(MoneyWatch) I spent a chunk of time earlier this week adding up my 1099s (statements of freelance income). I also added up all my business expenses to send those tallies to my accountant. The effect was like watching a financial version of "This is Your Life" -- at least for the last year or so. How had I earned and spent money in 2012?
It was interesting to see the numbers in black and white, but what was more useful was thinking about what I'd like those numbers to look like in 2013. I could quickly see that some projects that took a lot of time hadn't paid nearly as well (at least per hour) as I thought they did. I also could see that while some business expenses were pulling their weight in terms of helping me do my work more efficiently, others just weren't. Knowing this will help me make better choices this year.
Of course, if you have a normal, salaried job, your income might not change much year to year, the way a self-employed person's does. But I still think that studying your tax return can help you make these wise career moves. Here are some things to consider:
Figure out if you're underpaid. Looking at a W2 (or a pile of 1099s) puts your total compensation in a hard-to-miss place. Start looking around online at various salary-related Websites (here's a link to a list of some top places to start your research). About half of Americans say they feel underpaid. Are you one of them? If so, this could give you a kick in the pants to do something about it.
See if your salary matches your life goals. You may be fairly paid for your line of work, but if your line of work doesn't match up with what you'd like to accomplish financially, something's got to give. Again, the sooner you figure this out, the sooner you can start positioning yourself to switch into a different profession, or figure out a sideline.
Consider worst-case scenarios. If 100% of your household's income is reflected on your W2, you probably already know this is a somewhat risky position. Use this opportunity to make sure your emergency fund is robust. But also consider what it means for your career. What's your back-up plan if your current position disappeared? It never hurts to look around, solidify your network, and see what skills related to your current job are in most demand in the outside world.
What do you think while studying your tax return?Photo courtesy of Flickr user x_jamesmorris