How do i find out my gross monthly income

When you’re applying for a loan or opening up a credit card, you may be asked about your gross monthly income.

In this quick guide, we’re going to break down what you need to know about gross monthly income, how to calculate it, as well as how it differs from other types of income. 

Your gross monthly income refers to the amount of money you earn each month before anything is taken out. In other words, it’s your total income before any deductions or taxes leave it.

So when you get offered a job and they tell you the annual salary, that is typically your gross income. Your gross monthly income will be how much you earn each month before anything is taken out or subtracted. 

How to Calculate Gross Monthly Income

If you’re a salaried employee, it’s easy to calculate your gross monthly income. Simply take your annual salary and divide it by 12, which will give you your gross monthly income.

Let’s say you earn $50,000 each year at your job. That means your gross monthly income would be $4,166. If you earn money through side hustling, such as freelancing, you may want to include that in your total amount. You may also include child support payments, investment income, public assistance, and overtime.

This calculation will be helpful when applying for a loan, as it may improve your debt-to-income ratio or make you a more viable candidate. 

If you’re an hourly employee, take your hourly rate and multiply it by the hours you work each week. Take that number and multiply it by 52 weeks. That will get you the annual gross income. Take that number and divide it by 12 to get your gross monthly income. 

So if you make $25 per hour and work 35 hours per week, you’d make $875 per week. That times 52 weeks in a year equals an annual gross income of $45,500. Dividing that by 12 makes the gross monthly income $3,791.

Difference Between Total Monthly Income, Total Gross Monthly Income, and Total Net Monthly Income

Total monthly income and total gross monthly income are typically used interchangeably. If the word “household” is in front of either of the terms, it means the total income of all the members of the household combined. This is basically taking everyone’s salary and adding it all together to get the total sum. 

Knowing your gross monthly income is helpful when applying for financial products. Knowing your net monthly income can also be useful to help you accurately budget and prepare with the money that is actually going into your bank account. 

Total monthly income and total gross monthly income differ from your total net monthly income. Your total net monthly income is the total amount after everything is taken out and subtracted. So this is the amount after taxes, deductions, etc. are taken out. 

Because of that, your total net monthly income is lower than your total gross monthly income. Sometimes this can be significantly less, depending on the taxes and deductions taken out. If you’ve ever been shocked to see how much money is in your paycheck after thinking you’d make a certain amount after being told your gross monthly income, you know what I mean!

You can typically see your net monthly income on your paycheck after taxes and deductions are taken out. You can also use this net salary calculator to help you out. Net salary is sometimes referred to as net pay or take-home pay and that is the amount you can actually work with for accurate budgeting.

If you’re curious about what is gross monthly income or how to calculate gross monthly income, we hope our guide has helped you easily get the numbers you’re looking for.

In a nutshell, ‘gross’ is the total amount and ‘net’ is what you take home after everything like taxes and deductions are subtracted. Knowing these numbers can be useful when applying for loans, a mortgage, or a credit card. 

What Should Be Included in Gross Monthly Income?

Along with your salary or expected hourly wage, you may have extra sources of income every month. For example, you could work full-time at a restaurant, but also make and sell crafts in your spare time. Therefore, when you calculate your monthly gross income, you need to include all of the earnings you make, including any additional sources of revenue.

Some of the sources that you should include in your gross monthly income are as follows:

• Bonuses
• Investments
• Commission
• Overtime
• Income from a second or third job
• Business income

People who have an account on eBay or any similar platform used for small exchanges, such as selling an old phone, should also include any money they earn this way. Also, if you attend car boot sales or participate in farmer’s markets to sell off any old goods, this all adds to the amount of money you earn per month.

Don’t forget to include it!

The Importance of Gross Monthly Income

Now that you know how to calculate your gross income, you may be wondering why it matters in the first place. Keeping track of this value is crucial because it affects any line of credit application, for example.

The amount a lender offers you will depend, in part, on the amount of your gross monthly income. Keeping records of your income is essential to demonstrate that you have money coming in every month that you can use to make loan repayments.

Why Gross Income Is Vital 

Let’s dig a little bit deeper so you can understand how knowing your gross income can help you:

Salary negotiations - Using a gross monthly income calculator will help you negotiate a higher salary, as you’ll know if the offer you’re getting is actually improving your net worth. You’re going to fall flat on your face if you do not understand your current earnings and the financial terminology associated with them.

Taxes - You need to know your gross income to calculate your taxes correctly. If you file your taxes yourself, you will already know that you are asked to input your gross income and add in all of your expenses. The tax software will then determine how much you owe.

It would simply be impossible to file your tax return if you didn’t know what your gross income was, and this is why it is imperative to keep records of your finances throughout the year.

Credit limit - Aside from the points we have mentioned so far, your gross income comes into play whenever you apply for products like credit cards. A credit card issuer will typically look at your gross earnings and use this information when determining the appropriate credit limit.

Renting property - Next, your gross monthly income also matters if you are a tenant or intend to rent a property in the future. Your potential landlord will want to make sure you have sufficient earnings to make the required payments every month.

To do that, they will usually look at your gross income and figure out if you can reasonably cover the expenses.

Loan qualification - Last but not least, we cannot talk about the importance of gross monthly income without mentioning loan qualification. If you want to apply for a personal loan, you will typically need to provide some documents to prove your identity and that you earn enough money. Your gross income is crucial for the loan decision-making process. Again, this will help the loan provider determine whether you will pay your loan bills on time.

The Difference Between Gross and Net Income

You may have heard of the term “net income” before, so you may be interested in learning how it differs from gross income. Net income is what’s left of the total amount of your gross pay once taxes and other required payments have been deducted. Gross income is your earnings without any deductions, whereas net income is the amount you actually keep.

Some deductions you may have to pay include:

• Child support payments
• Wage garnishments
• Retirement contributions
• Expenses relating to your job, from travel costs to uniforms
• Health savings account contributions
• Flexible spending account contributions
• Voluntary benefits, for example, disability, critical injury, sickness, and accident
• Life insurance premiums
• Health insurance premiums

Deductions that reduce your taxable income are known as pre-tax deductions. Other deductions, for example, voluntary benefits and contributions, will not lower taxable income and are known as post-tax deductions.

Net income is often called disposable income or take-home pay, as it’s what remains for you to spend. Net income is what you can count on for your monthly budget. Debt payments, bills, living expenses, and other obligations all come out of your net income.

Do not ever use your gross income to calculate this, as you will end up being left short every month. This is because the money you have every month will always be reduced by your taxes and deductions, which is why your net income matters when it comes to everyday expenses.

Final Words

So there you have it: The answer to “What is gross monthly income?” and how to calculate it effectively. Although your gross income cannot and should not be used as part of your monthly budget calculations, it is still important to know what it is.

This is because your gross income is used to drive other areas of your financial existence, for example, your credit eligibility, and consequently, the amount of money you can borrow.

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