Pop Quiz part 4

The opportunities  are wide open

Here is the answer to the last question; how much disposable income do you have?

It’s straight forward.  Remember…… net income is the amount you bring home.  Disposable income is net income, minus all the fixed bills. In most cases this would include:

·         Rent/mortgage

·         Property taxes

·         Utilities … just the basic ones not the cell and internet

·         Car insurance and car payments... if you have one

·         Medical insurance/life insurance… if you have them

·         Other fixed payments you may have

Once these fixed bills are paid, the remaining balance is disposable income.  From this disposable income, you should plan to save between 10-15% of your net income for retirement.  

For example:

If your net income is $2000, and your disposable income after paying the fixed bills is $1200, plan to save $200-$300.  You then live off the remaining $900-$1000. This should cover food, clothing, gas, entertainment, internet, cell, medical expenses, vacations and other things that may occur.

Now you know the difference between gross income, net income and disposable income. You will want to know all three of yours - they will tell you how well you are doing at staying on budget.