Your Pay Won’t Be That Number They Offered

Engineering students have the opportunity to take paid Cooperative Education positions with companies while still in college. When I got my first co-op offer in my sophomore year,

I made the mistake of assuming that the Dollar per Month value they gave me was exactly how much money I was going to receive in my bank account.


I even annualized this take-home pay and starting imagining all the things I could buy with it.

Never mind that I was only going to be working for a semester before returning to classes – let alone remembering to account for Social Security and Medicare deductions.

Luckily I’m a natural worrier so even though I suddenly believed I was coming into $54,000 within the year (more on that in The Secret Life of Co-ops), I wasn’t actually ready to go shopping for a Dodge Viper.

This thinking is incredibly common among people just starting out in their careers, which is how so many Americans get completely roped into the debt-laden consumer culture right from the start.

$5000 bed? I can buy that today!

$25,000 car? Show me where to sign!

$250,000 house? I can afford those payments too!

When you spend your paycheck before you start receiving it, you’re in for a nasty surprise.

It’s easy enough to get a grip on what your actual pay will be with a little math. Here’s a simple way to calculate your take-home pay:


  1. Use a good tax calculator, like this one from TurboTax, to get a rough idea of how much you’ll pay in income taxes for the year. I’d multiply that number by 1.1 to be on the safe side.
  2. Add in your state income tax based on the spreadsheet towards the bottom of this page from
  3. For “payroll taxes” (meaning Social Security and Medicare), add another 7.6% of your salary.
  4. Then take a look at what you pay for health insurance and other benefits. Employer plans currently range from $120 per month up to $800 or more depending on factors like who you’re covering and how good your coverage is. Ask your new HR for the benefits package information.

These four items (federal and state income tax, payroll tax, and benefits) plus any retirement contributions you’re making are deducted from your pay before the check hits your bank.

Financial independence is achievable for people of every income level. Don’t go through life hoping things turn out well. Draw yourself a money mass balance and take control of your future!