What is the difference between gross and net income?

Gross income is your total earnings before any deductions — the salary number in your job offer letter. Net income (take-home pay) is what actually hits your bank account after federal and state income taxes, Social Security and Medicare (FICA), health insurance premiums, and 401k contributions are withheld. All budgeting should be based on net income, not gross, since you cannot spend money you never receive.