Everyday Money Habits · Classroom packet
Your first paycheck, line by line.
Your offer letter said one number; a smaller one landed in the bank. The lines between those two numbers each have a name and a reason. This packet walks a group through one shared sample pay stub in a single sitting — name every line, learn why some are taxes and some are your own savings, and sort each into the job it's really doing. Then everyone leaves ready to read their own. (For filling in your own numbers afterward, the first-paycheck worksheet is the companion sheet.)
Lead a group through reading a pay stub — name every line on a shared sample, sort each into today / tomorrow / taxes, and everyone leaves ready to read their own.
You're running a class, small group, or kitchen-table session and want a no-prep handout on how to read a pay stub.
For the leader
Anyone can run this — a teacher, a parent at the kitchen table, a small-group or mentorship leader — for two people or a full room. No one needs to bring a real pay stub; the group works the shared sample. Four beats:
- Open with the question — don't name the idea yet; let the room argue it first, then reveal the sentence.
- Read the sample stub together, then name each line from its clue.
- Sort every line into one of three piles — today money, tomorrow money, or neither.
- Before you close, everyone names one line to look up on their own stub — and a date.
- 0–4 Open with the question; then name the idea.
- 4–13 Read the stub; name each line.
- 13–20 Sort the lines into three piles.
- 20–27 Talk it through.
- 27–30 One line each to look up at home.
"Your offer letter said one number. A smaller number landed in your bank. Today we work out where the difference went, line by line — before I put a name to any of it."
1 · The whole idea, in one sentence
Your stub shows a big number at the top, but a smaller number reaches your account. Before we name a single line — where did the gap go, and how much of it is gone for good versus still yours somewhere?
Your paycheck isn't shrinking. It's being divided. The names of the dividers are worth knowing.
A paycheck is two numbers and a list: gross (what you earned) at the top, take-home (what landed in your account) at the bottom, and every deduction the system pulled in between. Here's one year for a 20-year-old earning $40,000, putting 4% into a 401(k), in a mid-tax state. Read it top to bottom — four cuts come out before a dollar reaches checking.
A full year on one page — a single paycheck covers one pay period, but the names and the order are the same.
2 · Name the lines
Go down the clues together. Each one describes exactly one line on the stub above — write the line's name in the blank. One of them is withheld like a tax but is actually your own savings — that's the point.
3 · Three piles
Hold every line against the framework from Lesson 1. Each is doing one of three jobs: today money (you need it this year), tomorrow money (saved or invested before you can spend it), or neither — taxes, which fund the country, not your future. Tick one pile per line. A couple are close calls; the disagreement is the lesson.
4 · Talk it through
- Which line surprised the room most — how little of gross becomes take-home, or how big a single deduction was?
- The "neither" pile (taxes) is non-negotiable on payday. What's the one legal lever that shrinks it?
- Why does a 401(k) dollar skip the income-tax line, but FICA still comes out of every dollar?
- Where would you actually go to find — or change — your 401(k) rate and benefits?
A case to argue
A friend just started driving for a delivery app and picking up catering shifts. The pay is decent, but nobody's taking out taxes and there's no benefits page anywhere. "The money's better than my old job," they say. "Am I missing something I'm supposed to be doing?"
What would you tell this person?
5 · One line, this week
The sample is practice; your own stub is the point. The move this week is to pull your most recent pay stub — paper or a PDF from the payroll portal (Workday, ADP, or wherever your employer hosts payroll) — read each line aloud, and look up any you can't name in a sentence. Then plug your real numbers into the paycheck calculator; if its net lands within $20–30 of your stub, you understand it. (The first-paycheck worksheet is the sheet for that solo pass.) Go around the group; each person names one line to look up and a date to do it by.
Answer key · for the leader
Keep this page back, or hand it out after the sort. The two close calls in Part 3 are the teaching moment — the disagreement is the lesson, not a wrong answer.
- Federal income tax — progressive — 10%, then 12%, then 22%; most first jobs land in the 10–12% range.
- Social Security + Medicare (FICA) — flat 7.65% (6.2% Social Security + 1.45% Medicare) on almost every dollar.
- State income tax — nine states collect none; the rest run about 3–13%.
- 401(k) contribution (pre-tax) — your own money, deferred before tax computes — a contribution and a tax cut in one move.
- Take-home pay — gross minus every line above — the only number you can spend.
- Health insurance premium
- Take-home pay
- 401(k) contribution
- HSA contribution
- Federal income tax
- Social Security + Medicare (FICA)
- State income tax
The health insurance premium is also withheld from your paycheck — often pre-tax, like the 401(k) — but it buys this year's coverage, so the job it's doing is today money, not tomorrow. The HSA contribution looks like another health cost, but it rolls over every year and can be invested, so it's tomorrow money (a Flexible Spending Account, or FSA, which you mostly have to spend within the year, would be today money instead). Same paycheck, opposite piles — the job decides, not the label.
The lever that shrinks the tax pile is pre-tax deferrals — your 401(k), and an HSA if your plan qualifies. They lower your taxable income before the federal and state tax lines compute, so a bigger pre-tax contribution is also a smaller tax bill. You set them during onboarding or open enrollment. (FICA is the exception — see the next note.)
Pre-tax deductions lower the income-tax line, but Social Security and Medicare still compute on your full gross. FICA funds a benefit you're personally earning toward — your future Social Security and Medicare — rather than adjusting a tax bill, so it isn't reduced by the 401(k) deferral.
Any answer that names the gap as deductions, not loss, works — e.g. "Gross is what I earned, take-home is what arrived, and the lines between are the system taking its share — some taxes, some my own savings."
Start with the missing stub: 1099 gig pay arrives whole, with no employer withholding, so the taxes aren't gone — they're owed later. The move is to set aside about a third of every payment the day it lands and pay the IRS quarterly, or penalties stack up. Then the bigger reframe: gig pay that "beats" a salary often loses once you carry the four things an employer used to cover — taxes (including the extra self-employment half a job would split with you), health coverage (bought on the ACA marketplace), a bigger cash buffer for the days you can't work, and the retirement account no employer will open (a Roth IRA, funded by the gig income). The "better money" is really unbundled money. Drawn from the "my first job is gig work" Moment (M13) on the site.
Based on the Your first paycheck lesson.
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