Tuesday, January 17, 2017

Of W-2s and Social Security

January (at least in the United States) is the season of the W-2.

For my non US readers, the W-2 is the form which employers provide to both you and the government detailing how much you earned and how much you paid in taxes.  It is one of many documents (for many of us, the key document) which makes up our tax submissions later in the year.

Another document - not key to the process, but interesting - is the form that comes later in the year from the Social Security Office detailing how much money you are supposed to get from Social Security (yes, I know the concerns about Social Security.  It is not the question here.  Hang with me).  The actual thing that I find rather interesting is that it also supplies you with a record of what you have earned every year that you have had a W-2.  In my case that is now over 30 years worth of data.  It turns out it is a unique record of how one has faired over the course of one's career life.

My very first entry was $958 (and, in a stunning example of inflation, that is worth at least $2100 in today's purchasing power). I can see my first year in the industry I am now in, the years that I joined the Firm (my first year income plummeted 40% and only came up because I took a job the next year), the year I got laid off and moved here, and the slow rise up after that (it took me 5 years to reach my pre-layoff number).

In doing my calculations this weekend for what my income will likely be and how things are going, I suddenly made the realization that the move to my new job in August will end up lowering my gross by approximately 13%.

My breath caught a bit at that number.  10% of anything is not a matter to be sneezed at.  And the change is explainable - we had a generous bonus last year and I cashed out my remaining vacation.  So my bottom number remains the same - so in that sense, it is not a terrible thing.

What is does cut into - and what makes the exercise of budgeting we have started on so important - is that excess of feeling as if there was money to spend and certain things which we used to simply "do" without worrying where the money came from.  It certainly makes one more conscious of every dollar one is spending.

This is not entirely without benefit - I think I can safely say that my life is overall much better since I took my new job.  I enjoy work a great deal more, I have more time, I am (I think) more pleasant to be around, and my commute has drastically shrunk (from 2.5-3 hours a day to 40 minutes a day).    

But it is a useful lesson for myself and perhaps a good reminder for others (and especially those just entering the job market) that decisions have consequences, sometimes very meaningful ones.  And to pretend that circumstances only continue on the upward path is to set one up for failure.

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