What is adjusted gross income? You’ve heard the term, of course. Perhaps your accountant mentions it in passing whenever you get your taxes done, or you recognize it as a line item on your annual tax returns. But without context, it’s hard to understand just how important it is. 

The term “disposable income” is something of a misnomer. It sounds like fun money, but it’s quite the opposite. Also known as disposable personal income (DPI) or “take-home pay,” , is the amount of money available after taxes and other employee deductions have been taken out of your paycheck. It’s not truly “disposable” because it has to cover your family’s most essential needs each month.