How to use deductions to make the most of your paycheck

The video tutorial explains how to manage your paycheck effectively by understanding the difference between net and gross pay, and the various deductions that affect your take-home pay. It covers mandatory deductions like Social Security, Medicare, and income taxes, and highlights the importance of pre-tax benefits such as health insurance and retirement plans. The tutorial advises against cutting back on these benefits due to their long-term advantages and suggests using online tax calculators to better understand deductions. Finally, it encourages viewers to review their pay stubs and consult HR for additional benefits.

What is the difference between gross pay and net pay?

• Net pay is the total salary; gross pay is the amount after taxes.

• Net pay includes bonuses; gross pay does not.

• Gross pay is the agreed salary; net pay is the actual amount received after deductions.

• Gross pay is the amount after deductions; net pay is before deductions.

Which of the following is a non-negotiable deduction from your paycheck?

• 401(k) contributions

• Social Security tax

• Health insurance

• Commuting expenses

How do pre-tax benefits affect your taxable income?

• They increase your taxable income.

• They have no effect on your taxable income.

• They reduce your taxable income.

• They are deducted after taxes are calculated.

Why is it not advisable to cut back on pre-tax benefits to increase take-home pay?

• They are mandatory deductions.

• They do not affect your tax bill.

• They are not important benefits.

• They provide long-term savings and reduce taxable income.

What should you do if you find an unrecognized number on your pay stub?

• Ignore it, as it is likely unimportant.

• Ask HR for clarification and inquire about additional benefits.

• Assume it is a mistake and disregard it.

• Consult a financial advisor.