Gross monthly income is an essential figure for an individual or a household, as it helps in budgeting and determining the eligibility of loans, credit cards, and other financial tools. In this article, we will walk you through the process of calculating your gross monthly income and provide practical examples to help you understand it better.

What is Gross Monthly Income?

Gross monthly income refers to the total earnings you receive each month before any deductions such as taxes, social security, insurance, or retirement contributions. It includes your salary or wages from all sources like regular job income, overtime pay, bonuses, commissions, tips, self-employment earnings, rental income, and more.

Steps to Calculate Gross Monthly Income

1. Determine Your Annual Salary

For employees with a fixed annual salary, start by identifying how much you make yearly before any deductions. You may find this information on your employment contract or payslip.

2. Include Additional Income

Add up any extra income you have received throughout the year from sources like overtime pay, bonuses, or commissions. Don’t forget to include any freelance work or side hustles that contribute to your earnings.

3. Add Other Income Sources

If you have multiple sources of income (investments & rental properties), be sure to include them when calculating your gross monthly income.

4. Calculate Your Monthly Income

To find your gross monthly income, divide the total annual income you calculated earlier by 12 months. The result will give you an accurate representation of your average monthly income before deductions:

Gross Monthly Income = Total Annual Income ÷ 12

Examples:

Example 1: Fixed Annual Salary

Let’s say you earn $60,000 per year without additional income and you want to calculate your gross monthly income:

Gross Monthly Income = $60,000 ÷ 12

Gross Monthly Income = $5,000 per month

Example 2: Variable Income and Additional Sources

Suppose you make $40,000 annually in your day job and earn an extra $5,000 in freelance work. You also receive a yearly bonus of $1000. In this case, your total annual income would be:

Total Annual Income = $40,000 (regular job) + $5,000 (freelance) + $1,000 (bonus)

Total Annual Income = $46,000

Divide the annual income by 12 to find the gross monthly income:

Gross Monthly Income = $46,000 ÷ 12

Gross Monthly Income = $3,833.33 per month

Conclusion:

Understanding how to calculate your gross monthly income is essential for proper financial planning and budgeting. By following these simple steps, you can quickly determine your average pre-tax earnings each month and tailor your financial decisions accordingly.