What is referred to as the money available after taxes and deductions?

What is referred to as the money available after taxes and deductions?

• A. Net income
• B. Gross income
• C. Disposable income
• D. Investable income

Answer: (C)

The term that describes the money available after taxes and deductions is "disposable income." This figure is crucial in personal finance as it reflects the amount of income an individual has left to spend or save after mandatory expenses such as taxes have been accounted for. Essentially, disposable income indicates the financial freedom one has to engage in discretionary spending or investment. In contrast, gross income refers to the total earnings before any deductions are made, which does not consider taxes or other withholdings. Net income, while also a valuable metric, typically pertains to the income remaining after all expenses, including taxes, are deducted from the total revenue but may include deductions such as retirement contributions. Investable income, on the other hand, highlights the funds available specifically for investment purposes, which may not encompass all of one's disposable income since some might be allocated to other expenses or savings. Thus, understanding disposable income is vital for budgeting and financial planning, as it is a more accurate representation of the funds an individual can allocate to their needs and wants.

The term that describes the money available after taxes and deductions is "disposable income." This figure is crucial in personal finance as it reflects the amount of income an individual has left to spend or save after mandatory expenses such as taxes have been accounted for. Essentially, disposable income indicates the financial freedom one has to engage in discretionary spending or investment.

In contrast, gross income refers to the total earnings before any deductions are made, which does not consider taxes or other withholdings. Net income, while also a valuable metric, typically pertains to the income remaining after all expenses, including taxes, are deducted from the total revenue but may include deductions such as retirement contributions. Investable income, on the other hand, highlights the funds available specifically for investment purposes, which may not encompass all of one's disposable income since some might be allocated to other expenses or savings.

Thus, understanding disposable income is vital for budgeting and financial planning, as it is a more accurate representation of the funds an individual can allocate to their needs and wants.