Work and pay
You just got your first paycheck
Your first paycheck will be smaller than you calculated. The gap between what you earned and what you receive is taxes and deductions, and understanding it is the foundation of every budget you will ever build.
This section explains each line on a pay stub, why the numbers are what they are, and what you should check every single pay period.
7.65% of your gross pay goes to Social Security and Medicare — 6.2% and 1.45% — and your employer pays the same amount again on your behalf. That second half never appears on your stub, but it is part of what you cost and what you earn.
Source: Federal Insurance Contributions Act rates, IRS.
Gross vs. net
Gross pay is what you earned. Net pay — 'take-home' — is what lands in your account. The gap is taxes and deductions.
From here on, budget with your net number. Every mistake people make with a first paycheck starts with planning around the gross.
What's coming out, line by line
Social Security: 6.2% of your pay, a rate set in federal law. Your employer pays another 6.2% on your behalf.
Medicare: 1.45%, also set in federal law and also matched by your employer. Together the two are called FICA, and 7.65% is the combined figure you will see quoted.
Federal income tax: based on what you put on your W-4. This one can come back to you as a refund if too much was withheld.
State income tax: depends where you live. A few states don't have one.
Anything else on the stub — health insurance, retirement contributions, union dues — you agreed to. If you see something you don't recognize, ask HR the same day.
Read the stub every time
Check that your hours are right. Payroll errors happen, and they're much easier to fix in the same pay period than three months later. Check your pay rate. Check that overtime got paid at time and a half if you worked over 40 hours in a week.
Give the money a job before it arrives
Money without a plan gets spent. Decide the split before payday, not after.
One simple starting structure: cover your fixed bills first, move something to savings automatically the day you get paid, then spend what's left without guilt. Even $20 a paycheck into savings builds the habit, and the habit matters more than the amount right now.
What you can do
- Read your first three pay stubs line by line.
- Verify hours and pay rate against your own records.
- Set up an automatic transfer to savings for the day after payday.
- Save your stubs — you'll need them for apartment applications and loan paperwork.
- Ask HR about anything on the stub you can't identify.
Where to check this yourself
Paycheck and deduction explainers at consumerfinance.gov. Overtime rules at dol.gov.