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How much do you really make?
By Daphne | September 28, 2007
You may know what your favorite credit card is or know the numbers by heart. Not a problem, the big question is: do you really know how much you take home every month? Really, honestly? How much do you take home? Of course if you have figured out your annual gross salary or your weekly or your biweekly salary. Then there are taxes and other deductions. So how much are you really taking home?
Let’s say you make $50,000 a year. Your gross earnings would be roughly $1923 based on 26 pay periods a year. GROSS, not net. Ouch! Then there are the deductions: federal and state taxes, social security and a percentage of health insurance. These may total about 28% of your income in total. If you wanted to be proactive and save money in an employer’s 401(k) program then you have even less to take home. Although the 401(K) will benefit you in the future, it is still less money you take home. Fortunately, though you are not taxed on certain contributions that are made directly from your check. A $200 401(k) contribution really only costs you a percentage of the $200 because your taxable income is reduced by the contribution you make.
BUT… that doesn’t help you now. After the deductions that you have your $1923 gross may suddenly look more like $1425 or less. That’s not so bad is it? So $1425 twice a month is still nothing to sneeze at $2850 can be manageable.
Where did my $50000 go? Fifty thousand dollars gross spends differently than fifty thousand dollars net. A net income of $50000 would be more like a gross income of $75000 or more. No matter how much you make in order to be able to have some left over means that you cannot spend all of your money.
Sounds simple… if you made $300 a day net and spent $325 you can see that you are spending more than you are earning. Could you live off of sixty percent of it - $180? Would you save 20% = $60? What about the other twenty percent … $60? You could become a philanthropist, tithe, give to a political campaign or open small college funds for all the children you know. Determine what you earn then you can figure out what you spend and what your needs really are.
Do it… figure out how much money you actually take home monthly, or biweekly or weekly. Then figure out how much of that money has to pay for the necessities in life. The money that you have left over is what you have to spend for the fun stuff. There may not be as much money for the fun stuff when you do the math. That’s when you see that there is a great disparity between your gross and your net earnings. Have you included any money for your future?
Get a paper bag because it may make you hyperventilate once you see that you aren’t bringing home as much as you thought you were. You can still enjoy things in life, it may mean saving for a big ticket item instead of charging it. Take a serious look at your income before you let any more go.
Topics: September 2007 |