Net Income
Definition
Your take-home income after all deductions: taxes, benefits, retirement contributions, health insurance. On a paycheck stub, it's what goes to your bank account. Gross income minus deductions equals net income.
Why It Matters
Net income (not gross) is what you actually budget. A $100k gross salary might be $65k net. Budgeting with gross numbers leads to overspending. Lenders look at gross, but you live on net.
Example
Gross salary: $120,000. Minus: $18,000 federal tax, $9,180 FICA, $6,000 health insurance, $12,000 401k. Net income: ~$74,820 per year or ~$6,235 per month. You can spend/save the ~$6,235, not the gross $10,000 per month.