On payday, your paycheck may be direct deposit, which makes banking very convenient. But have you put time into understanding your paycheck and pay stub information? This information can greatly affect your budget, taxes, retirement and more. We want to explain what you need to know about your paycheck so that you can better manage your finances.
Understanding Your Paycheck
When it comes to managing income and finances, many of us end up with consumer debt. Understanding your paycheck can help alleviate stress. How it works, what’s included, and what’s deducted are important lessons to learn to ease stress that may come from your paycheck.
Understanding Your Paycheck: What Should You Know
- Total Gross Income – The total gross income shows the amount of money a consumer makes per pay period. This can be based on either their annual salary or hours worked.
- Total Net Income – The total net income shows the amount of money the consumer actually receives after deductions and taxes are taken out.
- Hours – If the consumer is an hourly worker, this number represents the total number of hours worked during that pay period.
- Deductions – Total deductions shows the amount that was taken out for tax withholdings, such as social security tax, state tax, and Medicare. Also, these include benefits, such as life insurance, 401K, medical and dental.
- Other Types of Pay – Sometimes there are other types of pay listed near the regular pay box. This type of pay may include holiday, overtime, personal and sick pay. Be sure to review these to make sure the extras are calculated correctly.
Understanding Your Paycheck: How Should You Handle It!
Once you understand what’s really in your paycheck, it is also important to know the best way to manage it. Direct deposit is highly recommended to help you manage your finances. Here are 6 reasons why:
- Money is available sooner – Consumers’ paychecks are accessible in their bank account on payday.
- Money management – Direct deposit allows consumers to automatically disperse their paycheck into different accounts. This also eliminates the temptation to take out cash when depositing each paycheck.
- No misplaced checks – Consumers can receive their money on time and not worry about the check getting lost in the mail.
- Convenience – Direct deposit saves consumers a trip to the bank to deposit their paycheck every week or every other week.
- Easier to pay bills – Consumers know precisely when money will appear in their account, so they know exactly when they can pay bills or schedule automatic payments.
- No cost – Direct deposit has no cost associated with it!
Having a good overall understanding of your paycheck helps you better organize your money. This way you are likely to not accumulate too much debt.
If you are working on eliminating debt, speak with a certified counselor at ACCC today! Call 800-769-3571 or visit www.consumercredit.com