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Decoding Your Paystub

How to read between the lines and boost your income 

What is one of the most overlooked and often puzzling documents people get? Answer: Your paystub. When people look at their paystubs, they often only focus on one part — how much money they will get on payday.  

The IRS has estimated that around one-third of employers make a payroll mistake in any given year. That’s a huge amount, showing how one “small” mistake on your employer’s end can cost you thousands.  

Whether you’re on salary or have a part-time gig, it’s important to understand your paystub. This is especially important when you start a new job, get a raise, or work hourly. 

Let’s dive in to demystify your paystub and share ways you can earn additional income. 


Understand Your Paystub 

There are many parts to your paystub but here are a few of the most important elements.  

  • Pay periodthis is the time frame you worked. Most people are on a biweekly pay schedule that calculates a two-week or 14-day pay period. However, some people may be on a monthly pay schedule which calculates your pay period for the entire month. Always check to make sure the pay period is accurate and includes every day you worked.  
  • Rate of Pay / Hours Worked these are the numbers you should see if you’re paid hourly. Make sure both of those are correct. If they aren’t, reach out to your HR/payroll person ASAP. 
  • Pay date this is the date you receive your paycheck. Most companies pay their employees on a regular schedule, such as every other Friday. Make sure your pay date is what you were expecting and double-check any auto pay bills coming out after that day, so your account doesn’t go into overdraft.
  • Earningsthis is also called gross wages. Gross wages are the full amount of money owed to an employee before expenses like taxes and deductions are taken out. 
  • Employer contributions this is how much money your employer contributes toward your benefits, including retirement and healthcare. This section doesn’t take away from your net pay but shows a clear picture of how much your employer contributes. 
  • Taxes this is the three types of federal taxes that are withheld from pay: federal income tax, Medicare, and social security. Nebraska also has state taxes that everyone must pay.

Tax amounts taken out of gross wages are included on a pay stub. These taxes will show up on an employee’s W-2 later for tax filing purposes. This money is sent to the government on an employee’s behalf by the employer.

For salaried employees, make sure this amount is the same every month, and if it isn’t, contact your HR or payroll department.

  • Deductionsthis is the optional withholdings from an employee’s pay. An employee can choose to deduct contributions to a 401(k), a health care savings account, income, or child support payments. 

Deductions that are withheld pretax (from the gross income) have the advantage of being excluded in tax calculations. You’ll want to make sure your optional deductions are correct on every paystub, so it doesn’t affect your taxes later. 

  • Net Paythis is the dollar amount you get to take home at the end of the day after taxes, deductions, and other withholdings. This appears front and center on the paystub and is the number most people look for. You can use this number to set up a monthly budget. 

Lastly, how you receive your pay is important. Are you being paid in cash, with a paper check, or direct deposit? We recommend direct deposit because you get access to your money sooner which is a win-win for everyone! 

Note: The FDIC also has a great resource on how to read a paystub. 


Increase Your Income 

These days, many people are getting income from more than one source:  

  • Part-time job(s) 
  • Paid internship 
  • Side hustle 
  • Freelance work 
  • Child support 
  • Interest income 
  • Social Security 

The good news is it’s never too late to increase your income. To start, make a list of ways you can increase your income and then go from there. 


Track Your Earnings 

Are you tracking your income? If not, that’s okay! One easy way to do it is to list out every source of income on the left side of a sheet of paper. At the top, make columns for:  

  • Amount received 
  • Date(s) received during month 
  • Regular/unpredictable amount (e.g. tips)  

Fill in the details and continue this process at the start of every month.  

Here’s an example of how tracking multiple incomes can work:
A 30-year-old single woman has one child. She has a part-time job as a waitress (paycheck and tips); receives child support; and does freelance work (paid in cash and checks) as a children’s party planner. She lists out her income every month and uses our Mobile Deposit feature to deposit the various checks she receives.  

Pen and paper not your style? The FDIC also has a great tool to track your monthly income. No matter what method you use, it’s important to note the additional information and forms you may need when it comes time to file taxes.  

Knowledge is power. Always look at your paystub every month and make smart decisions with your hard-earned money (like setting aside some for savings!).  

If you want to set up a checking or savings account or have more questions about paystubs, our friendly team is here and ready to help.