Understand your paycheck

Gross is the offer. Net is your life.

Gross pay is hours × rate before anything is taken. Net pay — "take-home" — is what actually lands. The gap depends on your state, your tax withholding and any benefits you sign up for, so check a real pay stub rather than assuming a percentage. Budget from net, always, or you will be short every month.

Line by line

Every pay stub, whatever the format, has the same anatomy.

• Pay period and pay date — the weeks this covers, which is often not the weeks just worked.
• Hours and rate — check these against your own record first, every time.
• Gross pay — basic, plus overtime, vacation pay or tips shown separately.
• Federal, state and local income tax — withholding depends on your W-4 and where you live.
• Social Security and Medicare (FICA) — payroll taxes shown separately on most pay stubs.
• Retirement contribution — yours and any employer match, if your workplace offers a plan.
• Union dues, wage garnishments or pre-tax benefits — only if they apply to you.
• Net pay, and year-to-date totals.

The retirement line: ask before you change it

Some employers offer a 401(k) or similar plan, and some add a match to what you put in. Plans differ on whether you are enrolled automatically, how much is matched and any conditions on the match. Before you stop or change contributions, ask HR or read the plan documents so you know what you would give up. This is general information, not financial advice.

How to spot an error

Payroll mistakes are common and usually innocent — but nobody will find yours for you.

• Keep your own hours log: date, start, finish, breaks. A phone note is enough.
• Check hours and rate first, then the tax withholding, then the total.
• Missing hours and overtime are worth checking first; rules on overtime and paid time off vary by state and employer.
• Raise it in writing, politely, with the pay stub and your log attached.
• Keep every pay stub for at least two years — they are proof of income for renting and lending.

First pay stub surprises

A first pay stub is often smaller than expected: an emergency tax code, a part-period start, or a pay cut-off that pushed a week into the next cycle. Usually it corrects itself within two cycles. If it doesn't, ask.