Lesson 2.3: Gross Pay to Take-Home Pay
The video companion to Lesson 2.3 in Money Decisions.
Next Gen Personal Finance (NGPF)
NGPF's free library is one of the two sources this lesson's pay-stub video comes from.
FDIC Money Smart
The FDIC's Money Smart program is the other source — free financial education, including how pay and deductions work.
Key ideas from the lesson
- Earned isn't the same as received. Between your gross and your net sit the deductions — three groups of them.
- Income tax withholding is a prepayment, not a fee: when you file your return you settle up, and too much withheld comes back as a refund.
- FICA rates are fixed: 6.2% for Social Security and 1.45% for Medicare, on almost every dollar of wages. FICA is not settled up at tax time — it funds benefits you'll collect later.
- The third group is benefits: your share of a health premium or a retirement contribution. New York stubs may also show small lines for state disability and Paid Family Leave.
- Payroll makes mistakes — check every stub. Quick test: deduction rate = total deductions ÷ gross × 100. If it jumps with no change in pay, a line is wrong.
Why this helps
Lesson 2.3 is an autopsy: it takes one pay stub apart line by line until every deduction has a name and a reason. A short video walkthrough of a real stub does the same dissection visually, so the first stub you ever get paid on isn't the first one you've ever read.
Try this
While you watch, keep a tally with three columns — tax withholding, FICA, benefits — and drop every deduction the video names into one. At the end, compute the stub's deduction rate with the lesson's formula and check it against the video's total.
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