It's the question that's on everyone's mind: if the number two pencil is the most popular, why is it still number two? That is a good question, but it's a little off-topic. - I think a more relevant question is: where did all my paycheck money go? - Well, portions of your paycheck are deducted every pay period. They are listed as withholdings because they are withheld from your paycheck. - Your gross earnings are what you started out with before the deductions, but that amount decreases as the deductions are taken out. - Federal income tax is automatically deducted, and many states also take out income tax. - So, we subtract $53.90 and $19.60. - Then, there are also withholdings for FICA (Federal Insurance Contributions Act). - This tax is taken out to pay older Americans their Social Security retirement benefits and Medicare or hospital insurance benefits. - It's a mandatory payroll deduction, so we subtract $7.11 and $20.58. - Some of these paycheck withholdings will end up benefiting you when you retire, and some ensure that federal, state, and local government functions (roads, parks, police, and schools). - Your net pay is what you're left with after the deductions. - You started out with $490 gross pay but ended up with only three hundred eighty-eight dollars and eighty-one cents net pay. - This means you probably don't have to worry about making minor purchases like a number-two pencil now and then. - But before you go out and buy something really expensive, make sure it's in your budget and that you can pay for it with your net pay.
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