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Youth Finance
First Day on the Job
Unless you’re a child actor, chances are your first job won’t
pay much. Starting at the bottom of the pay scale is normal and a part of
being in the working world. If you have big plans like buying a car, you’ll
have to make smart money management decisions. Fortunately, it isn’t
always about how much money you make, but how well you manage your spending.
Determine Your “Take-Home
Pay”
The first thing to do is determine your “take-home pay.” Many
workers are shocked when they see their first paycheck because it’s
a lot less than anticipated. Why? Your employer is required to deduct and
withhold taxes, and then remit them to the proper government agencies.
For example, if you work 10 hours a week and are paid the federal minimum
wage of $5.15 an hour, you would earn $51.50 per week. This is called your
Gross Pay. However, you don’t get the entire $51.50. Here’s a
description of typical deductions:
Federal Income Tax: These are “pay-as-you-go” taxes,
meaning you only pay taxes as you earn money. Your employer
will calculate the taxes withheld based on how you completed
your Form W-4.
FICA: This is the Federal Insurance
Contributions Act (the proper name of Social Security). This
is divided in 2 parts — 1. OASDI (Old Age, Survivor and
Disability Insurance and 2. Medicare (retirement health insurance)
Depending on where you live, you may also have these deductions:
State Income Tax
City Taxes
State Disability Insurance (SDI)
Subtract these deductions from your paycheck and the total is your Net Pay
(also called, take-home pay). Depending on the state you live in, as much
as 10 percent of your pay go to federal, state, and local income taxes along
with nearly 8% for FICA. In other words, your gross pay might be $242, but
your take-home pay might be closer to $200.
Now that you have a better idea of your actual “take home pay,” the
next step is to determine what to do with your new income.
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