Money in, money out
Everything about money starts with two simple questions. How much comes in? And how much goes out?
Money in is your IncomeMoney that comes in to you, like a paycheck, tips, or payments for gig work.More in the glossary. It’s the money you get, like a paycheck, tips, or payments for gig work.
Money out is your ExpenseMoney that goes out, for things like rent, food, your phone, or getting to work.More in the glossary. That’s everything you pay for: rent, food, your phone, the bus.
Here’s the big idea: if more money goes out than comes in, you fall behind. If less goes out than comes in, you have money left over to save.
Your paycheck is smaller than your pay
When you get a job, you usually hear your pay as an hourly rate or a yearly salary. But taxes and other costs come out before you get paid. The money that actually lands in your account is your Take-home payThe money that actually reaches you after taxes and other deductions come out of your paycheck. Also called net pay.More in the glossary. That’s the number to plan with.