Questions: Why is net income lower than gross income?

The answer is "withholdings."

Explanation:

1. Withholdings: This is the correct answer. Net income is lower than gross income primarily because of withholdings. Withholdings refer to the portion of an employee's earnings that is not included in their paycheck because it is withheld by the employer for taxes, social security, Medicare, and sometimes other deductions like retirement contributions or health insurance premiums. These withholdings reduce the gross income to arrive at the net income, which is the actual amount the employee takes home.

2. Fixed spending: This is incorrect. Fixed spending refers to regular, consistent expenses that do not change from month to month, such as rent or mortgage payments. While fixed spending affects an individual's budget, it does not directly reduce gross income to net income.

3. Budgets: This is incorrect. A budget is a financial plan that outlines expected income and expenses over a certain period. While budgeting is important for managing finances, it does not directly impact the calculation of net income from gross income.

4. Discretionary spending: This is incorrect. Discretionary spending refers to non-essential expenses, such as entertainment or dining out. Like fixed spending, discretionary spending affects personal finances but does not directly reduce gross income to net income.