You start a new job and eagerly await your first paycheck. Is it less than you expected? Taxes can put a large dent in your paycheck. If you understand what these taxes are and why they are taken out of the paycheck, you can budget more effectively.
Gross Pay – This is your base pay. It is your hourly wage times the hours you worked.
Example: You earn $10 per hour and you worked 40 hours. Your gross pay is $400
Net Pay – This is your gross pay minus taxes and anything else your employer takes out of your paycheck.
Example: Your gross pay is $400 and you had $70 in taxes taken out. Your net pay is $330.
FICA Taxes - These payroll taxes support Social Security and Medicare benefits. Each employee must pay in a portion of their paycheck.
Federal Income Tax – This payroll tax is paid to the Federal Government. The amount you owe depends on if you are married or not and how many exemptions you claimed when you filled out your W4 Form. If you overpay during the year, you can receive a refund when you file your Income Tax Return.
State Income Tax – If your tax collects income tax, this amount will also be taken out of your paycheck. You can also receive a State Income Tax refund if you overpay throughout the year, but you have to file a tax return to get it.
If you think the taxes out of your paycheck are too high, check with your employer. Make sure you marked the correct number of exemptions on Form W4.
If you are like most Americans, you have debt. The best thing you can do is stay informed about collection law and fair debt collections practices. Don’t become the victim of unlawful debt collections. The Fair Debt Collections Practices Act is enforced by the Federal Trade Commission. The Fair Debt Collections Practices Act protects people like you from being harassed and abused by collectors.
What debts are covered by the Fair Debt Collections Practices Act?
This collection law covers personal, family, and household debt. This means your credit card debt, auto loan debt, medical debt, and mortgage debt are covered. The Fair Debt Collections Practices Act does not cover business debt.
The most important aspect of financial planning is learning how to budget.
This may sound complicated, but learning how to budget is actually simple. In fact, I’ve created a simple budget worksheet for you. All you have to do is fill in the blanks. Download the Monthly Budget Worksheet.
Watch the following video as it teaches you how to budget, using the free Monthly Budget Worksheet.
If you are the recipient of a service, you need to know how much to tip. Service providers often rely on tips, so make sure you give them their fair share.
I went straight to the Etiquette Experts at The Emily Post Institute to find out which common services deserve a tip and how much to tip for each:
Wait service (sit down style) – Emily says to Tip 15-20% of your pre-tax bill
Honestly, I would just take the total amount, including tax. It’s much easier to figure that way and it’s likely not much more. Personally, I usually over tip, especially if the server has been especially pleasant. It’s a hard job and they deserve the tips they get.
