Congratulations, you have officially secured your first job after graduation! Transitioning into the world of full-time employment can be a bit stressful and a bit confusing, but nonetheless exciting! There are many steps to “adulting” that can be difficult to decipher. Hopefully, this guide for analyzing your paycheck will be helpful in understanding the breakdown of how your money is divided.
Elements of your paycheck:
1. Gross Pay
This amount is based on how much you earn within your position. The total earnings include all the money you have earned before any deductions, which will be dependent on your salary or hourly wage. For example, if you are paid 20 dollars an hour, for 40 hours of work per week, your biweekly gross pay will be 1,600 dollars. This may vary depending on the industry you work in and if you receive any overtime, tips, bonuses, and/or commission, which would increase your gross pay.
2. Withholdings
A percentage of your gross pay will be deducted from each paycheck you receive, some of these deductions will be considered voluntary, while others will be mandated by state and federal law. A federal income tax will be deducted from your gross pay, which is dependent on the amount of your gross annual pay. Another phrase for this is your “tax bracket”. A state tax may also be deducted, this will vary depending on the state you are employed in. State income taxes will differ from state to state, so being aware of your state income tax percentage will be important.
3. Deductions
Based on your place of employment, there may be certain benefits offered to you. This can include your retirement account and insurance coverage, like vision, dental, health, life, and disability. These examples are not extensive or assured benefits, the benefits offered will be specific to your position and what your employer offers. Depending on the different benefits you choose to partake in, money will be deducted from your paycheck accordingly. This is also where you may find garnished wages if the court orders that.
4. Net Pay
Your net pay is what you will “take home”. This will be the amount you keep after the deductions are excluded from your paycheck. Every time you are paid you will receive a pay stub; this will include a detailed view of each deduction made and what it was put towards. Your net pay will play a very important role in how you choose to budget your earnings. This will be the amount of money you can effectively spend on necessities and leisure activities.
5. Year-to-date
On your pay stub, you will be able to see how much you have made over the course of your time working at that specific company. You will be able to see what you have made without deductions, how much has been deducted, and how much you have made with deductions. In simple terms, your net gross pay, net deductions, and net pay.
Other aspects of your paycheck
Your banking information will be listed on your paycheck. The pay period (dates you are being paid for) will be listed as well. Typically, the pay period will fall behind the date of payment. Leave time may also be included in your paycheck, depending on how your employer distributes leave.
Hopefully, this breakdown of your paychecks was helpful! Remember, if there is something you do not understand or if there are discrepancies in your pay, feel free to respectfully ask your employer for clarification.
