What Is Net Income?
Example: "My gross salary is $3,500/month, but my net income after taxes is $2,800."
Why It Matters
Net income is the only number that matters when building a budget. Your gross salary sounds great, but after federal and state taxes, Social Security, Medicare, health insurance premiums, and retirement contributions are deducted, the actual amount deposited in your bank account is significantly less. A common mistake new workers make is budgeting based on gross pay rather than net pay, which leads to overspending. Always use your net income as the starting point for any budget or financial plan.
Try it: Use your net income in the budget calculator to plan your spending. Open tool →
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Practice Banking Terms Hands-On
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