Budget off of gross or net?

[Broken Arrow]

Re: Budget off of gross or net?

Yeah, but you're a CFP!

In this context, my budgeting is two parts. My everday budget is obviously net. However, when I am working on specific items such as insurance, taxes, or retirement planning, then it would obviously be done in gross.

I think it's reasonable enough to separate them since I don't really work on the gross-related budget items as much as I do with the net-related items in my budge.

[Budgeteer]

Re: Budget off of gross or net?

I budget off of gross, although I'd probably advocate most people starting off with net. Why do I use gross?

Information. A huge part of the reason that I budget is the data that it gives me about my money and how it's being spent. If I were to use net, I would lose some of that information and it would obfuscate other portions.

I want to be able to look at my budget and see that my living costs are XX% of my income, that I save XX% in my 401k, etc. Yes, you can still have this with net, but it's less clear and less straightforward. It's a tiny bit more hassle to have to enter tax and what not when I put my paycheck in, but that's not really a big deal.

I think this is even more important when you have health care and those kinds of things deducted. I really want to know/consider that I am spending 5% of my check on things that I've had some hand in deciding to spend. Health care may not really be optional for me, but certainly there are different packages and providers.

Bottom line: I don't think there's anything wrong with net, but I like the complete picture I get with gross.

[b4freedom]

Re: Budget off of gross or net?

Why should it matter?

Your budget should be a tool. Use it however it works for you.

The net people tend to be the detail people focused on “What I've got, what I need, and will it be enough?”

The gross people tend to be the big-picture people, not so worried about the details. (AKA, financial planners and people who can afford them.)

[doodles44]

Re: Budget off of gross or net?

I thought net and take-home were the same thing. Can someone advise :-)
Thanks!

I budget off what I get in my paycheck, whatever that is!

[tinapbeana]

Re: Budget off of gross or net?

I thought net and take-home were the same thing. Can someone advise :-)
Thanks!

I budget off what I get in my paycheck, whatever that is!

doodles, for the bulk of america net is their take-home and that is typically what they budget off of when they budget.

in my world, and i think for many of us here, we consider that we have three 'versions' or views of our income:

gross pay aka what is my salary before anything is deducted,
net pay aka what is my salary after mandetory deductions likes taxes,
and
take-home pay aka what is my salary after voluntary deductions like insurance, 401k, etc.

since i personally don't have medical taken from my check, and there is no 401k, my net and my take-home are the same. for my DH, he has 401k removed, benefits removed, a monthly parking pass removed, and (grrrrr) any breakfasts he's eaten in the canteen over the past 2 weeks. therefore his net (salary minus mandetory deductions) is different than his take-home.

some folks might say net pay when i've referenced take-home and vice versa, but the 3 distictions are still the same.

there are times in your life where it makes financial sense to budget based on gross income, there are times in your life where you need the ease of budgeting based on net. all depends on your situation and location on the path of life

[scfr]

Re: Budget off of gross or net?

[QUOTE=b4freedom]Your budget should be a tool. Use it however it works for you.
/QUOTE]

Very good advice!

[Elgin526]

Re: Budget off of gross or net?

I can only spend what's in my hot little hands, so I budget on take home.

[poundwise]

Re: Budget off of gross or net?


I think, in general, effective long-term planning requires gross as a basis. However, monthly budgeting is, in one-form-or-another, a spending plan and thus is a doling out of net (available) funds.

Of course, self-employed persons would, perhaps more so than others, view it a little differently.

[LuxLiving]

Re: Budget off of gross or net?

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"I believe that we have to find a consensus about definitions. Naturally, one can constantly mix things up, so that one will call money what the next sees as an assets and the third as credit."

Werner Ehrlicher
(Money theoretician at the University of Freiburg, in a panel discussion "What is money?", Wangen/Allgau 1991)