Knowing how to figure out your net pay is important as it will help you budget your earnings wisely. Aside from that, you will need to know how to calculate your net pay when you get a new job or if you get a salary increase. There are a number of factors to consider when you determine your net pay.
Here are the steps on how you can figure out your net pay:
- Determine your salary. The first thing to do is to determine your exact salary. Prepare a clean sheet of paper, a pen and a calculator.
- Know the deductions. After determining your salary amount, you will need to know all the other factors that will be deducted from your salary. These are typically the FICA (Financial Security Contributions Act) Tax and the health and dental insurance. The FICA Tax is set at 6.2% and the Medicare rate is a t 1.45%. Multiply these amounts by the entire gross salary. Take note of the result that you will get.
- Retirement plan. Know your retirement plan amount contribution. The retirement plan contribution is for each pay period. The amount of the retirement plan contribution is dependent on the amount of salary that you earn each pay period. Take note of the amount.
- Withholding tax rate. Another factor to consider is the withholding tax rate. The withholding tax rate takes into consideration your filing status of the tax return and your claimed exemptions. Take note of this amount.
- Computing the net pay. Add up all the amounts that you set aside, the withholding tax rate, retirement plan amount contribution, FICA tax, health insurance and dental insurance. These are the amounts that you will need to deduct from your gross salary. After deducting these amounts, the amount that will be left from your salary is your net pay.
There is a simpler way to calculate your net pay. Here are the steps:
- Collect all your data. You will need to know your gross pay, deduction amounts and other information.
- Input data. Go online and go to the website paycheckcity.com. This website has a simple program that will help you determine your net pay. On the page, all you have to do is insert all the amounts needed for you to calculate your net pay. Some information required are the tax year, state, gross pay, pay frequency, deductions and many more. Input all the information needed.
- Calculate your net pay. Make sure that all the information you provided on the blanks are accurate. When you are sure, click on the ‘Calculate’ button at the bottom of the screen and wait for the results. The amount that you will get will be your net pay.
These are two ways on how you can calculate your net pay. By doing this, you will have a pretty good idea on where a part of your salary goes. When you already know your net pay, it will be easier for you to know how much you can spend and save on each pay period.