve made in your working life and then looking at what you have to show for it now.

Most of us probably have not kept meticulous records of our earnings, but we don’t need do that. The Social Security Agency sends to us every year a record of our earnings once we turn 25. This can be and should be sobering moment for most individuals. It was sobering moment for me, and is part of the reason I started to look at my personal finances more actively. Most people don’t have much to show for all that they’ve earned. I’ll take you on walk through my own social security report through 2003, in addition to the years and wages that art part of the standard report, I’ve added my age and short description of my employment. You might be asking why 2003? 2003 was the first year, I really started not only thinking about where I was but I where I was going financially. It was the first year, I started actually tracking my finances. The first year, I can actually tell you what my Net Worth was.

Cumulatively at the cusp of 28, I had made $402,381 before taxes. One thing the social security statement doesn’t tell you is how much you’ve paid in taxes. I would estimate my overall effective tax rate for that period to be around 20% plus or minus a few points. So even after accounting for taxes, I should have taken home nearly 321 thousand dollars! What did I actually have? $7449 spread across my checking and investment accounts, and another 25k of Home Equity. The social security statement doesn’t account for the 10k one time inheritance/gift I had received in 2000. The one place I was doing reasonably OK was in my retirements savings.  I managed to accumulate 5,280 in my Roth and another 34,732 in my 401K. However, much of the money in my 401k wasn’t even from my own contribution but rather the company match. My total networth was 65k of which I had probably contributed personally via my wages only 25k worth, less than 8%.

I count my blessings. I’ve always been fortunate enough to be both employed, and compensated fairly well for my work. Working has never been a problem for me. I’ve worked legally since the first day I was eligible for a work permit when I turned 14 in middle school. Compared to most 28 years olds, it could be said that I was doing pretty well.  According to CNN’s median worth calculator I was above the median.   However given my income, my net worth was pathetic and far below the median for my income range.   Though my own results are skewed because I was was receiving relatively high salary early in my career.  The calculator should really be done by age and by income (some day I’ll have to look at the census data myself) I was lucky because I had been in well paying jobs since I graduated college, but I wasn’t really taking advantage of that luck.  I was far from a complete screw up. I wasn’t racking up debt, and had some savings, but what I didn’t have was a plan.

Looking upon the social security statement, I realized that I wasn’t so much doing something wrong, but rather not doing something right. I had no plan in place, no goals financially.  I opened an ING account first, and began shunting money into that account and later my brokerage account.  The ING account was to establish an emergency fund, and the brokerage account for my longer term goal of financial independence.  I hardly changed my lifestyle, and am far from frugal when compared to many of other personal finance bloggers.  However, by deferring money directly, I quickly started saving money when I wasn’t before.  I spent less money, but on the surface one could hardly tell.  I was just less frivolous.  I also became more savvy.  I used balance transfer offers to pay off my 2nd mortgage and lowered what I was paying towards interest every month.  My investment performance improved as I started buying an index fund monthly instead of buying stocks willy nilly.  All it really took was a glance at my social security statement, and asking myself what do I have to show for it all? I urge everyone to do the same next time you get the statement if you haven’t already.