ECONOMICS
BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Your net pay will always be higher, so you’ll have more money to spend
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Your net pay is a more accurate picture of how much money you have available to spend or save
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Your employer knows what your gross pay is, but you only know what your net pay is
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Once you have your net pay, you can figure out how much to deduct in taxes, and then you can do your budget
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Detailed explanation-1: -Your net income is an important starting point when creating a personal budget because it is the amount of money you have to pay expenses. Net income is a term also applied to businesses, but business net income differs from individual net income.
Detailed explanation-2: -The foundation of an effective budget is your net income. That’s your take-home pay-total wages or salary minus deductions for taxes and employer-provided programs such as retirement plans and health insurance.
Detailed explanation-3: -Knowing your net worth is important because it can help you identify areas where you spend too much money. Just because you can afford something doesn’t mean you have to buy it. To keep debt from accumulating unnecessarily, consider if something is a need or a want before you make a purchase.
Detailed explanation-4: -Use net pay-the amount you receive after taxes and other deductions-rather than your gross pay. Only use income that’s regular and reliable. Fixed expenses are often contractual (rent, mortgage, or car payment) and typically don’t change from one month to the next.