Final answer:
After totaling expenses and expected income, you are left with discretionary income, which is the amount remaining after paying all bills and necessary expenses. Crafting and adhering to a budget is crucial in managing this process and ensuring financial well-being.
Step-by-step explanation:
After you total up all expenses and all expected income, you are able to calculate your discretionary income. This is the money you have left after paying all your necessary bills such as rent, utilities, car payments, and other essentials. Discretionary income can then be used to save, invest, or spend on non-essential items and activities. Creating a budget is essential for managing both your expenses and income effectively, ensuring you have enough money to cover your costs and work towards your financial goals.
When calculating a budget, you may consider several aspects such as your net annual income, which is your income after taxes such as social security and medicare have been deducted, and your monthly income. It's also crucial to incorporate strategies for saving, like aiming to save a certain percentage of your after-tax income each month. The amount left over after accounting for expenses compared to the initial income is a clear indicator of the financial health and planning required for a desired lifestyle.