Posted on June - 28 - 2011
The Difference Between Income And Expenses
I know this may sound like a weird question, but do you know what the difference between income and expenses are? What most people understand is the income is what they make and expenses is what they spend, but there is a little more to it than that. What most people don’t know is that there are more incomes and expenses than you are giving yourself credit for.
What you need to understand is the income is what you make and what you can save. The reason why savings is counted as part of the income is because it normally earns interest which means that it will be another source of income for you. Something that most people don’t realize is that having money in a checking account does not mean you are saving it, savings means it is making some money and is set aside for when you need it the most. Do yourself a favor and don’t just think that income is what you make from your day job, you might make money from side jobs, gifts from friends and family and things like that. Just know that you need to count all this as your income because it is new money coming in.
As for expenses, these are when you are spending money. What you must understand is that an expense is anything that is taking money out of your pocket, bank account, or credit card. Something that you need to know is that expenses can also refer to late payments and overdraft fees. What most people don’t think about is that when you get a late payment you will have to pay a fee and the same goes with an overdraft, that is why it is counted as an expense. Just know that the more expenses you have the smaller the margin will be from income to expenses.
A professional financial planning expert will be able to assist you in managing and investing your monthly finances wisely.
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