How to Adult: Wait, What Happened to My Pay Check?

Here's an interesting video featuring college seniors and what they know about 'real life,' particularly where their money is going to go, now that they're about to launch their careers....Even a Business major didn't know most of them.


https://www.bing.com/videos/search?q=how+to+adult+&&view=detail&mid=7D8AF44E83099AF75C327D8AF44E83099AF75C32&&FORM=VRDGAR


Did you know what any of those were??
W-4 - This is the form you sign when you accept a job offer (any job, anywhere). It will indicate your tax filing status (single, married, with or without dependents) and that determines how much tax your employer will take out of your check. You may be surprised at how much you actually see on your paycheck. Your employer will withhold Federal and State taxes, Social Security (FICA,, Federal Insurance Contributions Act): https://www.paycheckcity.com/pages/article.php?page=what-is-FICA , amounts for medical and/or dental insurance, and possibly costs of life insurance you have opted for, possibly union dues, and your retirement plan, as well as savings you may have opted for. These costs can easily run over $200 or more per check. You can also indicate you wish a certain dollar amount to be deposited in a savings account at a bank or credit union, or a retirement account.

A Flex Account is money withheld from your check and put into an account to pay medical costs not covered by insurance. If you had a co-pay, or if you visited a dentist or bought new glasses, you could use your Flex Account to pay for it (it is your money).


As to savings, if you saved $100 a month for 10 years in a bank account at 2% interest, you would earn $13,394.09 with interest (as long as you never withdrew any money). Here is a calculator: https://www.edwardjones.com/preparing-for-your-future/calculators-checklists/calculators/retirement-savings-calculator.html

Every year, anybody who earns over a certain dollar amount ($10,000 for a single person and $20,000 for a married couple filing jointly) has to file their taxes, essentially telling the IRS (Internal Revenue Service) how much taxes they paid. The form you receive from your employer is the W-2 and it is supposed to be in your hands by January 31 of the new year. All the information about your pay from that employer is on that form. You will also get tax forms from any other source of income for that year. If you file your taxes and you have overpaid, you'll get a refund from the IRS.

401K-A form of retirement savings, with your employer also chipping in money. Here's an example, if you start young and save 10% of your pay and your employer also contributes (that's what a 401K is), see how much you might be able to accumulate: https://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx

                                 This assumes a return and employer contribution you may or may not receive---it's one example
Of course, it's not likely you'll stay with the same employer over that many years, but you will probably continue to earn the same or more salary wherever you work. 401K accounts can be 'rolled over' from one employer to another.


IRA-Individual Retirement Account (there are several kinds of these)
How it impacts you: If you start at a young age stashing away money in a retirement account, when you reach retirement age, you can have a nice pile of money for whatever you need: Bill paying, vacations, whatever... and you earned it yourself.

Credit Score: Three companies, TransUnion, Experian, and Equifax, track your use of credit and give you a score that reflects how well you handle credit. A score of 850 is the highest you can get, and 300 is the lowest, although 300-549 is considered low. The scores are based on how much money you owe, whether it's a new credit application, how long you have made reliable payments-they are predicting if you are a good credit risk. Sometimes, if you aren't a solid credit risk (if you haven't been great at handling credit or haven't had a credit card before), you can get a loan or credit card, but it will have higher interest rates, such as for a car or a house, or may have a limit how much you can charge.

                                                                                 Aaron.... what were you thinking??


Here is a calculator to figure exactly how much money you'll give the credit card company: If you owe $2,000.00 on a credit card that charges 18% interest, and you pay $35 a month, it will take you almost 11 years to pay it off (IF you never charge anything else). In the end you will pay them $754.43 in interest. https://www.calculator.net/credit-card-calculator.html?balance=2000&rate=18&minimum=35&payoffoption=0&fixedpaymentamount=35&ctype=1&x=52&y=22 

You can check your credit scores free, once a year. Be aware that your credit report and your credit score are two separate things. If you apply for a loan, you can ask to see your credit score and/or report from the lender.

HMO-This is a Health Maintenance Organization, which is a type of health insurance. You'll pay a monthly fee, and will also have a deductible and "copays" which means, when you visit the doctor you pay a smaller amount, like $30, and the insurance picks up the rest or a certain percentage of the rest.


PPO-Preferred Provider Organization, Another similar type of health insurance, but it will only cover specific doctors/clinics/hospitals. You will also have a deductible and co-pays with this type of health insurance.  With any kind of health insurance, you need to check and make sure your 'provider,' or doctor, is in their covered network.

Congratulations on your first 'adult' job, and welcome to all things confusing when it comes to your pay.

If My Balance is $25 I'm Doing Fine, and Other Financial Myths

What do you know about money? Here are things you need to know as you begin living as an adult:

• If you have a checking account, You need to know how to go online and check your balance, and see what's going on with your account. It will show you all of your transactions. A transaction is either something you purchase/a debit (buy) or a credit (such as your paycheck being deposited).
• What do pending or posted mean??

-Pending means the bank knows you spent that amount and they'll take it out soon. Posted means they've taken it out. See if the balance includes pending amounts.


-When you bank (or buy anything) online, be sure to check that the URL (address at the top of the screen) has a padlock on it, that means the website is as secure as possible. Consider not banking using your phone, because phones get stolen or lost. Be constantly aware of being private when doing online transactions. Also, when you use a cash machine (ATM) be sure it's one your bank uses, or you will pay a fee for getting cash out. And that's how banks make money.

• What's an overdraft?

-An overdraft means you wrote a check or used a check card for an amount more than was in your account. For example, you have $50 in your account, but you write a check or swipe your card for $75. It may not reject this immediately, but fairly soon after you've tried that, the bank will notice.... and ironically, the punishment is typically a $30-$35 charge you pay the bank, plus the amount of the transaction or withdrawal. Yes, they are charging you money you obviously don't have. It's nonsense and it's how banks make money.

• What's a 'Stop Payment?'

-If you wrote a check for something and that check gets lost, or if you have a dispute with the place you wrote the check to, you can go to the bank and tell it to stop payment on that check. They'll refuse to pay it if the person or place tries to cash it. They will also charge you at least $30 to do that Stop Payment--they won't care what the situation is. And that's how banks make money.

• Do you know if your account has a minimum balance?

-Some do, some do not: Find out, and if there is a minimum, be sure you always leave that in the account or you will be charged a fee. And that's how banks make money.

• What is principal? What is interest?

-The principal is the basic amount of a loan you take out. If you take out a loan for $1,000, that's the principal. The interest is the fee you are using to 'use' the principal, and that's how banks make money.

• What is compound interest?

-Compound interest means you earn interest on your interest. If you put money in the bank and the account pays interest, you continue to gain (or accrue) interest on not only the main amount but the interest, too. This is how you make money, not the bank.

• Why should I pay more than my required payments on my loans (or credit cards)?

-When you take out a loan, any kind of loan including a student loan, the lender will charge you interest, that's their fee for your 'using' the money. You'll be paying on the interest before the principal (the amount of your loan). And so, it takes while to really start to chip away at the loan amount. Paying even a little bit more every month adds up: If you pay another $5 a month, that's $60 a year, plus it reduces your loan and helps you pay more and more of the principal and less interest.

• Why is it so hard to get out of credit card debt?

-Your credit card company charges you to use money you don't have (interest or finance charge) just like any other loan. If you charge something that cost $50 and their finance charge is 20%, then you're actually going to pay another $10 for that item, a total of $60. Once you repeat this with lots of purchases, you're paying a lot more for your total. Still, for some people, it's so easy to hand over a credit card to get something they want right now, until the bill comes and they realize they charged more than they thought. If you make the minimum payment, it will take a long time to pay it off because a chunk of your payments are going to that finance charge and not paying off the items (The 'principal'-see above). The credit card company is happy; you, not so much. You're paying interest on the whole amount you owe. You need to pay more than the minimum, or pay it off every month if it's possible.


Just for education purposes, look at a credit card offer you get in the mail before you rip it up and toss it: Read the fine print telling you what the interest rate is, what the late charges are, and what the annual fee is. These are not negotiable (you can't make them sympathize with you if you goof up). It's not uncommon to see a 28-30% interest rate, especially if you miss a payment.


Want to figure out how long it's going to take you to pay off an amount? Enter your numbers here and get a surprise:  https://www.credit.com/tools/credit-card-payoff-calculator/

• What is a budget, anyway?

-A budget just means that you write down how much money comes in and what goes out (is spent). If your paycheck is $500 every other week, you take home $1000 per month. What are your monthly expenses? These include food, house or apartment payment, car payment, school loans. Write them all down and add them up, and subtract from that $1000 income. What's left over is what you have in what's called discretionary spending-it's at your discretion how it's spent. You can spend it or save it or do part of each. And that's your budget.


If you see that you're spending more on something than you might need to, maybe you can find a way to cut down. How thrifty are you with food buying? Gift giving? Nights out on the town? That snack you like to pick up at the gas station? Remember how hard you work for your money when you're thinking of buying something. Think in terms of "want" vs. "need." It's a good idea to save money even if you don't need it right now: Cars break down, things need repair, and lots of other things happen that require money. It's nice to have a 'cushion' set aside in case that happens. Or, you may want to save for a big-ticket item such as a new computer or a down payment on a better car. There's an old term: Pay Yourself First. In other words, always take some of your pay and set it aside for your use.