Reading a Pay Stub: The Most Important Takeaway

|
Sep 17, 2014

I just completed a mini-lesson on “Reading a Pay Stub” which should be up on our site tomorrow.  While seemingly straightforward, I think this topic affords a teacher with an opportunity to extend the lesson beyond just the basic algorithms (gross pay, net pay, deductions, taxes, etc.) and definitions that help one make sense of a pay stub.

In my mind, the most important takeaway from this activity is explaining how a split direct deposit strategy can help you save more (this article from Consumer Affairs provides description of this strategy):

“NACHA suggests the easiest way to start a consistent savings program is to have your employer deposit just enough in your checking account to cover your expenses and have them automatically deposit the rest into your savings account through a split direct deposit.

“Just like retirement savings, if you automatically save the money, you are less likely to spend it,” said Jan Estep, president and CEO of NACHA. “Splitting direct deposit is easy to set up for new employees or established Direct Deposit users. The process takes minutes to complete. Just talk to your employer.”

This strategy makes saving automatic and applies the principal of SAVE FIRST in a simple way.  Rather than agonize over how much to save each month, this puts saving on autopilot.  I recall applying this strategy with my first paycheck but don’t recall where I had learned about it.  It has served me well over the years as I only needed to make one decision:  What percentage of my paycheck do I want to save?  Of course, students should also know that it is easy to change these split percentages as life situations change too so they have flexibility.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

Share This Post

Search The Blog

Categories