Learn how to read and understand your check stubs

Saving Every single day - How you can Read Your Paystub
If you are like most people, your paycheck means just one thing-money in the bank! But when you find yourself living paycheck to paycheck and need to improve your hard earned money management skills, you have to pay close attention to another perforated portion of your paycheck-the pay stub ( also called the explanation statement.) Educating yourself on how to read your pay stub and comprehending the information it has can play a vitally important role in effective money management and proper budgeting. Knowing where your money is going can help you stay on top of your finances and make the most of the hard-earned paycheck.

What's Included on a Paycheck Stub?

Although every company prints paychecks that are unique in their own individual way, there are several aspects of the employee paycheck that employers must include legally. Some paycheck stubs can be extremely detailed including such items as retirement plan contributions or accrued vacation time, and others will only detail the required information. The following items will appear on every paycheck stub and consumers have to fully comprehend their definitions and value:

Gross Pay: Includes the total amount of income that you earned during a particular pay period. A pay period is determined by your employer, but is typically bi-weekly or monthly. This figure doesn't factor in tax withholdings.
Net Pay: Includes the amount of income that you simply actually collect after all withholdings have been applied. It is the amount of money that you simply take right to the bank!
Federal Amount of taxes: When you were first hired because of your employer, you had been required to complete a W-4 form. This type covers any tax that you may owe towards the Federal government come tax time. It is deducted incrementally from each paycheck, and can vary depending on the number of exemptions you're considering to claim.
State Amount of taxes: Depending on a state of residence, you might or may not be required to pay a state tax. Most states however, do participate, so this amount is deducted out of your paycheck ( exactly the same way as Federal tax) to pay for the amount of tax that you may owe towards the state whenever your tax return is filed.
Local Amount of taxes: Although rare, a local tax may also be applied to employees of certain cities, counties or school districts. For instance, if you live in Nj, but work in New York City, you'll be required to pay not only New Jersey state tax, but also New York City tax in your earnings.
Social Security: The Federal government requires every employee to possess a certain percentage of the paycheck withheld for social security purposes. This entitles you to definitely receive a monthly social security payment upon retirement. The amount is currently 6.2% of the monthly earnings ( up to and including maximum earnings of $94,200 in 2006). Underneath the Federal Insurance Contribution Act (FICA) your employer will also contribute another 6.2% toward this for any total of 12.4%. The annual percent withheld and the maximum earning is susceptible to annual increase.
Medicare: Like social security withholdings, Medicare withholdings are also mandatory. Every employee pays 1.45% of their paycheck toward Medicare, and every employer contributes an additional 1.45% with respect to the employee. Upon eligibility for social security, a worker is entitled to coverage for a majority of their medical expenses.
Year-to-date (for pay and deductions): The year-to-date fields on your pay stub show just how much you have paid toward a specific withholding at any point in the calendar year. This can be useful when budgeting for monthly expenses or long-term goals.