Question

Based on this information, which is the first change should Carl make to his monthly budget?

Answer 1

its a lower net income

Answer 2

Since Carl has to adjust his budget, due to having less money in hand than expected, he must adjust his "net" income.

To make this more clear, let's go through it a bit more. For example, Carl knew he was making $10 per hour. If he worked 15 hours a week, he assumed that his check would be written for $150 ($10 x 15 hours = $150).

He was correct that he "made" $150 dollars. This was his "gross" pay. Gross pay means the money you receive before taxes are taken out of your check.

Now that Carl knows that his check will not be written the the "gross" amount, but for the "net" amount (money paid after taxes and withholdings were taken out), he should adjust how much money he has to start with. Once he adjusts the money he "brings in", he can better understand how to budget and allocate his finances.