Job adverts quote gross pay. Your bank balance shows net pay. Budgeting with the wrong one is a common beginner mistake.
Direct answer
Gross income is the total you earn before taxes, pension contributions and other deductions. Net income is what remains after those are taken out: your take-home pay. For a budget, always use net income, because that is the money you can actually spend.
What comes out between gross and net
Depending on where you live, deductions can include income tax, social security or national insurance, pension contributions, health insurance and union fees. Your payslip lists each one.
A simple example
Imagine a gross salary of 3,000 per month. If 600 goes to tax and other deductions, the net income is 2,400. A budget built on 3,000 would be 600 short every month.
How to find your net income
- Look at your payslip or the deposits in your bank account.
- For freelancers, subtract tax set-asides and business costs from what you invoice.
- If your pay varies, average a few months or use your lowest.
When gross income matters
Gross is useful when comparing job offers, applying for loans or understanding your tax position. For day-to-day money planning, net is the figure.
Where Teyro fits
Teyro's Budgeting for Beginners course turns this into short lessons you can play in a few minutes a day. It has 50 lessons, and you can start free.
The bottom line
Compare offers in gross, but budget in net.
This is general education, not personal financial advice.
