Why Didn't I Learn This in School: Payday Priorities

Before you open that wallet, it's important to know how your paycheck breaks down so you don't end up spending money you don't have.

Let's start with your salary.

SEE ALSO: Why Didn't I Learn This in School: How to Buy Groceries like an Adult

The number that you were given when you signed your contract is called your gross income.

Unfortunately, that number isn't what you're actually taking home due to one not-so-fun little word: Deductions.

Three major deductions are Federal Tax (21 percent of your gross income), State Tax (12.3 percent), FICA Tax (a combination of Social Security and Medicare taxes, 7.65 percent.)

Other deductions include Health Insurance and any money put towards 401K plans for retirement.

What remains of your salary after all your deductions are considered is called your net pay, and that's the amount of money you're physically bringing home.

So what's the proper way to budget your paycheck?

Watch the video above to find out!

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