In 2020, the United States has a labor force of over 164 million people. Most likely, you’re one of them. You need a paycheck to feed your family, after all.
While in employment, you’ll receive a paycheck periodically, no matter which industry you’re in. Along with these checks come pay stubs.
You may be asking yourself: should I keep my pay stubs? Keep reading to find out the answer to this question and more.
What Is a Pay Stub?
Before we get into whether or not you should keep your pay stub, maybe we should first define what it is. That way, you know what we’re talking about.
Your pay stub is also known as a payslip or paycheck stub. You get this from your employer on a regular basis, such as every week or every 2 weeks.
This piece of paper tells you more than what you’ve been paid for that period. It also shows what percentage of your paycheck went to things like taxes.
Reading Your Pay Stubs
At first glance, your pay stub may seem very confusing to look at. It’s filled with numbers, after all.
But it’s all very simple. These are the key elements of pay stub information:
- Gross wages: This is how much money you’ve earned before all the other deductions are taken into account.
- Tax deductions: The specific ones will depend on where exactly you’re located. Some common ones include Social Security, Medicare, and federal, state, and local taxes.
- Other deductions: These will also depend on your personal situation. Some common ones include 401k, life insurance, health insurance, and wage garnishments (for example, child support payments).
- Net pay: This is your gross wages minus the tax deductions and other deductions. This is your “take-home” pay.
If you ever need help reading your pay stubs, always feel free to reach out to your HR department, as it’s their job to help you understand these things. They can also better advise you on whether or not you should change your with holdings.
Should I Keep My Pay Stubs?
It may seem like a waste of time and space to keep your pay stubs, but you should absolutely do so. Below are some ways having these around may help you out.
Proof of Income
For many milestones in life, they require a large sum of money. For instance, if you want to buy a house or car, you’ll probably need to apply for a loan, as it’s very rare that someone can afford these big-ticket items on their own.
In these cases, lenders will want to see that you have a steady stream of income. Otherwise, you might not be able to pay back the money you’ve borrowed.
The same concept applies to if you’re trying to rent an apartment. Landlords want to see that you have enough income to comfortably pay the monthly rent.
Pay stubs are a handy way of proving you have income. These have your full name, employer’s name, pay periods, and payment amounts on them.
Proof of Prior Employment
When you’re trying to get a new job, most employers ask about what you were previously paid. They can always take your word for it, but in most cases, they’ll want to see proof.
When you can hand over old pay stubs, they’ll be able to easily verify your claims and see that you received a stable salary and kept a job for a certain period of time.
Keep Track of Finances
You shouldn’t put all your trust in other parties to get things like your pay and deductions right. They’re only human, after all.
When you keep your pay stubs, you can keep checking your finances and make sure everything’s in order. For example, you can keep a pay stub and check the deposit in your bank account a week later to make sure the right amount was paid out to you.
How Long Should I Keep My Pay Stubs?
Now, you know that you should hold onto your pay stubs. But just exactly how long should you do so for? After all, it seems a bit excessive to keep a stub from two decades ago.
In general, you should hold onto them for at least one year. Typically, your pay stubs are used to file and check your tax returns from the previous year. Once those are done, you can use your tax returns instead of the pay stubs, so you can throw the latter away.
When you’re throwing away your pay stubs, make sure you shred them thoroughly. Otherwise, unscrupulous characters can get your personal data off these papers. If you don’t have a shredder, then look into using a shredding service, as they’ll do it for you.
How to Create Pay Stubs
Maybe you’ve thrown away your old pay stubs. Or maybe you’re self-employed and don’t get a “paycheck.” Either way, you may be interested in learning how you can create pay stubs for your own records.
You can always use a paycheck stub maker to make up for any papers you’re missing or need. You can also use these as a way to track and “keep” your physical pay stubs, as these will essentially be your digital copies.
With digital copies, you can keep every file for practically forever, all without taking up precious space in your home.
Keeping Your Pay Stubs Is Important
“Should I keep my pay stubs?”
After reading this article, you should know that the answer is a resounding “yes.” Of course, you don’t have to keep the physical copies forever; just one year or so will suffice.
You can always make digital copies of your pay stubs by using something like a paycheck stub maker. That way, you can have easy access to these files and bring them up whenever you need to reference them, without having piles of paper everywhere.
For more information on finances, be sure to check out our other articles.