How Much Do you Make? Build Wealth

Most of us don’t even know how much we bring home every month let alone our gross income.

We designed a spreadsheet to track our paycheck on a monthly basis. The workbook includes sheets to track our net worth, our monthly income by year, and our annual income for a period of 30 years. The monthly income by year sheet named: “Inc yr Template” can be duplicated to track your monthly income by year for 30 years. One workbook can be used by you and your partner to track your financial health.

Recording your paycheck allows you to know how much goes toward taxes and how much goes to your retirement account. Are you happy with the amount that goes into your retirement account?

Do you know that, many of us would earn more than 1 million dollar throughout our working lifetime? Couples would reach that even faster. The real question though, is how much of that will we have kept to ourselves and put to work? This spreadsheet would help you manually track your earnings. I like being in charge of what is mine. Therefore, I don’t use apps. I do a lot of recording manually using excel as much as possible. It takes time but it allows me to pay more attention to the data. By recording your own paychecks, you take possession of your income and track where it goes.

You become more mindful of your money. You cannot decrease your expenses without knowing how much you earn. You need to take more control over your income. Once you know the part of your income you don’t have control over, like taxes, you’ll be more inclined to better manage what you bring home in order to put some to work. You would be able to budget effectively, and build wealth through long term financial planning like investing.

The spreadsheet named “Monthly Gross Income” or “Inc yr 1“would be used to record your paycheck. Customize it to fit the details on your paycheck.

You would record each paycheck to have total income by month. By the end of the year you would know how much you earned the whole year. You would also know the total amount paid toward taxes. With the spreadsheet you would track your social security, and your 401K if any.

The spreadsheet named “Annual Inc” or “Annual Salary Before tax” would track your total annual income. You have to type your annual income from monthly income spreadsheet on that sheet. If you can access your prior years’ income through your tax returns or your social security page on www.ssa.gov, you would see how your income progressed over the years. You would also see how much money passed through your hands all this years. You could easily have earned half a million over the past 10 years or so. If you are not sure, plug in the numbers and see for yourself. The same spreadsheet would calculate how much your net worth should be at any stage of your life once you enter the annual salary for a year and your age at that year. The net worth column called “PAW” in the sheet refers to the “Accumulator of Wealth” (“The millionaire Next Door” by Dr. Stanley). You accumulate wealth if your net worth is equal or more than what is calculated in the PAW column in the sheet for the current year. That brings you to know what your net worth is.

The sheet named “Net Worth” helps you do just that.

Every year update a column to see how you are accumulating wealth and how you should improve it.

Fill up the column for the current year’s net worth. This exercise takes some work but is worth it. Open your bank accounts to record your balances. Open your 401k and or Roth or IRA to record your balances. Look around your house and evaluate your valuable assets that in case of emergency can be sold and how much they can be sold. Estimate the value of your cars and record them. Note that cars, TV and so forth go down in value. If you own a house, you need to look on the latest statement to copy your outstanding balance as a personal liability on the sheet. If your city sends you a property tax assessment every year, pull the last one to copy the value of your house and write it on the sheet under personal asset. The difference between what you own and what the house is worth is the equity you built in it. If you have businesses on the side or personal investment accounts, record them all. The spreadsheet would calculate your net worth once you enter all the information needed. Don’t forget your credit cards debts and car loans. Compare your current net worth to the current PAW from the Annual Income sheet to determine where you are. Look at your net worth sheet. What category has a higher total? Is the liabilities or the assets. Are you building good assets that increase in value or the ones that go down over time? How could you increase your assets to increase your net worth? If you purchased a rental property and thrive to pay it down how the equity would improve your net worth? These are the questions you would ask yourself when you evaluate your financial health through this benchmark. This might seem like a waste of time but if you don’t take control of your money no one will for you. You will be stuck in the rat race without a defined goal in your horizon. As someone said it “We don’t live to work, we work to live”. You can not continue to spend every dollar you work hard to earn. You cannot continue to live paycheck by paycheck. it is time to start budgeting and long term financial planning.

The spreadsheet is free to download at the moment. You can download it to your computer or in the Cloud and go from there. Click on the link below “Track Your Money” to download the workbook.

Track Your Money

Please let me know if you have a question and I would address it in the best of my ability. I would keep testing the formula to make sure no formula broke. Feel free to adjust the spreadsheet to fit your needs. Your comments are well appreciated.