Personal finance test of income and pay stubs

What are the 3 main sources of income

Unearned, earned, and transfer payments

What are the three parts of earned income

Time based, performance and self employment

what does Unearned income include

Rent, capital gain, retirement, interest, and dividents

What do Transfer payments include

Unemployment, educational grants, medicaid, social security, disability, and welfare

What does time based in earned income include

Wages, and salary

What does performance include in unearned income

Tips, bonus, and commission

Income

Money an individual or business earns or receives as the result of economic activity

What is income the result of what

Of providing goods/services or investing capital. Income also enables purchasing, saving, investing and future planning.

What are the 2 primary types of income

Earned and unearned

Earned income

Money earned from direct participation in productive activities or labor, including wages, salaries, tips, bonuses, commissions, and self employment income.

Wage

The money paid to an employee for each hour work provided. Total wages = hours worked to= times the money per hour

How much more does overtime pay?

50 % ( one and a half) more than regular wage after 40 hours per week or 8 hours per day.

How many pay periods are payed in a year, when payed biweekly? what is biweekly

26, - occurring twice a week or happening once every two weeks

How many pay periods are in a year when payed bimonthly? What is bimonthly?

24, occurring twice a month or occurring once every two months (every other month

Salary

A fixed annual amount of money paid to an employee, normally in equal regularly scheduled increments, regardless of the number of hours worked.

Commissions

Money paid to an employee as a percentage of revenue they help generate

Bonus

A lump sum payment to an employee based on achieving certain performance- oriented goals. ex. bonus for delivering project early

Self employment

When individuals make money from their skills and passions without being tied to a traditional employer.

Where is self employment income from

it is income from freelancing or buisness ownership. ex. designing websites, selling jewelry, and turoring

What are benifits of self employment

flexability, tuning hobbies into income

Challenges of self employment

Fining consistent work, financial stability

what is the current federal minimum wage

$7.25

how many times does overtime wages have to be of the reglar hourly rate

At least one and a half times the regular hourly rate

Gross pay

The total amount of earnings before any taxes or other payroll deductions are subtracted.

Can an employee recieve a base salary or hourly wage in addition to their commision pay

They may or may not

Base salary

the fixed amount of money an employer pays an employee for their work before adding bonuses, overtime, or benefits. Employess who recieve tips also receive this.

Unearned income

Money recieved without direct participation

What do unearned income include

Income, dividents, capital gains, rents, and retirement income.

Interest

The cost ( of income) of borrowing( or loaning money). ex. 1000 savings account at 2%, interest = 20 a year

Retirement and examples

income from retirement plans. ex. 401(k), IRA, pension- what dad has

Rent

The payment made by a tenant to an asset owner for the use of property, land, or other assets, for a specified period of time.

DIvident

1. A payment made by an entity to its shareholders or members, distributing a portion of its profits or reserves.

401k

An employee-sponsored qualified retirement plan that allows both employees and employers to contribute money on a tax-deferred basis.

FICA

Federal Insurance Contributions Act, which includes social security and medicare taxes and is a mandatory federal payroll tax that funds Social Security and Medicare. ex. medicare taxes 1.45% and 6.20% of social security taxes= like 7.65% of total fica withholdings. Employees and employers split the tax evenly.

capital gain

The profit earned from the sale of an asset-sold something. Your profit is the selling price minus your cost basis (what you originally paid plus any major adjustments).

Transfer payments, whop distributes it

• paid/ distributed by the government and it is a payment of money to a person where no work or service is performed in exchange for the payment. No goods or services are recieved in return. ex. Unemployment compensation, disability benefits

Social security

A governement funded program offering

Total earnings

The total money paid to an employee during an accounting period, without deductions

Payroll deductions

Involuntary and voluntary amounts withheld (or deducted) from an employees total earnings

Net pay

The residual earnings an employee keeps or “takes home” after all payroll deductions have been subtracted from their gross pay, also called “take home pay”, befrore deductions are made

Difference between gross pay and net pay

Gross pay is the total amount you earn before any deductions, while net pay is your actual take-home pay after taxes and withholdings are subtracted

What things are involuntary on ur pay stub

income tax, social secuirty tax, medicare tax, court mandated garnishments

What things are voluntary that you have on your pay stubs

retirment plans, health insurance, life insurance, union dues

pre tax deductions

Deducted before taxes are calculated.These include contributions to retirement accounts, health insurance premiums, and other benefits that reduce your taxable income. ex. health insurance, premiums, 401(k), retirement plan contributions You pay less in taxes, sinc eyour gross pay is smaller

Post tax deductions

Deducted after taxes are calculated. These include items like union dues, garnishments, and other contributions that are taken from your net pay. These deductions do not reduce your taxable income. It reduced what you take home

Roth 401 k vs 401 k

roth 401k is paying taxes now and 401k is paying taxes later The main difference between a Roth 401(k) and a traditional 401(k) is that contributions to a Roth 401(k) are made with after-tax dollars, allowing for tax-free withdrawals in retirement, while contributions to a traditional 401(k) are made with pre-tax dollars, deferring taxes until withdrawal.

What is the most common involuntary deduction

Payroll taxes

Payroll taxes

Taxes imposed by the government based on employee earnings.

Progressive tax bracket

The more you make , the more they take. The tax rate increases with higher income brackets

How can employees control how much is taken out of federal taxes to some degree

Employees are required to claim a with holding allowance.Claiming more allowances meant your employer withheld less tax from your paycheck; claiming fewer allowances meant more tax was taken out. ex. having a bigger family and needing 3 allowances

What do emplyees submit to declare the number of allowances they want to claim

Form W-4

W-4( withholding allowance)

An exemption that reduces the income tax a employer withholds from an employee’s earnings.x

Gross pay vs net pay

Gross pay is the total amount earned by an employee before any deductions, while net pay is the amount received after all deductions, including taxes and benefits.

Federal income tax

This tax is paid to the federal goverment to support building infrastructure, the military, social prgrams and more

State income tax

This tax is paid to the state where the employee works state education and other state programs.

Pay stubs

A short summary outlining an employees total earnings and deductions for individual and cumilative pay periods.

What do social security taxes pay for

retirement income for people 62 years and older and disability benefits for workers.

What do medicare taxes pay for

Pays for health insurance for people 65 and older

What are 2 opitional deductions

health and retirement insurance