How To Calculate Gross Monthly Income | Gross Monthly Income Calculator (With Examples)
How To Calculate Gross Monthly Income | Gross Monthly Income Calculator (With Examples). When looking to obtain a loan or additional credit, individuals need to know their gross monthly income, and it typically appears on pay stubs. Here, we will define gross monthly income and show you how to calculate it for individuals or your household and your business.
Gross income is the sum total of salary, profits, and any other type of earnings before any taxes or deductions are taken out. Here is a run-through of what Gross monthly Income is all about.
- For businesses, gross income is your total income minus your cost of goods sold.
- For individuals and households, gross income is your total income before your taxes or any other deductions are taken out.
- Side hustles, child support payments, and investments all count toward your gross income in addition to your salary.
What is gross monthly income?
Gross monthly income is the amount paid to an employee within a month before taxes or other deductions. The specific amount appears on both job offer letters and paychecks. Potential additions to gross monthly income include overtime, bonuses and commission.
Why is gross monthly income important?
Individuals need to keep track of their gross monthly income because it’s required when applying for credit. The amount a lender or credit holder offers depends on an individual’s gross monthly income amount. It stands as proof as to how much a borrower has and if they have the means to pay back a borrowed amount.
How To Calculate Gross Monthly Income For Businesses
When handling the calculations for a business’s gross monthly income, the focus is not on hourly pay or salary. It’s about the revenue traffic that’s coming into the company. To find this number, you subtract the cost of goods sold, also known as COGS, from the gross revenue. On a gross Monthly Income Calculator, the formula below is used.
The Formula To Calculate Gross Monthly Income For A Business Is:
Gross Monthly Revenue – Cost of Goods Sold (COGS) = Gross Monthly Income
How To Calculate Gross Monthly Income For Individuals
Calculating your gross monthly income as an individual will depends on whether you are paid yearly or an hourly. If you’re an employee who gets paid hourly, getting to your gross monthly income, you will have to calculate your weekly pay and multiple by 52 to get your annual salary. As an individual, any earnings you receive outside of your job can also go towards your gross monthly income.
The Equation Using Yearly Salary Is:
Annual Salary/12 = Gross Monthly Salary
To Simplify The Equation:
Hourly Rate X Hours Per Week = Weekly Pay
Weekly Pay X 52 = Annual Salary
Annual Salary/12 = Gross Individual Income Per Month
What Is Net Monthly Income?
Net monthly income or net sales is the amount of money an individual or business earns in one month after accounting for deductions and expenses. For an individual receiving a pay check from their employer, the most common deductions are: State and Federal taxes, Retirement plan contributions, Flexible spending account contributions, Medicare, Social Secruity, Health insurance premiums, Other insurance (life, long- or short-term disability, etc.), Childcare.
Gross Monthly Income Examples (Gross Income Calculations Examples)
Example Calculations For Business Monthly Gross Income
A popular clothing company recently did a collaboration with a music artist on a line of sweatshirts. The new line brought in total revenue of $4,000,000 in the first month after release. The business spent the following amount on creating the clothing collaboration:
- $180,000 on the costs of labor.
- $150,000 on packaging and handling.
- $300,000 on sourcing materials for the sweatshirts.
With previous clothing lines, their average profit margin per month was $2,500,000. After tracking the monthly revenue for the project, the clothing company now wants to see what their gross income per month is to conclude if the collaboration with the music artist was successful and produced a higher profit or if they need to strategize differently for next time.
The clothing company calculates its gross monthly income by first getting a total number for their expenses during the project. They do this by adding together all of their costs.
300,00 + 180,000 + 150,000 = $630,000 in Cost of Goods Sold (COGS)
4,000,000 in Revenue – $630,000 in Cost of Goods Sold = $3,370,000 in gross income
Their gross income of $3,390,000 therefore improved their average numbers of $2,500,000 monthly
Example Calculations For Salaried Employee Monthly Gross Income
John works for XYZ Group as a full-time office manager. He earns an annual salary of $60,000 per year for his supervisory role. In addition to his salaried position, John works freelance doing translation services on the side, which earns him an extra $700 per month.
John is planning on buying his first house with his wife and wants to consider his finances to determine what their budget should be and if they can fulfill loan requirements. He decides to calculate his gross monthly income to make the decision.
To arrive at his gross income per month, John divides his annual income by 12.
60,000 dollars Per Year / 12 = $5,000 Gross Income Per Month
He adds monthly earnings from his freelance graphic design work to his gross monthly income.
5,000 + 700 = $5,700.
Why Is Gross Income Important?
Gross income is important for both a businesses and individuals because it follows your financial history and accounting, which provides insight into your overall financial health. The reasons why it’s so crucial varies a little between individuals and businesses, but regardless, paying attention to gross monthly income can help improve or maintain financial situations in the future.
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