How To Read Your First Paycheck

The first paycheck is usually smaller than expected. The number in the job offer is gross pay; the number that reaches your account is net pay, and the gap between them is itemized on your pay stub. Reading it once teaches you where your money actually goes before you ever see it.

Gross pay

Total earnings for the pay period before anything is removed — regular hours, overtime, bonuses, and commission. This is the figure salaries are quoted in.

Taxes withheld

• Federal income tax — based on the W-4 you filled out at hiring
• State and sometimes local income tax, depending on where you live and work
• Social Security, typically listed as FICA or OASDI
• Medicare

Social Security and Medicare are fixed percentages and not adjustable. Federal income tax withholding is an estimate based on your W-4 — get it wrong and you either owe money at tax time or receive a large refund, both of which are correctable by updating the form.

Pre-tax deductions

These come out before income tax is calculated, which lowers your taxable income. Common examples are health insurance premiums, 401(k) or 403(b) contributions, and health savings account contributions. A dollar contributed pre-tax reduces your take-home by less than a dollar.

Employer contributions

Your stub may list what your employer pays on your behalf — their share of payroll taxes, insurance premiums, and any retirement match. This is not money you receive now, but a retirement match in particular is compensation you forfeit by not contributing enough to earn it.

Year-to-date columns

Most stubs show both this period and the year to date. The YTD column is worth checking against your W-2 in January, and it is the fastest way to catch a payroll error while it is still small.

What to verify on the first one

• Your pay rate and hours are correct
• Overtime was calculated at the proper rate
• Benefit deductions match what you signed up for
• Your name, address, and tax status are accurate

Payroll mistakes happen and are much easier to fix in the first month than after a year of repetition.

This article is educational information, not personalized financial advice. For guidance specific to your situation, book a free consultation with our team.