Your first paycheck: a 5-step money plan for new skilled workers

U.S. adults answer just 49% of basic personal finance questions correctly. Gen Z scores 38%, according to the TIAA Institute-GFLEC Personal Finance Index. Nobody hands you a manual with your first paycheck. This is that manual.

Gross pay versus take-home pay

Your gross pay is what you earn before anything comes out. Your net pay, or take-home pay, is what lands in your account.

Here is an example. Say you earn $22 an hour and work 40 hours a week. That is $880 a week in gross pay, or about $45,760 a year.

Before you see a dollar, several things come out:

• Social Security and Medicare (FICA): 7.65% of your pay. On $880, that is about $67.
• Federal income tax: based on the W-4 form you filled out when you were hired.
• State and local income tax: depends on where you live and work.
• Union dues, if you belong to a union.
• Health insurance and retirement contributions, if you signed up.

Read your first pay stub line by line. If something looks wrong, ask payroll. Mistakes happen, and they are easier to fix early.

Five moves for your first 90 days

1. Check your W-4

Your W-4 tells your employer how much federal tax to withhold. Withhold too little and you owe money in April. Withhold too much and you give the government an interest-free loan. The IRS has a free withholding estimator.

2. Open a separate savings account

Keep savings out of sight. Set up an automatic transfer on payday, even $25. Pay yourself before you pay anything else.

3. Build a starter emergency fund

Aim for $1,000 first, then one month of expenses, then three. A blown tire or a missed week of work should not go on a credit card. Do this before you finance a truck or a full tool set.

4. Take the full retirement match

If your employer or union matches retirement contributions, contribute at least enough to get the full match. A match is part of your pay. Leaving it on the table is a pay cut.

5. Build credit on purpose

Use one card for one small, regular bill. Pay the full balance every month, on time. Your credit score will shape what you pay for a car loan, an apartment, and a home.

Plan for raises

Apprentice and early-career pay often rises in steps. When a raise hits, split it: half to your goals, half to your life. You will feel the progress without falling behind.

Money Moves gives general education, not personal financial advice. For your situation, talk to a qualified professional. Many credit unions and nonprofits offer free counseling.