Where your money goes
You will be able to tell gross pay from net pay, sort expenses into fixed and variable, and spot needs versus wants.
Your paycheck shows two numbers. Gross pay is what you earned before anything is taken out. Net pay is what is left after taxes and other deductions, and it is the money that actually reaches your account.
Expenses come in two kinds. Fixed expenses cost about the same every month, like rent or a phone plan. Variable expenses change from month to month, like groceries, gas or eating out.
Needs keep you safe, housed, fed and able to work, like housing, power and basic food. Wants make life more fun but are optional, like streaming, concerts or new clothes you do not need yet.
Before you can plan, you have to see where your money goes now. Tracking every purchase for a month shows you the real picture, including small habits that add up.
Example
A small habit, a big number
For example, say you buy a $4 snack every school or work day. That is $4 x 5 days = $20 a week. Over about 50 weeks, $20 x 50 = $1,000 a year.
- Net pay
- Your take-home pay after taxes and deductions.
- Fixed expense
- A cost that stays about the same each month.
- Variable expense
- A cost that changes from month to month.
- Need vs want
- Needs are essential; wants are nice but optional.
Miss one and it comes back at the end. You finish when all 5 are right.