Updated: Apr 11, 2020
Are you unsure about how much money you make and what that means for setting your budget? You're not alone. I can't tell you how many times I've sat down with a client and they have no idea what they make. Although not understanding your income is a problem, knowing you're unsure and not willing to learn is even worse. Don't be worried, though, I'm going to explain how you can calculate your income, how to apply that to your monthly budget, and how to implement it on my exclusive budget setting tool.
Before we start learning how to calculate our income, let’s start with defining income. According to Investopedia.com, "Income is money (or some equivalent value) that an individual or business receives in exchange for providing a good or service or through investing capital." Income can be paid through salary, hourly, or commission.
Below are some basic formulas to help you calculate your monthly income. First step - take out your paystub or offer letter to confirm which of the below scenarios pertain to you.
- Annual amount / 12 months
- Semi-monthly amount x 24 paychecks / 12 months
- Bi-weekly amount x 26 paychecks / 12 months
- Weekly amount x 52 weeks / 12 months
- Number of hours worked week x hourly rate x 52 weeks a year / 12 months
- take an average of your income
- look at the past two years or as much time as you have there if less
- don’t look at two years if you recently got a raise, then maybe look at past year
- use your discretion
Want more help, or math just isn't your thing? Watch this video below!