Take-Home Pay

Your take-home pay is the cornerstone of your budget. It's the actual amount of money that hits your bank account after all deductions - the money you actually have available to spend and save.

Gross Pay vs. Take-Home Pay

Gross Pay is your total salary before any deductions. This is often what people think of as their income, but it's not what you actually receive.

Take-Home Pay (also called net pay) is what remains after:
- Federal and state taxes
- Social Security and Medicare
- Health insurance premiums
- Retirement contributions (401k, etc.)
- Other deductions (union dues, HSA contributions, etc.)

Why This Matters

If you budget based on your gross pay, you'll always be short. Your actual budget should be based on the money you can actually spend.

How to Calculate Your Take-Home Pay

For Regular Employees

1. Find your most recent pay stub
2. Look for the "Net Pay" or "Take Home" amount
3. If you're paid bi-weekly (every 2 weeks), multiply by 2 for monthly
4. If you're paid twice monthly (semi-monthly), multiply by 2 for monthly
5. If you're paid weekly, multiply by 4.33 for monthly average

For Variable Income

If your income varies (freelance, commission, tips), calculate:
1. Look at the last 3-6 months of income
2. Calculate the average
3. Consider using the lowest month as your baseline for safety

Common Pitfalls

• Forgetting about irregular income - Bonuses, tax refunds, side gig income
• Not accounting for seasonal variations - Some jobs have slow seasons
• Including expected income - Only count money you've actually received

Practical Exercise

Before moving on, take a moment to:

1. Pull up your last 2-3 pay stubs
2. Note your net pay for each
3. Calculate your average monthly take-home pay

Write this number down - we'll use it throughout the course!

Key Takeaway: Always budget based on take-home pay, not gross pay. This is the foundation that everything else is built upon.