Topic 3 – Earning Your Money Wealth Management 2010

Sources of Income ● Definitions: wage, salary, interest, rent, dividends, transfer payments ● Earned income ● Unearned income ● Benefits & drawbacks of different types of income ● Relationship between education & income

Earned Income ● Compensation from participation in a business ● Includes wages, salaries, tips, commission, bonuses ● Opposite of unearned income

Unearned Income ● Comes from sources other than employment – Interest and dividends from investments – Income from rental property ● Also called unearned revenue ● Opposite of earned income

Benefits & Drawbacks

Income & Education ● The more education you have the more money you will make in your lifetime

Activity ● You are to interview an adult who is employed to find out what percentage of his/her income comes from the following sources: – wages/salaries – Interest – Rent – Dividends – Transfer payments

On-boarding Paperwork ● Definitions: on-boarding, form W-4, personal allowances, exemptions, form I-9 ● Identify types of on-boarding (new hire) activities ● Need to have identification when taking a job ● Identify acceptable sources of identification to provide upon employment

Types of New Hire Activities ● New hire paperwork – Filling out forms ● Insurance ● Direct deposit ● W-4 ● I-9 – Social Security Number ● Orientation

Let's See An I.D. ● Correct and accurate identification is required for employment in the U.S. ● Foreign workers and illegal immigrants who cannot provide accurate and required documentation will/should not be hired ● Acceptable sources: – Driver's license – Social security card – Birth certificate – Passport

Procedures for Paperwork ● Usually a human resource clerk or manager will walk a new hire through the process ● Once the paperwork is processed, the worker can begin to work

Activity ● You will access the Internal Revenue Service to digitally complete W-4 and I-9 forms ● Print completed forms

Interpret a Pay Stub ● Definitions: pay period, gross income, net income, deduction, pension, 401(k), FICA ● Components of a pay stub ● Types of deductions ● Reasons for interpreting a pay stub ● How do you interpret a pay stub

Components of a Pay Stub

Types of Deductions

Reasons for Interpretation

Activity ● Interpret the pay stub and record your findings on the handout, “The Long and The Short of It” ● Access the IRS website to find out what the employer does with the money it deducts from the paycheck