If you are looking to improve your money management skills and avoid living paycheck to paycheck, paying close attention to the details on the explanation statement portion of your paycheck which is the pay stub or simply learning how to read a pay stub is the way to go. If you learn how to read your pay stub and educate yourself about the information it contains, it can play a great role in helping you to effectively budget your expenses and manage your money. Do you know that if you know where your money is going it can help you to be in control of your expenses, finances and also help you to save a sizeable amount of your paycheck?
A pay stub is the perforated portion of your paycheck which is attached to your paycheck. While most companies will include the same basic elements on the pay stub, your employer may decide what is actually printed. If you are a salary worker, the amount of pay will generally remain the same but it can fluctuate if you are a worker that works on an hourly basis. It is good for you to read your pay stub every pay day whether you are a salaried or an hourly employee. Learning how to read your pay stub will help you to know if all the deductions and the computations are accurate. It is fairly easy to read the pay stub and here are some hints on how to read a pay stub.
Know the elements included on a pay stub: Companies prefer to make their paychecks unique but there are some basic elements that every employer must include by law. Here are the basic elements that must appear on a paycheck irrespective of the company and you should endeavor to understand the meaning and importance of these terms.
1. The payment amounts: These include gross pay and net pay. The gross pay is usually the total amount earned at a particular pay period while the net pay is the actual amount you receive as pay which you actually take home.
2. The tax amounts: These are the tax figures listed on the pay stub and they include Federal tax which is paid to the federal government and the state tax which is paid to the state government.
3. Understand the common abbreviations on a pay stub: The common abbreviations include YTD which is year to date, the tax abbreviations are FT for Federal tax and ST for the state tax, SS is used for social security or SSWT which is the social security tax withheld, and Med is used for Medicare.
Consider your year-to-date amounts for each category: The YTD amount is the amount usually found next to each deduction and it tells you the total amount you have paid in each category listed since the beginning of the year.
Consider all other deductions made from your paycheck: All deductions made against your paycheck are included and you should look at each deduction. Deductions may include 401k contribution amounts, insurance deductions, pension deductions, and deductions for union dues.
If you find any incorrect calculation or you need any explanation, consult the appropriate department especially the Human Resources in your company for assistance. Understanding how to read a pay stub is important if you are looking for how to exercise good money management skills as a worker.