When creating a budget, you should use your net pay (take-home pay) rather than your gross pay. The reason is that net pay reflects the actual amount of money you receive after all deductions, including taxes, insurance, and retirement contributions, have been taken out. This is the realistic figure you have available to spend, save, and invest. Budgeting based on gross pay can lead to overspending because it does not account for the deductions that reduce your disposable income. Using net pay ensures that your budget aligns with the actual funds you have, making financial management more accurate and practical.