Where Does My Paycheck Go?

[I’m traveling for work this week, so this post is pre-scheduled. Responses to comments might be a bit slow. Hopefully by the time you read this, I will be enjoying good weather and not inventing new ways to spend money.]

I got oddly fascinated by the breakdown of my paystub the other day. Sometimes I feel like no sooner do I get paid, than it’s all gone, you know? So, I decided to do a little math. In a standard half-month period (I get paid twice a month), here’s what happens to my paycheck:

  • 10% goes to income taxes (6.6% federal, 2.3% state, and 1.2% county — state/local taxes are way lower here than they were in my previous two jobs)
  • 7.4% goes to FICA (6% Social Security and 1.4% Medicare — interesting, I would have guessed Medicare ate up more of my paycheck than that.)
  • 2.6% goes to health insurance premiums (medical, dental, eyesight).
  • 25% goes to retirement savings

At this point we are up to 45% that disappears from my paycheck before I ever see it! No wonder I feel like it all goes so fast!

The other 55% gets direct-deposited, and that’s what I work with for my actual budget, so at this point I moved away from the paystub and looked at my budget and did more math.

  • 22% goes to various savings accounts (emergency, travel, down payment) — now I’m down to only 33%.
  • 10.7% goes to rent and utilities
  • 7.5% goes to cash for groceries and so on
  • 2.5% goes to transportation (car insurance, gas)

That’s a total of 20.7% for essential monthly expenses, so after all’s said and done I have just 12.3% of my paycheck for spending money and things like medical care, car repairs, clothing and so on. I usually put 2.5% in my slush/free spending account, so there’s just under 10% available for the other stuff.

I actually can’t tell whether that’s a lot, or a little. If anyone feels like doing some similar math, I’d love to know where you’re at.

39 thoughts on “Where Does My Paycheck Go?

  1. Alicia says:

    Before my paycheque gets to me, I lose just under 40% to taxes (federal and provincial averaging about 27%), CPP and EI, health benefits, and retirement contributions. So I see 60% of my gross salary and that’s what I budget with. That’s really funny to me that Canada’s second highest taxed provinces has less deductions than you do in your state. Granted, you said your taxes are lower, but we’re both at universities, so the benefits should be relatively similar. Also, I think I make a bit more than you. Either way, I find this stuff fascinating 🙂

    1. thesingledollar says:

      It is weirdly fascinating, isn’t it?

  2. Sounds reasonable to me! Your savings rate is high overall, so that’s good. We’re self-employed so all of our funds are “after” funds. We have to pay quarterly taxes which make up about a third of everything we earn.

    1. thesingledollar says:

      Quarterly taxes are so tough!

  3. Cindy says:

    I don’t break mine down into as much detail, but % wise, you’re definitely doing much better than I am! Taxes and FICA take about 28%, although with the refund I get every year it actually works out to closer to 25% (the amount I get back goes towards debt payoff). 4% to my 401k, which is low right now while I’m in debt payoff mode. 40% to what I call “expenses”, which is everything from my mortgage and rent, to utilities, insurance, car payment, etc. That’s high, but I’m paying a mortgage AND rent, plus all the utilities on the house. If everything goes okay with closing this month, that will drop down to 21%. From there, 15% goes towards either savings or debt payoff, depending on how I feel about my emergency fund. That will bump up to 34% once the house is sold. The remaining 13% is what I consider my “spending money”. But I include groceries and gas in that amount, plus any other expenses that pop-up, so there usually isn’t a whole lot left to spend.

    1. thesingledollar says:

      Your finances are going to change completely once the house is sold! I’ve got my fingers crossed for that to go smoothly.

  4. Kirsten says:

    I’m in awe of your 25% retirement savings. I KNOW we need to do more… But man, daycare. And debt. Blech!

    Hope you are enjoying your travels 🙂

    1. thesingledollar says:

      Well, you’re significantly younger than me, I suspect. I wouldn’t be doing this much if I were in my 20s or early 30s, probably. Gotta catch up! And the debt comes first, definitely.

  5. jolie says:

    I am similar to Alicia and also from Canada. 42% of my gross is gone before I see it. 11% to the pension plan and 31% to taxes, CPP, EI etc. I often dream of just one cheque a year where I get the whole thing. Wouldn’t that be lovely?

    1. thesingledollar says:

      Wow, that would be fun — maybe we should all run for office on the “one full paycheck a year” platform. I’d like it even if I lost a bit more to taxes etc the rest of the year!

  6. I love that only 10% goes to rent an utilities. That’s awesome! Mine is like 60%! Ouch!

    1. thesingledollar says:

      That’s my favorite part too. It makes it really hard to contemplate moving to a different city!

  7. Awesome work with the automatic push to retirement accounts. We do about 25%, I feel your pain as to where does the paycheck go!

    1. thesingledollar says:

      Yeah, the automatic push is really helpful. But knocking 25% off the top is pretty rough on the present day budget!

  8. I’ve been face-to-face with these kinds of calculations once or twice each month since I stopped working a real job because I have to do all the transfers myself. For each bit of self-employment income we get, I transfer 15% to our Roth IRAs, 10% to our church, and 36.05% to taxes (15% federal (marginal, since we also have withholding on my husband’s income), 5.75% to state, and 15.3% to FICA). So right away we are left with only 38.95% of each bit of income to go toward living expenses. 🙁 It was kind of depressing at first but I’m mostly numb to it now.

    1. thesingledollar says:

      Self-employment is “kind of depressing” from the tax side — the double FICA is a bummer. I’m impressed that you tithe. One of my goals is to get my various donations up to 10%; I’m giving myself a break on that right now since I’m trying to get my savings up to a respectable amount for a person of my age, so I fold small contributions to church and other causes into my free spending money, but next year I’d like to formalize it, probably with 5% directly to my parish and 5% to nonprofits.

  9. Hannah says:

    Our percentages are almost exactly identical (every year I think that I under withhold, but every year it seems to work out exactly right).

    1. thesingledollar says:

      My taxes have been so different year to year because my income has fluctuated a LOT — first as a freelancer, then as a graduate student on different kinds of fellowships, now with two “real jobs” in a row with really different income — I’m hoping eventually things will settle down and I can know exactly where I am as opposed to what I do now which is totally guesswork 🙂

  10. You put 47% away in various types of savings. That is amazing! We are still putting about that same percentage against debt. What a difference. The journey towards zero is slower than the journey up from zero that you are now on. Enjoy it. You are covering impressive ground : )

    1. thesingledollar says:

      I should note that my travel savings never last long 🙂 but yes, the e-fund and retirement contributions are good right now! Your debt is going to be gone so soon — even if it slows down over the summer with a potential strike or what have you.

  11. Hey, this is great! I might have to do a similar breakdown soon, since I don´t know these numbers for myself off the top of my head 🙂 Happy travels.

    1. thesingledollar says:

      It was sort of fun to do! I like knowing the percentages now. You should totally do it.

  12. I’m impressed by your saving percentages. This is a very cool break down.

    It seems that hard numbers sell in this PF world of ours, but percentages close the deal. Saving nearly 50% of your income, you’ll be all caught up in no time!

    1. thesingledollar says:

      I don’t know when I got to be such a nerd but I also think this breakdown is “cool” 🙂 I’m hoping that if I heroically save 50% for a year or two, I can relax a little and start blowing it all on crazy international travels and expensive cheese.

  13. That’s a lot going to retirement…that’s great!

    I also spend over 1/3 of my take home on rent, so that’s a huge chunk. Hopefully my housing expenses won’t always be as high, but that’s what happens when you move to an in-demand place with little more than an entry-level job.

    1. thesingledollar says:

      Ooooh, you should totally break your own down! Also, I’ve spent as much as 50-60% on rent when I lived in NYC and had shaky lower-income jobs. So I feel your pain for sure. Things will get better!

  14. I forgot to mention…I found this post fascinating, and will be sharing my own info in a future post!

  15. It’s so great that the largest percentage of your take-home pay goes toward savings!

    1. thesingledollar says:

      I’m pretty sure that won’t last forever, so I’m trying to take advantage of it now while I can 🙂

  16. ARBM says:

    This is fun! (Yes, I am a dork!)
    I decided to run the math on my latest pay cheque, not in as much detail, but I apparently lose almost 30% before I get my pay to taxes, CPP and EI… My mortgage is nearly 50% of my gross income… Which leaves me with just over 20% to put towards savings and all my other expenses… Luckily that’s just my pay, so my fiancé can add some to the rest of our monthly expenses…

    1. thesingledollar says:

      Wow, I’m glad you do have extra income from your fiance! That’s quite a mortgage. I’m lucky to live in a very, very cheap area right now. And I agree, running the numbers is fun, and we are obviously all big dorks around here 🙂

      1. ARBM says:

        I guess to be fair, if I were to take in to account my fiance’s income the mortgage wouldn’t look so bad… I just pay it out of my account and he pays for other stuff… perhaps I should revisit the math again…

  17. JW says:

    I’m a teacher and I have a LOT of deductions:
    20% to income tax
    7.14% to FICA
    2.25% for my union dues
    7.5% for my master’s degree (unique situation; I’m paying the city back until Sept/Oct)

    Savings: 4.5% to my pension and 7.5% to my TDA (like a 403b)

    I also pay for my transit pre-tax but that’s a benefit to me (<2% of income). Overall I take home just about 50% of my gross pay. My health care is free, though (slash part of it is through the union).

    THEN, rent & utilities is another 29% of gross (so 60% of take home… and I used to make less). So, about 20% is left for expenses. I usually spend it all BUT I tutor on the side/work overtime so cash flow isn't bad.

    1. thesingledollar says:

      Are you in NYC by any chance? Anyway, I’d definitely spend that remaining 20% if that were my situation! In fact that’s exactly what I did do when I lived in New York and had a breakdown closer to that 🙂

  18. Ramona says:

    We ‘lose’ about 40% in taxes as well, with the difference that the health insurance is a joke and my generation will probably have no state pension (though we do pay for it). Then we have a VAT of 24%, which we pay for most of the stuff we need, from products to services. I just try to ignore this and focus on what we’re actually left in our wallets, which goes for our daily expenses, kid’s stuff, savings etc. It’s still OK, while it’s annoying to see how much money ‘goes’ each month, we’re happy that we do make enough for a decent living.

    1. thesingledollar says:

      I’d totally be ok with paying more taxes for a better social welfare system, but since we aren’t going to get one of those any time soon, I’m trying to protect myself a bit….

  19. I actually ran this math last month to see why I felt like so little was making it to savings.

    Total taxes run 19% (which isn’t bad, considering I pay both halves of FICA for part of my income). Mortgage is another 9%. Utilities (including phone and Internet) add another 7%. Our various medications are another 8%. We’re lucky to have very cheap insurance, so that’s only 2%.

    That’s 45% right there. Sigh.

    1. thesingledollar says:

      Yeah, I’m very very lucky with my core rent/utilities expenses — they’re so low that it just doesn’t make that much of a dent. You’re right that 19% isn’t bad at all for self-employment. But yeah, it’s weird to realize how little of your paycheck is actually freeed up.

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