How do I read a pay stub and understand all the deductions?
My pay stub has a bunch of deductions and abbreviations I don't understand — federal, state, FICA, things like that. There's a big gap between what I supposedly earn and what actually hits my bank account. Can someone explain what all these deductions are? Am I getting taxed correctly?
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My parents told me the same thing and they were right. But everyone's situation is different. Run the numbers for your specific situation before making a decision. There are good calculators online that account for all the variables.
4 Answers
My parents told me the same thing and they were right. But everyone's situation is different. Run the numbers for your specific situation before making a decision. There are good calculators online that account for all the variables.
Talk to a fee-only financial advisor, not one who earns commissions on products they sell you. The commission-based advisors have an incentive to recommend products that benefit them, not you. A fee-only advisor charges a flat rate.
The simplest advice I ever got was: spend less than you earn and invest the difference. Sounds obvious but most Americans don't do it. Track every dollar you spend for a month — you'll be shocked where your money goes.
The biggest financial mistake I see people make is not having an emergency fund. Before investing, before paying extra on debt, save 3-6 months of expenses in a savings account. This protects you from going into debt when unexpected things happen.
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