Too often I hear “financial advisors” calculate a budget based on your monthly (or annual) gross pay. “You make $60K per year, that’s $5K per month. You make good money, you can pay off your debts quickly“.
But that’s gross pay. You don’t pay your bills using gross pay, you pay them with your net pay (take home pay). So, how much of your gross pay gets eaten up before you ever get to see your check?

Looking at this typical pay stub, we see almost $700 in deductions & taxes being taken out. That’s a solid 31% that you don’t get to use. The average person is living on only 2/3rds of what they think they are earning.
If you “earn” $55K per year, how much actually makes it into your checking account? You might be surprised to see how much (or how little) YOU get to spend of YOUR money….