What Is Total Monthly Income and How Do You Calculate It?

Total monthly income is a key financial metric for individuals and households. It provides a comprehensive picture of all earnings received within a specific period, typically a calendar month. Understanding this figure is important for various personal finance activities, including managing expenses and assessing financial capacity.

Defining Total Monthly Income

Total monthly income refers to the aggregate amount of money an individual or household earns or receives from all sources during a single month. This figure is calculated before any deductions, such as federal and state income tax, Social Security and Medicare taxes (FICA), health insurance premiums, or retirement contributions. It is often termed “gross monthly income” because it represents the full earning potential before any withholdings. This figure is used in financial assessments by lenders, landlords, and other entities to determine an individual’s ability to meet financial obligations. Knowing this amount helps in making informed financial decisions, from budgeting and saving to applying for loans.

Calculating Total Monthly Income

Calculating total monthly income involves identifying and summing all gross income streams received over a month. For individuals with a fixed annual salary, simply divide the annual salary by 12. If paid bi-weekly, multiply the gross amount per paycheck by 26 (the number of bi-weekly periods in a year) and then divide by 12 to arrive at the monthly equivalent. For those paid semi-monthly, add the gross amount of each payment, or multiply by two if payments are equal. Hourly wage earners can determine their monthly income by multiplying their hourly rate by the total hours worked in a month, or by converting weekly hours to an annual figure and then dividing by 12.

Common Income Sources Included

Various types of income are counted when determining total monthly income. Wages and salaries from employment are included before any deductions for taxes or benefits. Self-employment income, representing the gross revenue generated before accounting for business expenses, also contributes to this total. Social Security benefits, including retirement or disability payments, are generally considered part of gross income.

Pension payments and other retirement distributions are also included. Alimony payments received are often counted as income for financial assessments. Child support payments received are typically included in total monthly income for financial assessment purposes, such as loan applications.

Gross rental income, before deducting expenses like mortgage interest or property taxes, is also added. Investment income, such as dividends and interest earned from various investments, contributes to the overall monthly income. Government benefits, like unemployment benefits or disability payments, are also part of this calculation.

Income Sources Typically Excluded

Not all financial inflows are considered part of total monthly income. Proceeds from loans, such as student loans or personal loans, are excluded because they represent debt that must be repaid, not earned income. Gifts received are typically not included as they are one-time transfers of money or assets. Inheritances are also generally excluded as they are considered one-time windfalls.

Tax refunds, which are a return of overpaid taxes, do not count as income because they are not new earnings. Reimbursements for expenses, such as work-related travel costs, are also excluded, as they merely return money spent by the individual and do not represent a gain. One-time or irregular payments, like lottery winnings or insurance payouts, are disregarded in the calculation of total monthly income due to their non-recurring nature. These exclusions help ensure that the total monthly income figure accurately reflects consistent, predictable earnings available for ongoing financial planning.