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Congratulations! You’ve just landed a new job. Here are some important things to be aware of before you receive your first paycheck.

When will I receive my paycheck?

How often will you be paid? Typically, your payday will depend on the company you work for and which state you work in. You might be paid on a weekly, bi-weekly, bi-monthly, or monthly basis. Regardless of your employer’s pay period, expect to receive your paycheck on your employer’s set payday.

Bear in mind that state law requires your employer to pay you in a timely manner. Employers cannot pay less often than required, but they are allowed to pay more frequently.

How will I be paid?

You should expect to receive your money either by direct deposit or check. Direct deposit automatically puts your paycheck into your checking or savings account. This payment method is paperless, but you’ll still have access to a printed or electronic statement that shows information similar to what is on a physical pay stub attached to a check.

Your statement or pay stub will display important information relating to the money you’ve earned. You’ll see the date of payment, the pay period dates, how many hours you’ve worked, wages earned (both before and after taxes), and any other deductions.

Direct deposit may or may not be required by your employer, depending on which state you work in. You might find that the advantages of signing up for direct deposit, such as not having to worry about your check getting lost or stolen and accessing funds quickly, make it more favorable than receiving a physical paycheck. Think about which payment method works best for you and helps you the most in managing your money.

What does the information on my pay stub mean?

Whether you opt for a check or direct deposit, you’ll receive a summary of tax information each pay period. You might be tempted to ignore this information, but you should understand what it means and why it’s important.

The following terms and acronyms commonly appear on pay stubs. If you know what the abbreviations stand for, you’ll have an easier time decoding your statement.

Gross Pay — The amount of money you’ve earned during a given pay period before deductions and taxes.

Net Pay — Your total income after deductions and taxes are taken into account.

Year to date (YTD) — The amount of money you’ve earned since the first day of the calendar year. You may notice year-to-date information in both the deductions section and the pay section.

Federal Income Tax (FIT, FT, FWT) — Remember the W-4 form you had to fill out when you were hired by your employer? The information you provided on the W-4 is used to determine the amount that will be withheld from your paycheck for taxes. The more allowances you claim, the less money will be withheld.

State Income Tax (ST, SWT) — The amount of state income tax withheld from your paycheck, which will vary depending on where you live.

Social Security Tax (SS, SSWT) — Employers are required to withhold Social Security taxes from employees’ paychecks.

Medicare Tax (MWT, Med) — The federal government requires your employer to withhold a certain amount of your paycheck to fund Medicare.

Social Security and Medicare taxes are also known as Federal Insurance Contribution Act (FICA) taxes or payroll taxes. Your employer is required to withhold 6.2% of your gross income for Social Security taxes (up to a certain annual limit) and 1.45% for Medicare taxes. Your employer also matches these FICA taxes.

What other information might appear on my pay stub or statement?

Depending on the company and your employment status, you might notice some additional deductions appearing on your pay stub or statement.

This may include pretax and after-tax deductions. Pretax deductions (such as for medical insurance and 401(k) or 403(b) retirement plan contributions) are taken out before taxes and reduce your taxable income. After-tax deductions (such as for Roth 401(k) contributions) don’t affect your taxable income.

Contact your human resources department for further explanations of the information on your pay stub or statement. If you think there is a miscalculation on your paycheck, don’t hesitate to reach out to them.

It’s exciting to earn your first paycheck, but you should know that the information on the pay stub or online statement could be important to you as well.

Prepared by Broadridge Advisor Solutions. Copyright 2022.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

At the end of 2019, no one predicted that the unemployment rate would hit its highest level since the Great Depression, average wages would decline but household incomes would increase, thanks to government stimulus checks.  Had the U.S. government not provided stimulus checks, many more Americans would have struggled financially.

Financial advisors typically recommend having at least 3–6 months of non-discretionary living expenses (i.e., housing, taxes, debt service, groceries referred to as needs). This recommendation helps people handle short-term problems like being out of work for a month or two allowing them to pay their bills and not take on debt. Unfortunately, not everyone had an emergency fund for unexpected expenses, and individuals, depending on their income were impacted very differently.

Looking at the above chart we see that people have been put into one of six buckets based on their income. Those with the highest income (the 90–100 group) showed the most resilience and on average have about 10.7 months’ worth of expenses saved up. That suggests the average person in this group would have been fine and could have lived off savings since the pandemic began. Looking at the other two highest groups (60-79.9 & 80-89.9) have at least the minimum savings typically recommended by financial advisors of three to six months. However, the lower-wage earners are not so lucky and have anywhere from two weeks (less than 20) to 1.6 months in savings (40-59.9).

Due to the economic impact of the pandemic, many individuals hit the hardest were in the lower half of the income earners. This is unfortunate since they have the smallest emergency funds and have been forced to make tough financial decisions like taking on debt or making withdrawals from retirement accounts.

The pandemic has impacted individuals very differently and we are learning about the financial devastation of handling a long-term problem. The stark reminder though is the importance to build and maintain an emergency fund to help when things happen beyond our control. This of course assumes your financial situation allows you to. If you or anyone you know is working to build or rebuild their emergency fund, we are happy to talk and provide some free resources.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.