The secret to maximizing your earning power is not only about what you make, but how much of what you earn are you keeping? This is also called your “true earning potential.”
What is more important than keeping most of what you earn is understanding the details about how your paycheck is calculated and what all is included, or rather deducted from your pay.
To fully understand and maximize your earning potential, you need to understand your variable influences on your pay and your benefits.
Steps You Can Take Today to Better Understand Your Pay
- Take time to analyze the details of your paycheck
- Understand what deductions are regularly being taken from your paycheck
- Start to explore information, sign up for employer benefits and training, and be sure to understand your maximum contribution rates and employer benefit matches, if your company participates in any.
- Be sure to invest in your future. Take the necessary steps to get more education and training that will help you make informed decisions on your finances.
Financial Literacy Ideas & Tips
- By law, your employer deducts specific taxes and other items from your wage or salary every pay period. What you bring home is left. Your net income is the pay you receive after all taxes and deductions are subtracted.
- The deductions usually include federal, state and local taxes on your income; Social Security and Medicare; retirement savings contributions; health care insurance; and any other deductions you have setup to withdraw from your paycheck.
- Be sure you understand and take advantage of all of the credits and deductions available to you that help you lower your taxes. Seek out a tax accountant or a legal tax adviser to fully understand the tax law for your unique financial situation. Many employers offer tax consultant benefit services for free or low costs. Be sure to take advantage of these types of services available to you.
- If your employer offers a retirement savings plan, sign up. You can automatically have savings deducted from your account into a retirement account at no additional cost to you. Many employers will even match part of every dollar you save. If managed properly coupled with the right basic education and training, you will benefit from the small decisions you make today that will have a huge impact on your financial readiness in the future.