Gross pay vs. net pay
Gross pay is what you earned before anything is taken out. Net pay, or take-home pay, is what’s left after taxes and other deductions, and it’s the money that actually reaches your account.
What comes out
Deductions commonly include federal income tax, Social Security and Medicare taxes, and, depending on where you live, state or local taxes. Your employer asks you to fill out a form, the W-4, that helps decide how much federal income tax to withhold. Tax rules and amounts depend on your situation, so check your pay stub and official sources.
Read your pay stub
Look for the pay period, gross pay, each deduction and net pay. If something looks wrong, ask your employer or payroll department.
Plan from net pay
Build your budget from net pay, not gross. Then pay yourself first by moving a set amount to savings as soon as you’re paid, and set aside money for bills before the next payday.
Where to keep it
Keep your money in an insured account, such as a checking account for spending and a savings account for goals.