Debt Slapped Grad

Income is a very important item. It’s half your budget and let’s you know how much you have to work with. We are going to refine the definition of income. First, let’s make some important distinctions. Do not get lost in the trees here. We want a very specific number from you to use in the forms later in this program. We will tell you exactly what we need, but the following definitions may help. Again, if you get confused move on and we will ask you exactly what we want later. The following list is informational only. Do not perform any calculations or research yet.

1. Monthly Gross Income: this is how much you make on a monthly basis BEFORE taxes and deductions are taken out of your paycheck. In other words, this isn’t how much you actually have to spend so don’t make financial decisions based on this number.
2. Taxes: Taxes are taken out of your paycheck to pay the government for the services it provides. Most of the time, taxes are automatically taken out of your paycheck by your employer. If you are self-employed, you must make sure to pay your taxes. Approximately 15-20% of your paycheck goes toward government taxes. That is a very rough estimate and you can talk to your employer or a professional, licensed tax advisor to determine your actual amount.
3. Employer Deductions: may be taken out of your paycheck by your employer to pay for your or your family’s medical, dental, vision, disability, or life insurance, to name a few deductions. For this program, we want you to identify your net income and you can look at your paystubs or talk to your human resources department or your employer to find the amount. You will have the opportunity to list these deductions later in the program, but for our budgeting purposes do list any employer deductions in your budget. For example, if your employer deducts $280 a month from your paycheck to cover a dependent child on your medical insurance plan, do not list that in the budget. List it in on the part of the form that says “Employer deductions”. If you listed the above example in your budget, you would be counting the expense twice. The deduction is taken out of your gross income. You would then be taking it out a second time. That is why we are going to have you list the expense separately in the employer deduction section.
4. Employer Contributions: If your employer contributes to a retirement plan or pension, do not list that in your budget. List it separately in the section titled “Employer Contributions”. This means your employer is not taking it out of your paycheck, but is making a contribution. If your employer is making a contribution, it’s important to be aware of that and list it. Do not list it as part of your NET INCOME/TAKE HOME PAYCHECK because it’s not for you to spend. You will list it separately in the Employer Contributions category to make sure you don’t “double dip”, that is, count the contribution twice and artificially inflate the income you have to work with. If your employer is making a contribution, it’s important to be aware of that and list it in the appropriate section, which is the employer contributions section later in the program.
5. Monthly Net Income: this is the actual amount you are paid on a monthly basis AFTER taxes and deductions have been taken out of your paycheck. This is the amount you actually have to spend/save.

MONTHLY BUDGET – NET INCOME
: Estimate your monthly net income in the monthly budget form below. It’s important to note that you want to eventually make sure your income amount is accurate. That will let you know how much you have to work with. If you are working with a wrong number, it can hurt the effectiveness of your budget.