How to Read a Pay Stub: A Comprehensive Guide

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If you go online and look up information about saving money, the first thing you’ll see is that you need to set a budget for yourself. Every website leads with this piece of advice, in part because it’s an easy way to fill in 200 words.

Creating a budget seems fairly easy, doesn’t it? You only have to figure out what you spend vs. what you make, and then you can find places to save money!

The problem, of course, is that some people don’t know how to read a pay stub, so it’s hard for them to have accurate information. We’re here to help! Read on to learn more about reading a pay stub.

Employee Earnings


In this section, you’ll see how much money you’ve earned. This section usually gets broken up into regular hours worked, overtime hours worked, and any bonuses you’ve received. If you’re in a salary position, this section may show a 40-hour workweek, regardless of your actual hours.

Keep in mind that the earnings you see in this section only cover gross income, which is the money you make before taxes and other deductions.

Everyone’s Favorite Subject: Taxes


Unfortunately, what you make isn’t what you take home. Uncle Sam has to get his cut of the money you’ve earned.

In this section, your pay stub will show the taxes that you, the employee, must pay out of your gross earnings. This includes your federal income tax, social security tax, medicare tax, and possibly state taxes.

These taxes depend on several factors, such as your marital status, dependents, and income. Generally, the more income you make the more you’ll pay unless your income is in the top 1%. For state taxes, the price you pay will vary depending on where you are. You’ll pay a lot of taxes in New York State or California, but in Florida, you’ll pay zero.

Taxes That Your Employer Pay


Remember that your employer also pays taxes to the government. They must also contribute to social security and medicare, along with Federal unemployment taxes and certain state taxes. These totals will match the amount that you pay.

These taxes don’t affect you, but they’re listed for accounting purposes.

Deductions and Contributions


If your employer offers you benefits such as insurance or retirement accounts, these will get listed here. As an employee, you’ll contribute to these, and many employers will match your contributions up to a certain amount. These won’t necessarily affect your income on a week-to-week basis, but they could have an impact on your taxes.

If you want to skip over this and only see what impacts your income on a week-to-week basis, you can use a pay stub generator to create simplified documents for your personal records.

Now That You Know How to Read a Pay Stub, Create A Budget Today!


If you want to create a budget to help you save money and figure out how much you can invest, understanding how to read a pay stub will help. Understanding your pay stub information will help you in other ways too, such as knowing how much you can afford to pay when looking for housing and loans.

For more information that can help you build a healthy financial future, check out the rest of our blog today!

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