I use these terms a lot throughout my posts, so I figured I should probably clear them up, in case there’s any question…
Gross Income is what you make before expenses
Net Income is what’s left after expenses
This is the entirety of what you collect from your customer.
In terms of a rental property, it’s the whole of the rent check you collect from the tenants. So if you charge $1000 a month, your gross income is $1000.
Or in terms of sales, Gross Income is the total product you’ve sold that day. So $2500 for a day’s sales is your Gross Income
This is what’s left after all the expenses.
In terms of rental property, it’s what’s left after you pay taxes, insurance, property management, repairs, and mortgage (if you have one). In some calculations we’ll need to pull out the mortgage payment separately, but that’s a different story. So your $1000 a month may turn into $200 or less, depending on how much your expenses are. $1000 is gross, $200 is net.
In terms of sales, it’s what’s left after you pay for supplies, labor, overhead, and so on. So that may turn $2500 into $500. Or if you’re selling digital products that have very little cost, that $2500 might stay close to $2000. $2500 is gross, $500 (or $2000) is net.
Other terms frequently used for Net Income include Profit, Cashflow, and of course Positive Net Income (don’t want negative net income, that’s never good!)