It's About Your Pay Check (Episode 3)

[00:00:00] Brian: Welcome back folks. We continue to be very excited about this new show. It's about your paycheck. We come in and bring you some starting ground. We feel like this is the starting line to your financial wellness, right? Where do I start? You start with this podcast.

[00:00:15] Brian: That's where you start, right? If you want a new journey, because there's so much, there's a, it's such a bigger conversation going on, right? Well, so before I get carried away, what's good, man? Nah,

[00:00:26] Walt: you're right, man. I jump on that bandwagon. I share the same sentiment as you. I think that this is really going to help some people become aware and educate them and empower them to understand and know their pay.

[00:00:42] Walt: Honestly I think it's such a big thing because going back to that stat that we have, 60% or more of Americans live paycheck to paycheck. You know what I'm saying? To try to make ends meet and having a [00:01:00] financial literacy or understanding of how your pay works can help you along the way with that,

[00:01:05] Brian: right?

[00:01:07] Brian: Well said. Shoot, well, we did a few shows already and this is so we did like an intro and we, so we taught you guys how to calculate your gross, how to check that out, and now we're going to talk about how to calculate your net pay. There's always the running joke, of course, this gross to net the net is the gross part because of some how much little you get out there.

[00:01:31] Brian: But yeah we're going to teach you some of the things that are you need to look out for in your check, right? Keep your employers honest, keep your payroll team honest. We are a payroll team. So we know how to check them in a nice way. And believe me if you find something that's the wrong, that a good payroll team is going to be very appreciative of it and and want to correct that for you guys.

[00:01:58] Brian: Good payroll folk [00:02:00] understand that their coworkers are their customers, right? We deliver a product. That product is your paycheck. So we want to teach a few things about it. So yeah, any who, we're gonna this is a really good one. It's a three step process to how to calculate your net.

[00:02:18] Brian: We'll go through the process here, step by step. And and that's it, man. Why don't you take it, why don't you take us through the first two? All right, great.

[00:02:27] Walt: I'll do that. So the first step. Is to understand your gross pay is the total amount of money you earn before deductions again, keyword before any deductions are taken out.

[00:02:43] Walt: It includes your regular salary or hourly wages, plus any additional earnings like bonuses or commissions. Again, the keyword here for understanding. The difference between gross pay and net pay is that your gross pay [00:03:00] is what you make before any deductions. Yes. And the net pay, which we're going to tell you about is after all those deductions, right?

[00:03:12] Walt: The next part that's going to help you calculate your net pay is to know what deductions need to come out of your check, right? , deductions are amounts taken out of your gross pay to cover various expenses and our taxes. Some of those examples are income taxes and FICA, Federal Insurance Contributions Act.

[00:03:34] Walt: Which is which is basically consists of social security and Medicare contributions, right?

[00:03:39] Brian: Then you have your Yeah, I'm sorry to cut you off. Because this is FICA is a big item for confusion on page stubs, right? Companies coded a million different ways. Some comp I've seen companies coded FICA, OASD, FICA, MEDI really [00:04:00] cryptic and or SS SS, or so some, cryptic stuff, folks.

[00:04:09] Brian: So it's important to understand, like the first check you get, grill your people. That's that's a great opportunity, right? That first check you get really drilling, make yourself a key, even write it down, use that first one as an example for all other ones to define what those codes are on your check so that you're not confused.

[00:04:27] Brian: Because again, FICA refers to both of those deduction codes. Social Security and Medicare. There are two different codes. They calculate at two different rates. And, but some companies jumble them up. And because it's in the same Federal Insurance Contributions Act, they jumble them up and they try to be fancy and stuff like that.

[00:04:49] Brian: I don't know why they do that. But I . Just wanted to point that out. When it comes to taxes, they get cryptic. Make sure you get them to define it for you. [00:05:00] If it's not really

[00:05:01] Walt: No, it's necessary man. Because that's part of the title for step two says know the

[00:05:07] Brian: deductions.

[00:05:07] Brian: Oh, see what i'm saying What you're what

[00:05:10] Walt: you're doing is trying to give them knowledge to understand the difference And how their company May operate versus somebody else's company, right? If you need help recognizing that ask a professional. And they can tell you exactly what it is. Then for the deductions. You have to also worry about health insurance and retirement contributions. You have to worry about other deductions like life insurance, health savings accounts, flexible savings accounts.

[00:05:39] Walt: We'll get into this a little bit later, but there's such a thing as called pre tax deductions. We won't get into the nitty gritty of that. Now, but we will talk about that in a later show so you can understand how that impacts your taxes, your gross pay, your net pay, how that all works. Okay. The next step, Brian [00:06:00] is going to tell you about in that step three, how to calculate

[00:06:03] Brian: net pay.

[00:06:05] Brian: This is where I say I stole the magic the neg the calculate the net pay. So again, you've taken all the information that Walt just, the first two steps, you've taken your gross, plus, and then you apply your minuses, right? Minus your taxes, minus your deductions, and you're gonna get to your net pay, N E T, net pay.

[00:06:29] Brian: And that's Pretty much it, right? That's the quick magic part of it is to calculate your net pay. You're going to follow the steps, start with your gross pay, total earnings before deductions, you're going to subtract all of your deductions mentioned above taxes, insurance, retirement, et cetera.

[00:06:48] Brian: These are all listed in your pay stub. And again, please. Don't just accept codes on there that you don't understand because you love where your net pay is, right? Oh my gosh, I'm so happy net pay is [00:07:00] great that I'm gonna accept all these codes. Just not question the codes that are there. You know what I mean?

[00:07:07] Brian: When you get your first check, or even now, a million checks later, if there's codes on your check you don't know, please just ask your payroll team. What do these mean? What are these? And help me understand what they, should have the descriptions on it. You know what I mean? But if they don't, be afraid to ask them.

[00:07:26] Brian: I think I'm, I say that because I come across so many folks that are like, no, I don't want to bother my payroll. No, I'm good. I'm good. I'm not gonna, I'm not gonna, I'm not gonna put my name out there. Like they're literally afraid to reach out to their, companies and stuff. And you shouldn't your, payroll team should be cool.

[00:07:42] Brian: They should let you know what's going on. You can send them an email. It's easy. Very right. Anonymous. Hey. Just wondering what this means. I answer those emails all the time and it's no problem. That's a great, that's an easy email, so that is it folks. That's how you get to your [00:08:00] net pay. Ooh, take us through the example you have.

[00:08:03] Brian: Well

[00:08:05] Walt: so the example here, let's say your gross pay is 2, 500 per month. Now let me preface this stuff before I continue this example that we're using. Even even if your gross pay per month is 2, 500, your net pay more than likely will not match this example.

[00:08:28] Walt: So please don't confuse.

[00:08:30] Brian: This is just for easy math.

[00:08:34] Walt: Everybody's tax situation is different. That is everybody's income status. All that stuff is different. So this is just an example. I just wanted to say that. So let's say you earn 2500 a month and that after all your taxes and deductions everything, et cetera, that totals out to about 500 per month, your net pay will be calculated by taking [00:09:00] the gross.

[00:09:01] Walt: Pay minus those deductions. So in this case it will be that 2500 minus those 500 of deductions and that will give you your net pay or your take home pay. Another, term for net pay is take home pay, right? So that would be 2, 000 after all the deductions, after all that is calculated, then that's what you would bring home.

[00:09:28] Walt: Anything else you want

[00:09:28] Brian: to add? , that's it. Yeah. All

[00:09:33] Walt: So I know we have some helpful resources and tips here at the bottom. You want to read?

[00:09:40] Brian: Yes, absolutely. So one of them is paycheck calculator. I think we mentioned it a few times, but it's a great tool. They have a mouth. They just Google it.

[00:09:48] Brian: There's a bunch of them. They're all. helpful they're all going to do what you need it. If you're savvy with Excel, you can do it in Excel, which I would prefer or Google sheets. If you're set right, it's [00:10:00] the sheets one, right? Google sheets. You can build your own calculator. If you're savvy with it enough, honestly, if you probably even in not that savvy, it's just math.

[00:10:10] Brian: If you got a paycheck, you need to know some math, some basic math, right? So I know all of us, that's our worst subject growing up, but I tell my kids right now, it's math is everything is it's like the basis for all intelligence. Go ahead and use one of the calculators out there, build it yourself.

[00:10:29] Brian: It's helpful to get a good understanding. What you need employee handbook or HR department, your employers, employee handbook, or HR department can provide valuable information about your benefits, your deductions, your pay, pay policies. One that I mention all the time that's really a great call out for a handbook is you have to work the day before and after a holiday to get paid for the holiday if you're a full time employee, right?

[00:10:56] Brian: So things like that, that you don't you assume [00:11:00] don't assume stuff not every company gives the same paid holidays. Some companies. If they, this is, I know this is a sidebar, like we'll come back to these things that are popping in my head. Some companies pay PTO out when they pay things out at a lesser rate than what you, your normal rate is.

[00:11:22] Brian: So be care, right? Now you look at your stub and see why your rates are different. They should all be there. Your rates on how you're getting paid should all be there. Anywho but that would be in a handbook. That was my point. And then IRS website is a great one. I take advantage of that all the time.

[00:11:38] Brian: It's super it's, it can be heavy. It can be a lot kind of Google what you need. Look, start with the Google. Take, yourself through those steps for what you need. You want me to finish them out wall? All right. Financial advisors, if you have complex situations, yes. You [00:12:00] definitely want to talk to a CPA, talk to a financial advisor.

[00:12:04] Brian: And shoot, if you're, if your situation is complex like that, then you might have a little bit of monies. And then you might want, to have folks checking their work to keep people honest. If we're talking that stuff have a CPA to check your other CPA. Trust, but verify.

[00:12:26] Brian: And then keep track of your finances, create a budget, keep track of your income and expenses, and help you manage your money effectively. Absolutely. I was just telling Walt, hey, you mentioned some good stuff and there's a ton of podcasts out there on financial wellness. We only claim to be your first step in financial wellness.

[00:12:50] Brian: Okay, it's a daunting task. It's a lifelong journey. If you want to be good with your money, you want to save your money. You want to be prudent, [00:13:00] diligent, efficient, all these good words, which are money it's, daily. You need to put the work in. So we want to be the springboard for you.

[00:13:11] Brian: Goodness, it's an overwhelming thing. Where do I start? Start it. So it's about your paycheck. All right. And what else were you got for as well?

[00:13:22] Walt: I think as far as helpful resources and tips. It's just that it starts with knowledge. It starts with gaining the information.

[00:13:33] Walt: Yes, that is where this process starts for you. It's okay, hey, you have to make a decision that you want to learn and understand how your finances work, and then you will go out and obtain the knowledge necessary to help you do so. as Brian said, find those resources, those helping hands that are going to be helpful for you.

[00:13:59] Walt: [00:14:00] And we're going to have tons of different tips for you, no matter what type of employee you are, whether you're in the medical field, whether you're a union payroll employee, no matter what level of employee you are, we're going to have resources and help you understand your money a little bit

[00:14:18] Brian: better.

[00:14:18] Brian: Thank you. You said union and made me think if you are in a union, your employee handbook has another handbook. It's a union handbook and it's a CBA agreement. You have a collective bargaining agreement that will dictate the things and the rules of your pay. So not only I don't know how it goes.

[00:14:38] Brian: I've never been a union employee, but I have supported union. I've worked for them. But I wasn't a union myself. But I worked for them, mom, 47 years union shop. So we're definitely a union family, but I don't know what it looks like to get the stuff, but I know as a payroll professional supporting them, I had to [00:15:00] abide by the CBA and your union shop reps fight hard for that CBA stuff.

[00:15:05] Brian: So go ahead and make sure you read that. That's a huge call out for union folk is to know your CBA, your collective bargaining agreement. Yes. man, that's it, man. I think it's, great folks. It just giving you the tools , again, it starts with your paycheck.

[00:15:25] Brian: It starts with that knowledge, right? And, from there go off into the world, research, Google, we want to give you enough to be dangerous. Yes, absolutely. All right. Cool, man. And that is it. That is all for today, folks. And check us out on the next episode. Next time. Peace. Yes, we're recording.