Income and Taxes

Income and Taxes

Acquiring your own income is the first step toward being a self-sufficient adult. Income gives you the ability to pay your day to day expenses, while planning for the future. However, having a job entitles you to more than just your salary. Although it can be enticing to accept any compensation package presented to you, understanding your different options gives you higher negotiating power, and helps guarantee your total compensation is worth your time and effort.

The first thing to consider before accepting a job offer is your gross pay. This amount does not reflect anything other than the number of hours you have worked and how much you were paid for those hours. Knowing the minimum wage in your state and being prepared to ask for employment benefits is a good way to ensure your employer does not take advantage of you. After you’re satisfied with your gross pay, make sure to factor in considerations like taxes, withholdings, retirement contributions, etc. It is important to note that additional employment benefits are not limited to those working in large firms. Hourly employees may also be entitled to forms of compensation, depending on their employment agreement, and are often paid “overtime” when picking up extra hours. 

In addition to your direct compensation (salary and wages), most employers will also offer you a group insurance package, as well as retirement and direct contributions to savings. While this may not seem that important in the short run, it’s important to start saving early.

In this unit, we’ll dive into the different compensation packages, and how group insurance, equity compensation, vacation time, family perks, social security, and other employment benefits can be just as important as just your initial income. 

About Kevin Smith

Kevin is the content manager for Personal Finance Lab and is from Chicago, Illinois. He has a Master's Degree in Economics from Concordia University in Montreal, Canada. In addition to an economics background, he has also built training manuals to prepare finance companies for licensing requirements in mortgage loan origination and insurance sales.