Good Financial Reads: A Closer Look at Your Paystub

We always talk about how much we make in terms of gross income. However, no matter how much we get paid, the amount that we actually take home always feels too small. To add insult to injury, payroll companies give us pay stubs that are impossible to decipher, and good luck trying to ask your payroll department for an explanation…Understanding the breakdown of your pay stub will help you better understand your tax withholding and optimize your savings. So here is a breakdown of the major items in your paystub, from your gross pay to your take home income. Everyone is different, so little differences may apply to you.

So we’ve all had the joy of opening a pay stub, expecting a big amount, and then looking at the bottom and being very disappointed. The goal in this video is to walk you though your pay stub, whether this is the first time reviewing a pay stub or you have done it years upon years.

What do you look for? What do you review? What can you change? And what can you automate?

Looking at your paycheck can be frustrating. You know your salary, but then when you look at your paycheck, it’s a lot lower than you anticipated. What is FICA tax and why is it coming out of your paycheck?

We explain the tax, why it benefits you, and what to expect below. 

I thought I’d never say this, but I think I like the IRS website. Not necessarily the IRS or the tax system we have in place. Just their site. It has great information about taxes you can find answers to almost anything tax-related. One very useful tool on their site is their Withholding Estimator. If you are a W-2 employee, I suggest you use it now to estimate your tax liability and see if you are with your taxes for the year. Don’t wait. A paycheck checkup can help you see if you’re withholding the right amount of tax from your paycheck. Too little could mean an unexpected tax bill or even a penalty, both of which you are better off avoiding. Too much can mean a tax refund. While it may be nice to get a refund, it also means your paycheck every period is smaller than it could be. Why not shoot for zero or a small refund and save the money instead?