At first glance, it may seem that the concept of gross income is deeply theoretical and essential only from the perspective of the economic system.
However, this concept is not only relevant to businesses but also to individuals, as it is vital in determining solvency in dealing with any creditors.
Gross income is the full amount of earnings before deduction of income tax, other mandatory deductions, and any other gains a person receives during the month. It can also be revenue from rent, alimony, or interest on a deposit. Thus, this is the amount of all money earned during the period. The amount of taxes you owe is not counted and does not affect the calculation.
Educated and ambitious people, people with high income skills, and successful and productive people in business, in most cases, have income from different sources, which is quite tricky to calculate.
Why know your monthly gross income?
Gross income is a solid financial indicator that a person needs to get a loan or buy a house with a mortgage. Lenders will be interested in confirming the ability to pay down monthly payments.
Calculating Gross Income with an Annual Salary
Calculating your gross monthly income is very easy. Since your income is monthly, add all the types of payments you received during the year and divide that amount by twelve since there are 12 months in a year. It can be your salary and any other type of income: alimony, scholarship, interest on a deposit.
For example, if the sum of your annual income were $108,000, your gross monthly earnings would be $108,000/12= $9,000 per month.
It will be easy for you to know the amount of your annual income if you keep permanent records using, for example, a paystub generator. This program will allow you to effortlessly identify, add and account for any gain you receive. In addition, it will be easier for you to calculate your net income for the year because the pay stub generator will determine all necessary deductions for taxes, pensions, insurance, and so on.
Calculation of gross income by the hour
A slightly different scheme will apply if you are paid by the hour throughout the year.
Hourly pay is a time wage system where each employee is charged a rate for one hour of work and a record of the number of hours worked.
To use the following formula, in addition to your hourly wage, you will need to know the number of hours you operate in a week or month.
Your hourly wage will be multiplied by the number of hours worked per week to calculate your monthly gross income. This amount is then multiplied by 52 (number of weeks in a year) and divided by 12 (number of months in a year).
For example, if your hourly wage is $30 per hour and your number of hours per week is 40, your monthly gross income would be $30x40x52/12= $5,200.
You must add those to your monthly gross income if you receive a certain amount of overtime hours per month, bonuses, bonuses, or commissions.
Example calculation.
Here’s an example to make it easier for you to understand the rules for calculating your monthly gross income. It shows how you can easily use the math formulas mentioned above, even if you have more than one source of income, either as a fixed monthly paycheck or as an hourly wage.
Graphic designer Anna works alone. She works three jobs yearly, each with a set hourly wage. The hourly wage for the first employment is $30, and she spends 10 hours per week. The second job, which pays $40 an hour, necessitates more focus. On this project, Anna spends 20 hours every week. Additionally, she has a third project with a $1000 monthly fee. Let’s count her monthly gross income.
Let’s start with Anna’s weekly gross income from the first project:
30×10 = $300.
Anna earns $300 per week working on the first project.
Income from the second project per week is:
40×20=$800 per week.
Working 30 hours a week on two projects, Anna will receive an income of $300 + $800 = $1100.
Over a year of work, the income from the two projects will be 1100×52=57200 dollars.
The annual income from the third project that Anna is working on will be $1000×12=12000.
Add up the numbers and determine the total annual income of Anna, who will be working on all three projects simultaneously during the year:
57200+12000=69200 dollars.
For the calculation of a month’s income, this sum needs to be divided by the number of months in the year:
69200/12=5767 dollars per month.
Using the above formulas, we could quickly determine Anna’s monthly gross income. Use these same rules if you need this information.
Why else do I need to know my gross income?
The state is committed to providing a living wage to the elderly and those destitute through no guilt of their own and who have taken all possible measures to ensure their existence.
Poverty causes the need for financial assistance from the state.
Many people work full-time, but their earnings are insufficient to get their families out of poverty finally.
Most families fall into or periodically climb out of poverty, but there are persistently poor households in which poverty will be passed down from generation to generation.
The state’s leading role in the issue of poverty is to assist socially vulnerable segments of the population who cannot provide for themselves.
It can do it by providing cash and in-kind benefits for children (TANF, child support, food assistance ), people with disabilities (SSI/DI, Medicaid), the elderly (SSI, food programs, Social Security, Medicare)
Some state programs provide targeted services to disadvantaged people, creating economic opportunities. These programs are eligible for underprivileged people who meet eligibility requirements (e.g., living in a poor household, being unable or physically unable to receive an education, etc.). Examples include, above all, vocational training programs for young people or unskilled adult workers.
In this case, you need to provide information on the monthly gross income level to determine the level of poverty and disadvantaged status, as well as the ability of a family or individual member to participate in one of these programs.
