I asked twenty people in my office if they had ever read their pay stub line by line. Three said yes. Three out of twenty. The other seventeen just look at the deposit amount and move on. Which means they have no idea if their tax withholding is right, if they are contributing enough to their 401(k), if their health insurance deduction went up, or if there is an error that is costing them money. Pay stubs are not exciting reading, but spending ten minutes understanding yours could genuinely save you hundreds or thousands of dollars a year.
Start at the top: gross pay. This is your total earnings before anything gets taken out. If you are salaried, it should be your annual salary divided by the number of pay periods (26 for biweekly, 24 for semi-monthly, 12 for monthly). If the math does not match, ask HR. For hourly workers, check that your hours are correct and that overtime (anything over 40 hours in a week for most workers) is being paid at 1.5x your regular rate. I have caught overtime errors on my own stubs twice. Both times, the company owed me money.
Federal income tax withholding is usually the biggest deduction. The amount depends on what you put on your W-4 form. This is where a lot of people get confused and either over-withhold (getting a big refund, which means you gave the government an interest-free loan) or under-withhold (owing money in April). If you got a refund over $1,000 last year, you are probably over-withholding. Use the IRS Tax Withholding Estimator at irs.gov to recalibrate. Getting an extra $80-150 per paycheck beats waiting for a lump sum in April.
FICA taxes are the two lines most people glaze over: Social Security tax (6.2% on income up to $168,600 for 2025) and Medicare tax (1.45% on all income, plus an additional 0.9% on income over $200,000). These are not optional and your employer matches them dollar for dollar. So when you see 7.65% coming out of your check, your employer is also paying 7.65%. Self-employed people pay both halves, which is why freelancers get hit with that 15.3% self-employment tax.
Benefits deductions -- health insurance, dental, vision, HSA/FSA contributions, 401(k), life insurance, disability -- are where you should pay the most attention. These often change at the start of each year after open enrollment. Check that the amounts match what you elected. A common error: you switch from a family plan to an individual plan after a life change, but payroll does not update the deduction. I spoke with a reader who overpaid $200/month for health insurance for six months because HR never processed her coverage change. She had to fight to get the money back.
Your 401(k) contribution deserves special scrutiny. If your employer matches -- say 50% of the first 6% you contribute -- you should be contributing at least enough to get the full match. Not doing so is literally leaving free money on the table. On a $60,000 salary with a 50% match on 6%, that is $1,800/year your employer gives you for free. Over a 30-year career with average market returns, that unmatched money could represent over $150,000 in lost retirement savings. Check your stub. Make sure you are getting the match.
Finally, look at your year-to-date totals. These track everything cumulatively for the tax year and they are your early warning system. If your YTD federal tax withheld seems low compared to what you owed last year, adjust your W-4 now rather than getting a surprise in April. If your YTD 401(k) contributions are approaching the annual limit ($23,500 for 2025 for those under 50), make sure your employer stops contributions at the cap. Some payroll systems handle this automatically. Some do not. Ten minutes reviewing your pay stub each month is one of the simplest financial habits you can build.
