Want more money in your pocket? Of course, you do!
It’s Friday afternoon. You just finished work. You love your new job working in an ideal office environment.
Your money goes right into your checking account. Easy as pie.
Understanding your pay stub is not on your list of things-to-do. But maybe it should be.
Human error can occur. Technology can malfunction.
CNBC reported on a 2017 survey with shocking stats. Over 50% of employees surveyed found a mistake on their paycheck.
The good news is that you don’t need a business degree to make sense of your paystub. Understanding your paycheck can mean keeping more of your hard-earned money.
Here are some helpful tips to keep in mind while peeking at your paycheck.
Scan Each Section
All company paychecks have a similar look. They may not be exactly the same. But they should have the following sections:
- Employee information-this is the area where your name, address, and employee ID number will be. Sometimes part of your social security number will be captured in this area.
- Pay period-this is the timeframe that you are being paid (usually 1-2 weeks).
- Year-to-date-this will show your total hours and pay from the beginning of the year through that pay period. Sometimes you may see YTD.
- Gross pay-this is your pay before taxes.
- Net pay-this is your pay after taxes.
Understanding your pay stub will soon be second nature.
Understanding Your Pay Stub: The Big Words
The big words are usually what is withheld from paycheck. These words may seem scary, but it’s helpful to understand them.
First, I will discuss pre-tax deductions. Employers will take things like health insurance and retirement account money out before you are taxed. This will save you money.
Second, you may see a place for employer contributions. Sometimes your company will pay for part of your insurance. Some companies may contribute a certain amount to your retirement.
- State taxes-depending on the state, you will have some money taken out for this purpose.
- Federal taxes-the feds won’t forget to take out taxes, either. If the amount is too big, try adjusting your tax forms. This may affect your refund at the end of the year.
- FICA taxes-additional money taken to fund federal programs, like social security and Medicare.
- Insurance-health insurance is the most common insurance deduction. You may also notice a health savings account (HSA) deduction.
- Retirement account-these are sometimes called 401K or 403B accounts. Employers sometimes match these
Checking the Numbers
The numbers don’t lie…except when they are entered wrong. The checkstub maker just prints paystub. The numbers must get there somehow, though.
It could be that you input your hours directly. Or you may write down your hours and they are entered by someone else.
Either way, input errors happen.
You may not be able to control the federal withholding on your paycheck very much. But you can control checking your paycheck for errors.
Check to make sure your hours and pay rate are right. Make sure your tax withholding amount is right.
Errors may occur. This is why understanding your pay stub is essential. It only takes a few moments to scan your paycheck.
More money in your pocket is the goal. But it can make you feel good about yourself knowing you can read your paycheck.
Keep track your money and learn more about finances by checking us out here.