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Section 1 of 6
Your paycheck is smaller than your salary
Guess first
You earn $5,000 a month before anything comes out. What do you think lands in your account?
Say you earn $5,000 a month. That is your gross pay. Before it reaches your account, federal tax, Social Security and Medicare, state tax, health insurance, and maybe a retirement contribution come out. With the Paycheck lab's sample settings (single filer, California, $200 of health insurance, 5% to a 401(k)), the deposit is smaller than that. Your state and benefits change that. That deposit is your take-home pay, and it is the only number your rent can come from. The Paycheck lab, in the Lab tab, estimates yours. It is an estimate, so check it against a real pay stub when you have one.
Key points
- Gross pay is what you earn before anything comes out
- Take-home pay is what reaches your account after tax and deductions
- A deduction leaves before the deposit, so it is not money you can spend later
- Compare the lab with a real pay stub when you have one
Do this today
Run the Paycheck lab, write down the take-home it shows, and name one line that reduced it.