How did that go? You have just completed a balance sheet to show your net worth. Earlier in this section, you prepared an income statement to show your monthly profit or loss. 

Both of these financial statements should be kept up to date. They are tools to help you understand your financial picture. In this section, we are going to take a second look at your income statement.

An income statement is like your monthly budget. It is a spending plan that helps put you in control of your money. A budget shows:

• How much money is coming in;
• Where the money needs to go to meet your needs and wants; and
• When you will be able to reach your goals.

Preparing a budget takes a bit of work, but sticking to a budget takes really hard work. Following your spending plan takes determination and discipline.

Earlier in this section you did a quick income statement and we are going to look at that in more detail now. It is important to consider all sources of income, including child support and spousal or partner support. You should have an idea of the total amount of income coming into the household.

In addition, it is important to know all of the expenses that need to be covered. The next section includes an expense estimator, which will help you list the different expenses you expect to have. Expenses are listed as discretionary (optional) or non-discretionary (required).

Before we take another look at the expense estimator, there are a few specific financial terms you should understand.

Gross Income

Gross income is your total income from all sources: employment, unemployment compensation , , , interest and investment income, pension income, rental income, and business income.

Taxable Income

Taxable income is gross income, less union dues, rental loss, business expenses, and other adjustments.

Now, it’s time to roll up your sleeves and start thinking about all of your expenses.