Salaries and wages are one of the most important aspects of budgeting. This is where the fruits of your labor are seen at least once a month, depending on how you are paid! But how do you go about budgeting for salaries and wages? And what do you need to know before you start? In this blog post, we’ll discuss everything you need to know about salaries and wages to make your budget a winner!
- What are salaries and wages?
- Why are salaries and wages important?
- How to budget for salaries and wages using My Financial Snapshot’s Budgeting Tool
- Bonus: Breaking down your paystub!
What are salaries and wages?
Let’s keep things simple by defining exactly what we are talking about budgeting for. Someone who is paid a salary is paid a fixed amount in each pay period, with the total of these fixed payments over a full year summing to the amount of the salary. Someone who is paid wages receives a pay rate per hour, multiplied by the number of hours worked.
Why are salaries and wages important?
Salaries and wages are paramount to your budget. More often than not, this is your primary source of income. Getting this number right can greatly affect the accuracy of your budget! The good news is that we make it easy to set your salary or wage.
How to budget for salaries and wages using My Financial Snapshot’s Budgeting Tool
What is the source of your income? What is the amount of your income? What is the frequency? That is all that we ask for when completing a budget. The source of your income is the company that you work for. The amount and frequency go together. If you make a $52,000 salary and get paid once a week. The amount would be $1,000, and the frequency would be weekly! Check out some screenshots below of exactly where you input these amounts on our budgeting tool!
Bonus: Breaking down your paystub!
There are several ways to input how much you make into your budget. If you are looking at your bank statement and you see the amount deposited into your account. That amount is net of taxes and other payroll deductions. There are three main items taken out of your paycheck: taxes, insurance premiums, and retirement. Taxes are expenses and are usually federal income taxes, state income taxes, social security taxes, and Medicare taxes. Insurance premiums are also expenses. Depending on your employer, you may be paying for health, dental, vision, and more types of insurance policies. Retirement payments to a 401K, IRA, and other types of retirement plans are investments and savings!
If you are budgeting and want to use your salaries and wages after payroll deductions (the exact number you see deposited into your bank account). Be sure not to budget for taxes, insurance premiums, or retirement.
If you are budgeting and want to use your gross pay. Be sure to budget for taxes, insurance premiums, and retirement.
Ok, that was a lot of information. Where can you find this information? Our Budgeting Tool is designed to be easy to use based on information that is readily available to you already! Below we break down an example pay stub from a standard pay stub. Typically your employer should provide you online access to your paystub information through an online portal. If you need help getting access to this information, contact your HR or payroll manager at your company!