Analyzing Your Paycheck
Personal Finance
Types of Pay

Your pay can be calculated in a number of ways – make
sure you know which way it is being calculated.

Types of Pay:

Salary: Set amount of money earned per year – or another
set time.

Wages: Set amount of paid per hour or day or item of work.

Piecework: Usually involves manufacturing/ assembly items
Types of Pay

Commission: Fixed percentage or amount of profit given for
making a sale

Sales, Marketing, Real Estate, Retail jobs

Bonus: Sum of money paid in addition to regular pay for job
performance/meeting goals.

Tips: Money given to employee by customer in exchange for a
service

Waitresses, Bartenders, Hair stylists, Caddies
Regulations Affecting Pay

Fair Labor Standards Act – standards governing employee
payment and compensation.
http://www.dol.gov/elaws/flsa.htm

Equal Pay
FSLA forbid employers from paying one person less than
another person for the same work.




Work in same establishment
Work under same/similar conditions
Perform work requiring skill, effort, and responsibility
Often used to prevent discrimination against women, minorities, and
older workers.
Regulations

Minimum Wage: Lowest hourly rate employer may legally
pay most workers.

Raised periodically for inflation. (Just raised)
http://www.dwd.state.wi.us/dwd/publications/erd/pdf/erd_9247_p
.pdf

Subminimum Wage: A wage paid under certain conditions
to certain categories of workers, such as trainees, that is
less than the established minimum wage.
Over Time
Work in excess of 40 hours per week.



Usually 1.5 times normal wage
For example
$8.00 * 1.5 = $12.00/hr
Not paid to salaried employees – weigh the loss of overtime
pay before changing to salaried position.
Where Does My Money Go?


Almost 31% of an individual’s paycheck is deducted
 Taxes are the largest expense most individuals will have
 Therefore, it is important to understand the systematic
deductions
U.S. tax system operates on an ongoing payment system
 Taxes are immediately paid on income earned
Family Economics & Financial Education
Reading a Paycheck
Paycheck Stub
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
$1,353.33
Deductions
Current
Year-to-date
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Paycheck Stub

A document included each pay period which outlines
paycheck deductions
Personal Information
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Personal Information


States the employee’s full name, address, and Social Security number
Always check to ensure this information is correct
Pay Period
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Pay Period

The length of time for which an employee’s wages are calculated; most are weekly, biweekly, twice a month, or monthly

The last day of the pay period is not always payday to allow a business to accurately
compute wages
Gross Pay
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Gross Pay
 The total amount of money earned during a pay period before deductions


This is calculated by multiplying the number of hours worked by the hourly rate
If a person is on salary, it is the total salary amount divided by the specified time
period
Net Pay
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Net Pay
 The amount of money left after all deductions have been withheld
from the gross pay earned in the pay period
Deductions
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Deductions

The amount of money subtracted from the gross pay earned for mandatory
systematic taxes, employee sponsored medical benefits, and/or retirement
benefits
Federal Withholding Tax
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Federal Withholding Tax

The amount required by law for employers to withhold from earned wages to pay taxes

The amount of money deducted depends on the amount earned and information provided on the
Form W-4

Largest deduction withheld from an employee’s gross income
State Withholding Tax
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
State Withholding Tax


The percentage deducted from an individual’s paycheck to assist in funding
government agencies within the state
The percentage deducted depends on the amount of gross pay earned
FICA
(Federal Insurance Contribution Act)
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
FICA

This tax includes two separate taxes: Fed OASDI/EE or Social Security and Fed MED/EE
or Medicare

These two taxes can be combined as one line item or itemized separately on a paycheck
stub
Social Security
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Social Security

Nation’s retirement program, helps provide retirement income for elderly and pays
disability benefits

Based upon a percentage (6.2%) of gross income, employer matches the contribution
made by the employee
Medicare
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Medicare


Nation’s health care program for the elderly and disabled, provides hospital and
medical insurance to those who qualify
Based upon a percentage (1.45%) of gross income
Medical
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Medical


The amount taken from the employee’s paycheck for medical benefits
Occurs when the employer has a medical plan for employees but does not pay
full coverage for his/her benefits
Retirement Plan
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Retirement Plan



The amount an employee contributes each pay period to a retirement plan
A specified percentage of the contribution is often matched by the employer
May be a 401K, a state, or local retirement plan
Year-to-Date
On-The-Go
Employee
SSN
Check #
Beakens, Joe
201-92-4856
164
Check Amount
$1,102.98
Employee Address
293 Michael Grove
Billings, MT 59102
Pay TypeGross Pay
Deductions
Current
Year-to-date
$1,353.33
Federal Withholding
State Withholding
Fed OASDI/EE or Social Security
Fed MED/EE or Medicare
Medical
401K
$106.00
$40.82
$83.91
$19.62
$0.00
$0.00
$503.46
$117.72
$636.00
$244.92
$0.00
$0.00
Totals
$250.35
$1,502.10
Pay Period 6/11/2004-7/11/2004
Year-to-Date

Total of all of the deductions which have been withheld from an individual’s paycheck
from January 1 to the last day of the pay period indicated on the paycheck stub
Types of Benefits
Be sure to consider benefits when choosing a job!!

Insurance Benefits: Group health care plans offered by
employers


Other insurance plans: Vision, dental, disability, long-term care, flex
plans
Savings and Retirement Benefits: Employers deduct
money from the employee’s paychecks to deposit in a savings
or investment account.


Some or all deducted on a pre-taxed basis
Tax sheltered annuities, 401K plans
Types of Benefits

Other benefits:








Paid Holidays
Vacation Days
Sick Leave
Flex Accounts
Pay for addition education/training
Paid maternity leave or money towards childcare
Gym memberships
Addition perks
Unions

Important Part of American History



Collective Bargaining: Meeting with employers and
elected officials to negotiate the terms of a contract




Developed in early 1900’s
Protect Worker’s Rights
Pay
Benefits
Work Environment
Currently hot topic in politics
Professional Organizations

Professional Organization:

a nonprofit organization seeking to further a particular
profession, the interests of individuals engaged in that
profession, and the public interest.

Keep up to date with current trends in the profession
Further education or credits

Workplace or employee pays fee to belong




Resources
Classes
Conferences
Budgeting
Personal Finance
Why Budget?

A budget is helpful no matter how large or small your
income is.


It is ALL about saving.
If created efficiently, a budget can help you:




Avoid running out of money between paychecks
Evaluate your spending habits and making better choices
Set aside savings for unexpected costs (They WILL happen!)
Work toward a financial goal
Budgeting
Although a budget can be created for any time period, most
create on for a year

Divided it up into months (by 12)
Creating a budget involves three main tasks:



Estimating Income (Gross vs Net -- irregular)
Estimating Expenses (Fixed vs Variable)
Bringing the two into balance – saving
Estimating Expenses
Group expenses into general categories

Groceries, dining out, gas, cable bill, miscellaneous, etc.

Fixed Expenses: Regular payments that do not vary from
month to month. (Rent, car payment)

Variable Expenses: Normally increase and decrease from
month to month. (Groceries, Dining Out)
The MORE accurate you are – the more effective your
budget.
Estimating Expenses
You can estimate your expenses using several ways –

Your past spending.


Expert recommendations


Information from bank statements, receipts, tax forms.
Percentages of income to allow for various expenses.
National Averages


Consumer Expenditure Survey – shows how consumers spend their
money.
Published periodically by the Bureau of Labor Statistics

Pie Chart
Saving Money

PAY YOURSELF FIRST!!



10% of household income – more if you can.
Treat savings as another FIXED expense.
Necessary to reach long-term savings goals and have emergency fund.
Balance Your Budget
Income – Expenses = Zero
If result is a positive number, add money to savings.
If result is a negative number, adjust your budget.

Decrease expenses, do not cut out savings.
Adjusting Your Budget
Look at discretionary expenses – categories that aren’t necessary.



Shopping
“Fun” money
Add-ons to other expenses (Cell minutes, HD or Tivo, Internet Speed)
Think of ways to trim expenses



Coupons
Eating in more
Buy sale items
Reduce Fixed Expenses – Less expensive car, lower rent, better
deal on auto insurance.
Using Your Budget
Establish a budget – use discipline!!
Monitor it each week
 Compare actual expenses vs. budgeted amount
 Analyze if overspending – Make adjustments.
 Revise budgeted amounts, if needed.
