I started an interesting financial habit about 5 years ago. I’m not sure if it’s good or necessary for building wealth, but I’m going to share anyway.
It’s simply this. I review and recalculate each and every paycheck I get.
I know this sounds very laborious, but in fact it takes about 2 minutes per paystub. And I only do it every other month.
The process is that I get my paystub detail from our company website and copy/paste it into an excel workbook that automatically does a bunch of checks and recalculations. And then that information appears up on a summary tab that shows all the paychecks I’ve received over the past several years. As a result, I can trend all my income details to understand the dynamics. I can share the workbook if anybody is interested.
Here are the benefits.
1.) After working in public accounting and auditing several company’s payroll, I know first hand that payroll mistakes get made all the time. Often time for months and years because employees don’t check their paystubs. So, it’s just a good thing to make sure you’re getting paid correctly.
2.) I have more visibility into my gross salary and all the deductions for taxes, HSA, health insurance, etc. Before I started doing this, I wasn’t really aware of how much we were paying in taxes. It’s startling and something to be very very aware of. Another reason to own rentals.
3.) Since I now know the algebra of how my paycheck is calculated, I can better estimate any changes to future paychecks. For instance, I can estimate the impact of W4 changes, the tax withholdings from my bonus, etc.
Anyway, I don’t know if this is helpful, I thought I would mention it.