How To Calculate Gross Monthly Income—Some Examples and Considerations

Updated · Oct 17, 2022

Most people don't think much about how your gross monthly income is calculated. 

After all, as long as your paycheck arrives on time and in the correct amount, why does it matter? 

However, if you're trying to get a loan or make a major purchase, it's important to understand how your gross monthly income is determined. 

In this blog, we'll explain everything you need to know about how to calculate gross monthly income

What Is Gross Monthly Income

Gross monthly income is the total amount of personal income earned in a month before any deductions are taken out. This includes income from all sources, such as wages, investments, and government benefits.

Gross monthly income is used to calculate things like mortgage payments and loan eligibility. 

It's important to remember that gross monthly income is not the same as net income, which is the amount of money that actually goes into your bank account after taxes and other deductions have been taken out.

We’ll show you how to calculate that at the end of this blog

How to Calculate Gross Monthly Income

Calculating your gross monthly income is relatively straightforward, but the exact way you do it will differ depending on “how you earn”.

Below we’ll provide three examples of how to calculate it for differentiating earning models.

Fixed Salary 

If you earn a fixed salary, which is a yearly amount split into months, then you’ll need to take the total amount and divide it by twelve.

For example, say you earn a salary of $50,000 a year. The formula will look like this:

$50,000 / 12 = $4,166.66 (salary / 12 = gross monthly income)

In today’s fast-paced economy though, a person is lucky if they only need one stream of income to make up their gross monthly pay.

But many work multiple jobs, have a side hustle, or run their own businesses, which means their gross monthly income varies from month to month.

If you work multiple jobs, you’ll need to do this calculation for each one, and then combine them.

Freelance and Other Variable Incomes

When it comes to calculating your gross monthly income as a freelancer, there are several key factors to consider. 

The first thing to keep in mind is that you are responsible for paying your own taxes and other applicable fees, such as social security contributions. 

In order to understand the full scope of these expenses, and their impact on total monthly income, you will need to consult with a tax professional or familiarize yourself with the relevant financial regulations in your area. 

Another important consideration is how often you typically get paid by your clients. You could get paid by the hour, by the project, or even by word count if you’re doing freelance writing.

Let’s say you’re a freelancer that gets paid $15 per 500 words by one client. This month you write 5000 words. Divide 5000 by 500 and you get 10. Now times $15 by 10 and you get $150 this month.

You work for a different client, to supplement your monthly gross salary, at $10 per hour, and you work 20 hours this month. $10 times 20 equals $200.

Lastly, you do a commission project that’s $250 straight up. 

You now have three lots of income. By combining them all, $150 + $200 + $250, your gross monthly income equals $600. 

That’s an example of how a freelancer would have to calculate their gross monthly income. Instead of being able to do it once, as a freelancer, you’ll have to do it every month.

The same applies to other variable incomes, for example, if you run an ecommerce store, or if you earn passive income. Naturally, sales will differ from month to month.

Once you’ve been earning for at least a year, you can figure out your total annual income.

What Is Net Monthly Income

Net monthly income is a measure of a person's total income after all applicable taxes and other deductions have been taken into account. 

This figure is used to determine an individual's economic status and often serves as a benchmark for eligibility for loans or other financial assistance programs. 

Generally speaking, net monthly income falls into one of three categories: high, medium, or low. People with high net monthly incomes typically have high earnings from their jobs and/or substantial sources of additional income, such as investments or dividends. 

An easy way to remember it is that it is also sometimes called “take-home pay”. Think of a fisherman catching fish in a net and taking them home. 

How to Calculate Net Monthly Income

To calculate net monthly income, you first need the gross monthly income (GMI) figure we discussed above. You’ll have to reduce it to an adjusted gross income (AGI), which is your GMI minus any deductibles. 

Your deductibles will be specific to you. The formula will look like this:

GMI - total deductibles = adjusted gross income.

Once you have your AGI, you’ll need to minus the amount of taxes you’ll have to pay. The formula is as follows:

AGI - taxes = net monthly income

The amount of taxes you pay will depend on how much your income is, as well as be specific to your country or state. 


Now you know how to calculate gross monthly income, but remember, your gross monthly income is only one piece of the puzzle when it comes to managing your finances. 

But by taking this number into account and making sure that you have sufficient net monthly income, you can be well on your way to maximizing your earning potential while minimizing financial stress. 

Even if you don’t need the figure yet, take some time to calculate your gross monthly income—it might just be the key to a more prosperous future.

Garan van Rensburg
Garan van Rensburg

Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.