How to Read a Pay Stub


How to Read a Pay Stub

It’s important to know how to read your pay stub. Students should have at least a general understanding of where their money is going and how they are receiving it.


Working part-time as a ­college student isn’t an uncommon practice. However, college students tend to be generally unaware of where their money goes when they get it as well as truly understanding how they get it. Often, students are concerned with their purchases and it’s personal benefits (food, alcohol, entertainment, etc.) but how often do students budget and keep track of their income?

My question to all of you students: why would you not care more? The small amount of effort could equal a significant increase in your take-home money. This is where monitoring your pay stub comes in. For those of you that aren’t too sure what a pay stub is and its purpose, I’m going to give you a basic crash-course that will hopefully allow you to make better personal finance decisions and have a better understanding of where your money goes and how you obtain your final amount.


What is a Pay Stub?

Essentially, a pay stub is a record of your earnings and deductions from your job.

  • Earnings: Money you produced as income in exchange for hours worked or through other related means.
  • Deductions: Money lost due to insurance, taxes, or contributions.

The pay stub itemizes each of your earnings and deductions per pay period. While this might not be extremely applicable to you right now, your pay stubs  (which will be provided in the form of  W-2 at some point) will help you do your taxes. For now, understand that your pay stub contains 3 important parts:

  1. Gross Wage
  2. Taxes, Deductions, and Contributions
  3. Net Pay

If you’ve never worked before I’m here to inform you that the hours you do work don’t directly translate into how much you’ll get paid. Sorry to break the news to you. And if you have worked before, you’re about to learn why your pay gets cut so drastically and where it goes.

Components of a Pay Stub

Gross Wage

Your Gross Wage is basically the money you would have received before your deductions are taken out. For example, let’s assume you get paid weekly.  If you make $10/hr and worked 20 hours during this week your gross wage would be $200.00. This is the amount you would receive initially based solely on hours worked. Unfortunately, as I’ll breakdown next, you’ll have deductions in the form of taxes and sometimes contributions.

Taxes, Deductions, and Contributions

In this section, you can see a detailed breakdown of how much money is taken from your gross wages due to taxes, deductions from your employer and any contributions you’ve put money towards such as insurance. While I won’t get into an in-depth breakdown of the tax deductions and the various forms of contributions, I will just give a very brief summary of each for the sake of general comprehension.


Tax departments deduct money from your gross wages before you get your hands on it. The most common taxes that will be deducted will be from your Federal Income tax, FICA (Federal Insurance Contributions Act) tax, and State/local tax. Aside from these deductions, the IRS will also help themselves to a supple piece of your income pie.


Personally, I don’t think college students should worry about this section too much. Typically, deductions in the form of contributions involves money that goes to places like Insurance (life, dental, health, etc.) or perhaps for a 401k or some other kind of account for a future benefit. The reason why I say not to worry too much about this section is because college students (at least in my experience) tend to not contribute to their 401k or insurance (although you likely will in the future when you get a full-time job after graduation so it’s good to consider them and know a little about what contributions are beforehand).

Net Pay

Here’s the final section of your pay stub and likely the section you’re most interested in. The Net Pay is the amount that you pocket once your deductions are subtracted from your gross pay.

Just to give you a simple formula (since I hear college students love formulas):

[Gross Pay – Deductions = Net Pay]

If you’d like to see some examples of these sections on pay stubs, check out the following examples:



So in this example, the employee initially made $2,500 for 50 hours of work. During this pay period (which took place from October 31 to November 6) this employee lost 959.19 in deductions which you can see listed out directly in the large right-hand box. Finally, at the bottom-right corner you can see the Net Pay, which is what the employee takes home. From the pay stub, we can see that this employee received 1,540.81.

[2,500 – 959.19 = 1,540.81]

Let’s take a look at one more example:


In this example, John Smith received additional income in the form of overtime on top of his standard income due to his regularly worked hours. Overall, his Gross Pay comes to $1,725.00. As indicated by his various listed deductions, John Smith loses 430.34 from his Gross Pay due to various deductions. Conclusively, this brings his Net Pay to $1,294.66.

[$1,725.00 – $430.34 = $1,294.66]


Why is a Pay Stub Important?

Money is extremely important for every human in this country. This statement is especially true for college students. It’s vital for students to keep track of their own income in order to better plan for their expenses. Also, believe it or not, it’s not far-fetched for an employer to mess up your hours and underpay you. If you don’t think it can happen…well, if you never check your pay stubs then I guess you’ll never know, right? Perhaps they accidentally altered your clock-in time or maybe there was a malfunction with the computer or the machine that tracks and stores your hours.

I’ve personally seen instances where the computer used to clock in rounds your hours down if you clock out before an exact hour (so you’d get paid maybe for 45 mins or less despite working for an hour).

Only you can truly control your money and your finances. Don’t wait until it’s too late. Take control now.

The reason is insignificant. What matters is that something could go wrong which could cost you money and more importantly, time. This is why it’s important to keep track of what you received and how many hours you’ve worked. Now, for those of you that are doing your taxes (which you should do because you’re likely to get a tax return i.e. Money back into your banking account), my advice to you would be to seek out a FREE tax professional on your campus (if there is one available on your campus). If not, depending on if you work or not you might want to consider seeking out a CPA (certified public accountant) who can assist you. While the cost varies, a CPA could range from $50-$300 dollars.

While this seems like a lot consider that a CPA can help you get back more than what you paid him/her. For example, you might pay a CPA 200 but he/she might help you receive back $250+ dollars. In comparison, if you were to do taxes on your own you might potentially only get back about $100 or so.

For more related articles to help you control your personal finances better, check out:

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