What is Gross Monthly Income?

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Gross monthly income is the amount of income you earn in one month, before taxes or deductions are taken out. Your gross monthly income is helpful to know when applying for a loan or credit card. Let’s dive into gross monthly income, how to calculate it based on your annual or hourly pay, and when it’s helpful to understand.

What is Gross Monthly Income?

Your gross monthly income is everything you earn in one month, before taxes or deductions. This is typically outlined on your job offer letter, and you can find it itemized on your paycheck.

Generally, if you make regular overtime, bonuses, or commissions, you can add this to your gross monthly income. To do so, you would determine the amount you’ve received over the past year, divide it by 12 and add this number to your monthly amount.

Your net monthly income is different, in that this is the amount of money you actually take home after taxes and deductions. For example, even though your gross monthly income might be $4,500, you will only receive a net amount for $3,900.

You should know what this number is if you’re applying for a loan, as approval may rely on whether your gross monthly income exceeds a certain amount.

What is Gross Monthly Household Income?

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Your gross monthly household income is the total monthly income of all members of your household. It can include:

  • Business income
  • Income from a second job
  • Regular overtime, bonuses, or commissions
  • Investments
  • Child support payments
  • Public assistance
  • Social Security payments

For example, if Sarah makes $3,000 a month at her full-time job, $1,500 a month with her side business, and her husband John makes $4,200 a month, their gross monthly household income would equal $8,700.

Lenders and credit card companies look at your gross monthly household income on applications when deciding whether you qualify, and how much you can borrow. It’s helpful to be aware of this number if you’re going through these processes. Typically, as a rule of thumb, lenders won’t let you borrow more than 28% of your gross monthly income.

How to Calculate Your Gross Monthly Income

If you earn an annual salary, simply take the amount you earn each year (your salary) and divide this amount by 12 to get your gross monthly income.

For example, if Sam makes $45,000 a year and she divides her annual salary by 12, her gross monthly income is $3,750.

If you’re paid hourly, you’ll first need to find your annual salary. Multiply your hourly wage by how many hours a week you work, then multiply this number by 52. Divide that number by 12 to get your gross monthly income.

For example, if Matt earns an hourly wage of $24 and works 40 hours per week, his gross weekly income is $960. If he multiplies his weekly income by 52, his annual gross income is $49,920. Lastly, if he divides his annual income by 12, he’s left with his gross monthly income at $4,160.

Calculating your monthly income is useful when it comes to creating a monthly budget, preparing your taxes, and when applying for a loan or credit card. With a clear understanding of your monthly income, you can better understand your financial health and goals.


: Investopedia | BankRate.com