What is net income?

Net income is the amount of money an individual or business retains after all expenses and deductions have been subtracted from total earnings. It represents the "take-home pay" for individuals, reflecting what is actually available for spending or saving after taxes, contributions, and other deductions have been accounted for. This concept is crucial in finance since it provides a clear picture of financial health by showing what is left over after all obligations have been met.

In comparison, total earnings before deductions represents gross income, which does not provide a complete picture of what one will ultimately take home. Money deposited in a checking account is simply a record of transactions and does not directly indicate how much income is available after deductions. Lastly, savings accumulated over time refers to the total amount set aside from income but does not represent a specific accounting of income versus deductions. Understanding net income is essential for budgeting, planning, and overall financial management.