How to Figure Out Gross Monthly Income

Gross monthly income represents the total amount an individual earns in a single month before any deductions are subtracted. This figure includes earnings from all sources. Understanding gross monthly income is important for financial assessments, as it provides a clear picture of resources before taxes, health insurance premiums, retirement contributions, or other withholdings.

Identifying All Income Sources

To determine gross monthly income, identify all forms of income received. This typically begins with compensation from employment, such as wages and salaries. Information for these earnings can be found on pay stubs, which detail gross pay for each period, or on annual W-2 forms provided by employers.

Beyond regular wages, other forms of earned income are included, such as commissions, tips, bonuses, and overtime pay. These additional earnings should be factored in. Self-employment income, representing total receipts minus business expenses, is also included. Documentation for self-employment income often includes profit and loss statements, invoices, and bank statements.

Investment income, such as dividends and interest from savings accounts or bonds, is another component. Capital gains from asset sales are also included. Statements from banks, brokerage firms, and 1099 forms (e.g., 1099-INT for interest, 1099-DIV for dividends) are primary sources for this data. Rental income from properties owned, and royalties from intellectual property, are also part of gross income, with net rental income being the relevant figure.

Government benefits, such as Social Security, disability payments, and unemployment compensation, are also considered income. Statements or official letters from issuing agencies serve as documentation for these income streams.

Converting Income to a Monthly Figure

Once all income sources are identified, the next step involves converting these figures into a gross monthly amount. For an annual salary, divide the total by 12 months. For example, a $60,000 annual salary yields a gross monthly income of $5,000.

For those paid hourly, multiply the hourly rate by the number of hours worked per week, then by 52 weeks in a year, and finally divide by 12 months. A common assumption for full-time work is 40 hours per week. Weekly paid individuals can multiply their weekly gross amount by 52 and then divide by 12.

For bi-weekly pay, there are 26 pay periods in a year. The bi-weekly amount is multiplied by 26 and then divided by 12. Bi-weekly pay differs from semi-monthly pay; bi-weekly often results in two months with three paychecks. Semi-monthly pay, received twice a month, results in 24 pay periods annually. To convert, the semi-monthly amount is multiplied by 24 and then divided by 12, or simply multiplied by 2.

Income that is variable or irregular, such as commissions, tips, bonuses, or self-employment earnings, requires an averaging method. Average these incomes over a specific period, such as the last 3, 6, or 12 months. For example, if a self-employed individual’s income fluctuates, their total earnings over the past 12 months could be summed and then divided by 12 to arrive at an average monthly figure.