What Needs To Be Included In Your Gross Monthly Income - 4 Key Factors

When you’re calculating your income, it can be easy to miss out on some of the important data over the months. Simple jobs can be easily forgotten, especially if you didn’t realize that you needed the information later on.

To help you get your gross monthly income correct, and to help you remember which details you need to store, we have listed all of the information you need to know below.

Also read: How to Provide Proof of Income

What Is Gross Income?

Your gross income is the total amount of money earned before any deductions. This means the figure before taxes, paying debts, or automatic insurance payments.

The figure should include all of the income you have received over the month or year (depending on the timescale you are looking at). If you have multiple jobs then all are included. If you received assets such as a house or car, this is included. If you received a cash payment, this should also be included.

When looking at companies, the term isn’t gross income, it is gross profit. The same concept stands, as it should contain all profit figures before deductions regardless of what form these profits take.

 

What Are The 4 Key Factors Which Make Up Your Gross Income

To help you remember all of the factors within your gross income, bookmark this page and read through this list of 4 essential criteria. 

Also read: Wage Vs Salary

All Wages

The first and most important part of your gross income should be your actual income. Your wages or salary should make up the largest part of this figure. If you get paid on a weekly timetable, you should add up all of the days for the month, and all of the days you have been paid for. Then divide the days worked by the days paid. And you will have your percentage of how much the figure should be for that month.

Remember to add in all of your wages from every job (even one-off jobs) that you have been paid for.

 

Additional Income

If you receive benefits, bonuses, overtime pay, or any other additional payment, this should be added to your gross income too.

These figures are normally lower and might even seem unnecessary due to their low value, however, every dime needs to be added to the gross income.

Also read: Proof of Income for a Mortgage

Tax Returns

Because tax returns are still a form of income, you need to declare it on your gross income. This may feel contradictory as your gross income can determine how much tax you need to pay, however, all forms of income need to be included.

 

Imputed Income

This part of the tax process may not apply to everyone. However, if you can work, but refuse to work so that you don’t need to pay child support (for example), then the amount you could be earning is added to your gross income.

This is because the reason for your lack of income isn’t due to lack of trying, or inability to find a job, it’s due to a choice that is affecting your overall value.

Also read: How to Save Money For a Car

What's The Difference Between Gross Income And Net Income?

When looking at businesses you will see the term gross income and net income. Both describe profits, but they can be used in a personal capacity too.

On an individual level, your net income is the total amount of income you have after all of your expenses have been deducted. This doesn’t just mean taxes or automatic deductions, it also means bills and personal expenses.

Where the gross income calculates how much you earn when everything is included, your net income is how much is left once everything has been paid for.

From a business point of view, the net income is the total amount of money that employees will receive from their monthly pay packet.

Or the business itself, the net income represents all of the earnings after the expenses have been deducted. This includes interest, taxation, wages, and so on.

The gross income is meant to show the higher view of the company and how much it can produce financially. The net income shows how profitable the company is and how cost-effective it is.

Also read: What is the 50 30 20 Rule?

How To Calculate Individual Gross Income

To calculate your individual gross income, you need to add together all of your earnings before taxes or deductions have been subtracted. On your paycheck, this number should be titled “gross income”.

If you have multiple sources of income, make sure to include them all.

 

How To Calculate Business Gross Income

Unlike individual gross income, business gross income is allowed to note one cost. This cost is the price to create and sell their goods.

For example, if they managed to make $100,000 in sales, but it cost $1,000 to make and distribute the product, then their gross income would be $99,000.

 

What Are The 5 Key Factors In Net Income?

Your Net income will include all of the factors of your gross income along with the following 4 factors.

 

Taxes

For both personal and business net income, your taxes will be removed from your income amount to represent your true net income.

Governmental Debts/Payments

Government debts could include student loans, while their payments could include child support or low-wage support.

 

Operating Expenses

Operational expenses are only included in the business's net income. These are the costs to create and sell your product or service.

 

Dividends

Dividends are for both personal and business net income calculations. They include interest, profits from stocks, and any other passive income.

Summary

The key factors in your gross income are your wages, your additional income, your tax returns, and your imputed income. Essentially it should include all of the money coming to you, whether that's stocks, rent from tenants, or even interest if the interest is large enough.

Your check stubs can be a great way for you to keep track of your finances so you can easily add the figures to your spreadsheet.