Know Your Numbers

You can’t control what you can’t see. This lesson builds your complete financial picture — real take-home pay, every expense (including the ones you’ve forgotten), and the hidden costs that drain low-income budgets without you noticing.

Your Financial Audit

Help me audit my complete financial picture:

Income:
- Primary job: $[amount]/hour, [hours]/week
- Second job (if any): $[amount]
- Other income: [tips, gig work, child support, benefits]

Monthly bills I know about:
- Rent: $[amount]
- Utilities: $[amount]
- Phone: $[amount]
- Transportation: $[amount]
- Insurance: $[amount]
- Other: [list]

Help me:
1. Calculate my exact take-home pay (after taxes, in [state])
2. List ALL expense categories I might be forgetting
3. Estimate my irregular/annual expenses (car, medical, clothing, etc.)
4. Calculate my monthly sinking fund amount for irregular expenses
5. Identify the gap between income and expenses
6. Flag any "poverty premium" costs I'm paying (fees, markups, penalties)

The Real Income Calculation

Most people overestimate their income. Here’s what actually matters:

Calculate my exact take-home pay:
- Hourly rate: $[rate]
- Hours per week: [hours]
- State: [state]
- Filing status: [single / married / head of household]
- Dependents: [number]
- Any pre-tax deductions: [health insurance, 401k, etc.]

Show me the breakdown: gross → each deduction → net.
Also show my effective tax rate (total deductions ÷ gross).

✅ Quick Check: You got a raise from $14 to $15/hour. How much extra per month is that? (Answer: Not $173 ($1 × 40 × 4.33). After taxes, it’s closer to $120-140/month. A $1 raise at this income level loses about 20-25% to taxes. Still significant — $1,440-1,680/year — but budget from the net increase, not the gross.)

The Complete Expense Map

Most budgets fail because they only include bills. Here’s what people forget:

Help me build a complete expense map. Ask me about each category one
at a time so I don't miss anything. For each category:
1. What I pay
2. Whether it's fixed, variable, or irregular
3. If there's a cheaper alternative I should consider
4. Any red flags (am I paying too much for this area?)

Finding the Hidden Leaks

I tracked my spending for the past month. Here are the costs that
surprised me: [list them]

Help me identify:
1. Which of these are "poverty premium" costs (fees, markups I pay
   because of my income/location/banking situation)
2. Which are avoidable vs. structural
3. The annual cost of each leak
4. Specific actions to plug each leak (with estimated savings)
5. Total potential annual savings from fixing these leaks

Common poverty premium costs:

✅ Quick Check: What’s the very first thing you should do before building a budget? (Answer: Track your actual spending for 2-4 weeks. A budget based on what you think you spend will be wrong. A budget based on what you actually spend will work. Use your bank/card statements or a simple notes app to track every purchase for 2 weeks, then build your budget from real data.)

Key Takeaways

• Always budget from net (take-home) pay, not gross — the difference at $15/hour is $400-700/month depending on your state
• Irregular expenses (car repairs, medical, clothing) are the #1 budget killer — estimate annual costs and divide by 12 to create a monthly sinking fund
• The “poverty premium” costs low-income households $500-1,500/year in fees, markups, and penalties that wealthier households don’t pay
• Track actual spending for 2-4 weeks before building a budget — a budget based on estimates will fail; a budget based on real data works
• AI can calculate your exact take-home pay, build a complete expense map, and quantify your hidden financial leaks

Up Next

In the next lesson, you’ll take these numbers and build a zero-based budget — a plan where every dollar of your income has a specific job, so nothing leaks away unnoticed.