As a wage earner, we generally look for a job with the highest hourly wage. We may do some quick math to understand how much we will earn in a week or month and accept a job based on that alone. The amount we will earn from our hourly wage is called gross income. When we receive our check for the week it may be a bit lighter than we had hoped after taxes have been deducted. We accept this and move on with what is left, our net income.

Gross income refers to the total amount of income earned by an individual or entity before any deductions or taxes are taken out. It includes all sources of income, such as wages, salaries, bonuses, commissions, rental income, and self-employment earnings. Gross income is typically calculated on an annual basis and is used as a starting point for determining taxable income. It represents the total amount of money earned before any expenses or deductions are subtracted. This is not something most of us were taught in school.

In addition to taxes, the cost of health benefits (medical, dental, long-term disability) is also deducted from our gross income. Contributions to your retirement plan are also deducted from your gross income. However, ultimately your retirement plan deductions should make you money in the long run. More on that in a future module.