Take-Home Pay

  

Categories: Company Management

The net money you actually bring home, usually in after-tax and other obligations.

Like...let's say you're a partner in a venture capital company and you make a salary of $1 million a year. Might seem like a ton of money. It may become that if the fund does well...but here's the math in The People's Republic of California: you are taxed about 50 percent off the top. So you have $500k to play with...but you have fund investment obligations, meaning that you have $100-150k a year, usually, that you then have to invest in your fund. You also have 401(k) contributions and other things that come out of your paycheck before taxes. After "everything," you might end up with $300k or so as your take home pay.

Might seem like a lot, but when a dump of a 40-year-old asbestos-filled house costs $5 million, private school for each kid is $50k a year, and alimony for the first spouse is running you $100k a year, the money evaporates...fast. Better hope you find the next GOOG.

Related or Semi-related Video

Finance: What is Deferred Compensation?8 Views

00:00

Finance allah shmoop what is deferred compensation Well you don't

00:07

get it today You get it next year at some

00:11

point you know differed If you've gotten paid today it

00:15

would have binford but then it was deford's so well

00:20

yeah it's money you don't get right now Yeah so

00:22

whywould compensation be deferred Well lotsa reasons think about a

00:27

bonus that a sales person might earn through out the

00:29

year like they get two grand in bonus money payable

00:33

next year for each month that they sell over four

00:36

pounds of yellowcake uranium powder Bob here did it in

00:40

january messed around in february and march and was a

00:43

good boy in april may and june and then on

00:45

lee hit one more sales goal ahead of christmas doing

00:48

four pounds in uzbekistanian november So bob had five months

00:53

hitting his sales bonus target and we'll have owed to

00:57

him ten grand in bonus money e compensation that was

01:02

deferred and noting that all bonuses are paid in january

01:05

of the following year like it's deferred to the following

01:08

year So from the company's perspective they show deferred compensation

01:13

as a line item or a thing on their balance

01:17

Sheet is a liability And then they converted to being

01:19

an expense when they pay everything out the first month

01:22

of the next year so come january Bob will be

01:26

very happy with his healthy bonus That is you know 00:01:29.357 --> [endTime] assuming he's still around to enjoy it there No

Up Next

Finance: What is stock based compensation?
7 Views

What is stock based compensation? Stock based compensation is exactly what it sounds like: a way to compensate employees using stock. It’s used i...

Finance: What is Compensation: Advisory Fee Limits?
2 Views

What is Compensation: Advisory Fee Limits? Advisory fees are paid to financial professionals for managing client funds. In general, the market dete...

Find other enlightening terms in Shmoop Finance Genius Bar(f)