Page 18 - Book2E

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will be different than anyone else’s. Studies show that writing things down greatly increases your chances of actually doing what you say you will do.
What is the Difference between Gross Income and Net Income?
When you are creating a budget for yourself, it is easiest to work with the amount of income you receive monthly because most of your bills will be paid monthly. Two terms are commonly used when discussing income. They are “Gross Income” and “Net Income.” Gross Income is the amount of money you are paid before any deduc- tions are taken. It is the amount you actually earn. It will appear on your pay stub labeled as Total Earnings or Gross Income or other similar term. Very few people have their full Gross Income at their disposal.
Net Income is the amount of pay that remains after all payroll deductions are made. It will appear on your pay stub as Net Pay or Net Income. It is often called Take-Home Pay. The deductions will include not only those you are legally required to pay, but also any deductions you have elected or chosen to pay such as health insurance and a contribution to your 401(k) fund. Common deductions include:
• Federal Income Tax •
• Social Security Tax •
• 401(k) •
• Simple IRA Savings •
• Health Insurance •
• Long-term Disability Insurance •
State Income Tax Medicare Tax Cafeteria Plan Dental Insurance Life Insurance Garnishments
It is important to know how much your Net Pay or Net Income is because this is the amount you will use when creating your monthly budget. Locate your most recent pay stub and:
Establishing a Budget