Understanding your income sources is one of the starting points towards creating a budget. Your annual gross income represents your total income before any taxes or other deductions. “Take-home pay” represents your net income, specifically your income minus taxes, credits, and deductions. Some common income sources include:

Wages, salaries, and tips

This is money you earn at your job. When calculating your net income from wages and salaries, be sure to deduct any 401(k) contributions you choose to make.

Interest and dividends

Interest income can be earned from your bank accounts, such as savings accounts and certificates of deposit (CDs). Dividends may be received if you hold stock in a company.

Rental income

Net rental income is the total amount of money received for rent after expenses for the property have been paid.

Social Security

In 2012, approximately 56 million Americans will receive a total of $778 billion in Social Security benefits.

Miscellaneous income

Other income may include unemployment compensation, winnings from gambling, gifts received, or money taken from an IRA, 401(k), or pension.

 Tip 

Net rental income is the total amount of money received for rent after expenses for the property have been paid.
With a better understanding of what’s coming in every month, you might want to take a closer look at what’s going out.

Q:
Gross income represents your total income after taxes or other deductions.

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