Lesson · 10 min
Reading a paycheck
Gross vs. net, deductions, and where your money goes before you see it.
A paycheck lists your gross pay (what the employer promised), your deductions (taxes, benefits, retirement), and your net pay (what actually lands in your bank account). Understanding the difference stops the classic mistake of budgeting off gross.
Kayla's first paycheck
Kayla's job pays $18/hr and she works 20 hours. Her gross is $360. Federal tax, state tax, and FICA subtract about $60. Her net is roughly $300 — that's the number she can budget.
Rule of thumb
Assume your take-home pay is 75–80% of your gross when you're first starting out.
Vocab
- Gross pay
- The total pay before any deductions.
- Net pay
- What lands in your bank account after deductions.
- FICA
- Payroll tax funding Social Security and Medicare (7.65%).
Quick check
1. Which number should you build a budget on?
2. Kayla earns $500 gross this week. If deductions total 22%, her take-home is closest to…