How to Read a Paycheck

Freshman Year · Wealth · Required Lesson

How to Read a Paycheck

25–30 minutes Medium Required

Destination

By the end of this conversation, the mentee should be able to explain the difference between gross pay and net pay, identify at least three common deductions and know where to ask questions about their own paycheck.

Stop 1 of 4

Talk

Goal: Find out what the mentee already expects from a paycheck, and clear up confusion before it becomes frustration on payday.

“Almost everyone is surprised by their first paycheck. The number on your pay stub is rarely the number you expected—and that is normal, not a mistake.”

Choose three to five questions

1. Have you ever gotten a paycheck? What did you notice about it?
2. If you earn $15 an hour and work 10 hours, how much do you think will actually land in your bank account?
3. Have you heard the words “gross pay” or “net pay” before? What do you think they mean?
4. Who do you think decides how much tax comes out of a paycheck?
5. If your paycheck looked smaller than expected, who would you ask about it?
Mentor Tip: If the mentee has a real pay stub available (with permission), it can be far more useful than a hypothetical example. Just be sure to protect their privacy and avoid recording or photographing personal information.

Stop 2 of 4

Learn

Gross pay vs. net pay

Every paycheck starts with gross pay—the full amount you earned before anything is taken out. What actually lands in your bank account is net pay, sometimes called take-home pay. Net pay is almost always smaller than gross pay, and that is expected, not an error.

Route 21 Big Idea:
The number you agreed to when you were hired is your gross pay. The number that shows up in your bank account is your net pay. Budgeting always starts with net pay—it’s the only money you actually have to spend.

Where the money goes: common deductions

Federal income tax Money withheld for the federal government, based on how much you earn and the information on your Form W-4.
State income tax Some states also withhold their own income tax. A few states don’t have one at all.
Social Security & Medicare (FICA) A fixed percentage that funds retirement, disability and healthcare programs. Almost every employee pays this.
Other deductions Things you may have chosen, like health insurance, retirement contributions or union dues.

Reading a sample pay stub

Here is a simplified example for someone who worked 20 hours at $16.00 per hour:

Sample Pay Stub — Weekly
Hours worked20.0
Pay rate$16.00 / hr
Gross pay$320.00
Federal income tax−$22.00
Social Security (6.2%)−$19.84
Medicare (1.45%)−$4.64
State income tax−$6.00
Net pay$267.52
In this example, about how much of the paycheck went to taxes? Does that surprise you?

Year-to-date (YTD)

Most pay stubs also show a year-to-date column—the total of everything earned and withheld since January 1. It’s useful for tracking your income over time and for filing taxes.

Stop 3 of 4

Try

Do the math together

Pick an hourly wage and a number of hours. Work out gross pay together, then estimate that roughly 15–20% will typically be withheld for taxes on a first job. Compare your estimate to the sample pay stub on the last card.

If you worked 12 hours at $17.50 an hour, what would your gross pay be? What might your net pay be?

Choose Your Route

Pick the video that best fits your time and interest today. You only need to watch one.

Level 1 · Quick Stop

Understanding Your Paycheck

Approximately 3–5 minutes

A simple, no-frills explanation of gross earnings vs. net pay and where deductions come from.

Watch the Quick Stop
Talk afterward: What is one deduction from the video you had not heard of before?

Level 2 · Scenic Route

How To Read Your Paycheck

Approximately 8–10 minutes

A line-by-line walkthrough of a real pay stub—name and employee ID, pay period, pay rate, hours worked, gross income, federal tax and Social Security.

Take the Scenic Route
Talk afterward: Which line item on a pay stub do you think would be easiest to overlook?

Level 3 · Open Road

How to Fix Your Paycheck to Save Money

Approximately 15–20 minutes

A deeper look at paycheck withholding, including how adjusting a W-4 can change take-home pay and what your employer isn’t always quick to explain.

Explore the Open Road
Talk afterward: Was there anything in the video that made you want to double-check your own withholding someday?
Mentor Reminder: Let the mentee choose the route whenever possible. Tax withholding can be a dry topic—short and concrete beats long and abstract for a first pass.

Stop 4 of 4

Grow

Reflection

What is one thing about paychecks you understand now that you did not understand before?
What is the difference between gross pay and net pay, in your own words?
Who could you ask if something on your paycheck looked wrong?
What questions do you still have about paychecks or taxes?

How can your mentor help?

How can Route 21 help?

Would it help to see a real sample pay stub together, or talk to someone who works in payroll or HR?
Mentor Wrap-Up:
Did the mentee walk away understanding gross vs. net pay? Do they know who to ask if something on a real paycheck looks wrong? Did you agree on one next step?