planet paycheck

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2.13.1. G1 © Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 1 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona An employee starting a new job has the option to choose how he is paid for the first twenty days of work. He works five days a week, for four full weeks. Make the best choice for the new employee after comparing the two options. Double the Salary Payment Option 2: The pay will be $0.01 for the first day. Each day the pay will double. So, it will be $0.02 the second day, $0.04 the third day, $0.08 the fourth day, etc. By the end of twenty days, how much money will the employee have made? Payment Option 1: For the first twenty days of work, the new employee will be paid $500 a day.

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Page 1: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 1

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

An employee starting a new job has the option to choose how he is paid for the first twenty days of work. He works five days a week, for four full weeks. Make the best choice for the new employee after comparing the two options.

Double the Salary

Payment Option 2:The pay will be $0.01 for the first day. Each day the pay will double. So, it will be $0.02 the second day, $0.04 the third day, $0.08 the fourth day, etc. By the end of twenty days, how much money will the employee have made?

Payment Option 1:For the first twenty days of work, the new employee will be paid $500 a day.

Page 2: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 2

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Double the Salary

Payment Option 2:Day 1

$ 0.01 Day 11

10.24

Day 2

.02 Day 12

20.48

Day 3

.04 Day 13

40.96

Day 4

.08 Day 14

81.92

Day 5

.16 Day 15

163.84

Day 6

.32 Day 16

327.68

Day 7

.64 Day 17

655.36

Day 8

1.28 Day 18

1310.72

Day 9

2.56 Day 19

2621.44

Day 10

5.12 Day 20

5242.88

Total:

$10,485.75

Payment Option 1:$500.00 a day * 20 days = $10,000

Page 3: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 3

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Solution

Payment Option 1:$500.00 a day * 20 days = $10,000.00

Payment Option 2:This is a better choice for the new employee as he will be making $10,485.75

This is $485.75 more than if he would have chosen Payment Option 1

Page 4: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 4

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

An Earthlings Guide to Understanding Paychecks

Family Economics & Financial Education

Planet Paycheck

Page 5: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 5

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Planet Paycheck Navigation

Welcome to Planet Paycheck!

While visiting Planet Paycheck the vast

world of paychecks will be explored!

Page 6: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 6

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

First Job!• Miss Patty Paycheck has just received

her first paycheck from her new job!– But, the paycheck amount seems a little

lower than she had figured. How could that be?

• Taxes – Required charges of citizens by local, state, and federal governments– Taxes are deducted from all employees

paychecks– Used to provide public goods and services

• Roads, police, schools, governmental agencies, fire and emergency services

Page 7: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 7

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Starting a New Job

To receive a paycheck, an employee must:Complete a Form W-4

• Employee’s Withholding Allowance Certificate

• Determines the amount of money withheld for taxes

Page 8: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 8

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Starting a New Job

Complete a Form I-9• Used to prove the identity of

people and avoid hiring non United States citizens

• Must provide at least 2 of the following–passport–driver’s license–U.S. military card–Social Security card–birth certificate

Page 9: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 9

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Starting A New Job

Form W-2 (Wage and Tax Statement)

• States the amount of money earned and taxes paid throughout the previous year

• Used to file income taxes by April 15th

• Individuals may be exempt from filing federal withholdings if they make less than a certain amount per year

Page 10: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 10

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Methods for Paying Employees

1. Paycheck• Paper check with stub• Least secure payment method

because the employee is responsible for handling the paycheck

2. Direct Deposit• Employers directly deposit employee’s

paycheck into the authorized employee’s bank account

3. Payroll Card• A payroll card electronically carries the

balance of the employee’s net pay

Page 11: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 11

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Payment Method Pros and Cons

•Paycheck–Pros:

•Employee controls when the check is deposited

–Cons: •Least secure, employee responsible for getting it to the bank

•Direct Deposit–Pros:

•No direct handling of check•Employee knows exactly when he/she will be paid

• Payroll card– Pros:

• Wages automatically loaded onto a card

– Cons• May charge fees

for use of the card

Page 12: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 12

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Reading A Paycheck Stub

Items on a paycheck stub include: •Personal Information -The employee’s full name, address, and social security number or employee identification number

• Pay Period -The length of time for which an employee’s wages are calculated–Most businesses pay employees either

weekly, bi-weekly, or monthly

Page 13: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 13

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Reading A Paycheck Stub

Gross Pay – The total amount of money earned before payroll withholdings

• If a person earns an hourly wage, gross pay is calculated by multiplying the number of hours worked by the wage

Page 14: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 14

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

What is the Gross Pay?

If Miss Patty Paycheck worked at Terrific Tacos for $6.00/hour for 15 hours a week what will her gross pay be?

What is Miss Patty Paycheck’s gross pay for a two week pay period?

15 hours x $6.00/hr = $90.00/week

# hours worked x wage = gross pay

30 hours x $6.00/hr = $180.00 for 2 weeks

Page 15: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 15

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Reading A Paycheck Stub

• Payroll Withholdings – The amount of money subtracted from the gross pay for taxes. Typically about 30% of your paycheck!

– Withholding Tax – The amount required by law for employers to withhold from earned wages to pay taxes

– FICA-Federal Insurance Contribution Act• Fed OASDI/EE (Federal Old Age Survivors

Disability Insurance Employee Employment Tax) or Social Security - helps provide retirement income for the elderly and pays disability benefits

• Fed MED/EE (Federal Medicare Employee Employment Tax) or Medicare - health care program for the elderly and disabled

Page 16: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 16

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Reading A Paycheck Stub

• Net Pay – The amount left after all payroll deductions have been taken from the gross pay– Net pay is also referred to as “take home”

pay

Page 17: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 17

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Miss Patty Paycheck’s Paycheck Stub

• Miss Patty Paycheck’s paycheck includes:– Gross Pay $180.00– Payroll Withholdings:

• Federal Withholding Tax $14.10• State Withholding Tax $5.45• FICA $13.77

• What is her Net Pay?

• Gross Pay – Payroll Withholdings = Net Pay

$180.00 – ($14.10 + $5.45 + $13.77) = $146.68

Page 18: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 18

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Reading A Paycheck Stub

• Year-to-Date- Totals all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub

Page 19: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 19

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sample Paycheck StubTerrific Tacos

EmployeePaycheck, Patty

SSN/Employee Identification Number201-92-4856

Check #164

Check Amount (net pay)$146.68

Employee Address293 Michael GroveBillings, MT 59102

 

  Pay Type-Gross Pay

Deductions Current Year-to-date

 $180.00 Federal WithholdingState WithholdingFICA

$14.10$5.45$13.77

$296.10$130.80$330.48

  Totals $33.32 $757.38

Pay Period 6/11/2007-6/25/2007

Page 20: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 20

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Remember to Review

• It is important to review each paycheck stub to identify any possible mistakes!– If a mistake is found, contact the

employer for clarification

Page 21: Planet Paycheck

2.13.1.G1

© Family Economics & Financial Education – February 2006– Get Ready to Take Charge of Your Finances – Planet Paycheck – Slide 21

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Thanks for Visiting

Thank you for visiting planet paycheck.

Good luck with all of your future paycheck journeys!