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?!How to Adult

Lesson

Gross pay versus net pay

Published:
October 12, 2026
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  • The Social Security wage base changes yearly.

We left these specific numbers out until they're checked against current official sources.

AThe super simple explanation

is your total pay before anything is taken out.

— "take-home pay" — is what's left after taxes and deductions.

That's why your paycheck is smaller than your hourly rate times your hours.

BWhy does this even matter?

  • Budget with net pay, not gross — that's the money you can actually spend.
  • Reading your pay stub helps you catch mistakes.
  • It explains why a raise doesn't show up dollar-for-dollar in your account.

COkay, how does it work?

Hours × hourly rate (plus overtime), or your salary divided by the number of pay periods.

DShow me an example

A first paycheck (illustrative)

Gross pay: $1,000.

Social Security (6.2%): $62. Medicare (1.45%): $14.50.

Federal income tax withheld (depends on W-4 and earnings): say $70. State tax: say $30.

Net pay: about $823.50.

Illustrative example with made-up people and numbers — not current rates or rules.

EWords you should know

Gross pay
What you earn before taxes and other deductions are taken out.
Net pay
What you actually get after taxes and deductions — your take-home pay.
FICA
The Social Security and Medicare taxes taken out of most paychecks.
Pay stub
The statement showing how your paycheck was calculated.
More in “Words everyone pretends to know” →

FCommon mistakes

  • Budgeting based on gross pay.
  • Never looking at the pay stub.
  • Not updating your W-4 after a big life change.

GQuestions people are too embarrassed to ask

HQuiz me

Totally optional. Nobody's grading you.

Question 1

Q1. Which should you budget with?

Question 2

Q2. What does FICA fund?

Question 3

Q3. What controls federal income tax withholding?

IWhat next?

Ready to do it?
Walk me through: Create your first budgetReady to do it?
Walk me through: Understand your first paycheck
  1. 1.Find your latest pay stub and match each line to this lesson.

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