Income is money that people receive for doing work or from other sources. It's the money you earn before or after any amounts are taken out.
Income is what you earn, not necessarily what you get to keep. Different types of income have different names.
Gross income is the total amount of money you earn before anything is subtracted. It's your complete earnings.
Gross income is like the whole pizza before anyone takes a slice. It represents your total earnings.
Net income is the amount of money you actually receive after subtracting certain amounts from your gross income. It's often called "take-home pay."
Net income is like the pizza slices you actually get to eat after sharing with others. It's what you truly have available to spend.
The difference between gross and net income comes from deductions - amounts taken out for specific purposes.
Always remember: Gross income is your total earnings, while net income is what you actually get to keep.
Deductions are amounts subtracted from gross income to calculate net income. They represent costs or savings.
Some deductions are necessary expenses, while others are choices about how to use your money.
To find net income, subtract all deductions from gross income using this formula: Net Income = Gross Income - Deductions
When calculating, make sure to include all deductions, not just the obvious ones.
Knowing the difference between gross and net income helps you make better decisions about earning, spending, and saving money.
This knowledge becomes even more important as you get older and start working regular jobs.