Brought to you by the Every Dollar app. Start budgeting for free today. Today's question comes from

Sherry in Vermont. Hello, Mr. Ramsey. Can you please explain why the most common form of income mentioned

is gross income, not net income when discussing budgets and personal finances. I find it confusing

because in my mind, the deducted taxes don't

count. You can't spend what you owe the government, so if you include that, it makes it

seem like you have more discretionary income than you actually do. Thank you for the clarification.

Well, it depends on what we're talking about. The problem is, honestly, Sherry, the...

Too many people don't know...

I'm going to say this delicately.

They don't know what to flip their own money is.

I mean, so here's the thing.

If you make $60,000 a year, that's $5,000 a month, gross, before taxes.

But if I ask you what your net is, and you say $2,500, which is $30,000 a year,

then I've got to go try to figure out because you apparently don't know whether you have taken out 401k out of that, health

insurance out of that, whether you have your car payment deducted out of that and it's going

to your credit union.

That's not real net, but it is what you're coming home with because you had all these other

crap taken out of your check.

And so a lot of people don't really understand that net, what you get, your take-home pay,

because people have various things taken out, is not germane.

I can tell what's going on with your gross, but I can't, and I know about what your taxes are based on your gross,

but, and then I can do the calculations while we're sitting here to help you move towards getting out of debt.

...