I was talking with my son about his budget, and it was an eye-opening session for me. What I realized was that not only did I not have the proper financial foundation when I started out — but my children didn’t either! We seriously have been growing together all these years! Now, it’s time to apply all this knowledge across the board.

One of the simplest (but most powerful) lessons that came out of that conversation was understanding the difference between gross income and net income.

When we figure out our expenses each month, we should base them on the amount we actually bring home — our net income. But when we’re looking for financing or applying for credit, lenders tend to look at our gross income— the total amount we earn before taxes, insurance, and other deductions are taken out.

That’s the tricky part. Gross pay is the number they use to impress us when offering a job — the salary that makes us feel like we’re doing well. But the truth is, we never see all of it. On average, about 30–35% of our income goes to taxes and deductions before it even hits our account.

So when you say you make $5,000 a month, what you really live onis closer to $3,250–$3,500. And that’s the number that matters when it comes to budgeting, saving, and setting real financial goals.

Here’s a quick breakdown to help you calculate:

• Gross Monthly Income: The total amount you earn before any deductions.
  👉 Example: $25/hour × 40 hours/week × 4 weeks = $4,000 gross monthly income.
• Net Monthly Income: The amount you actually take home after taxes, insurance, and other deductions.
  👉 Example: $4,000 – 30% (taxes/deductions) = $2,800 net monthly income.

Once you know these two numbers, you can start to see where your money really goes — and how much you truly have to work with.

This conversation with my son reminded me that financial education starts at home. We can’t assume our kids will just “figure it out” — most of us didn’t! The earlier we teach them these basics, the stronger their financial foundation will be.

So, take a moment this week to look at your own paycheck and talk with your family about it. Understanding the difference between what you earnand what you keep might just change the way you see money altogether.

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