Guide: How To Calculate Gross Monthly Income (With Examples)
Updated 14 September 2023
Knowing how to calculate your gross monthly income is important when making decisions about your standard of living and financial expenses. In this article, we discuss what gross monthly income is and how to calculate it.
Related: What Is Annual Income?
What is gross monthly income?
Gross monthly income refers to monthly financial remuneration derived from any sort of employment or business venture. The calculation of this differs based on your source of income. For workers, gross monthly income is the total amount of monthly remuneration received before personal income tax and employee Central Provident Fund (CPF) contributions are deducted. It is the cumulation of wages, overtime pay, tips, allowances and commissions as well as one-twelfth of any annual bonus.
If you are calculating as a business, though, gross monthly income refers to the average monthly profit from your business, profession or trade after the deduction of monthly business expenses.
What to include in gross monthly income
When calculating your gross monthly income, you have to include all your sources of income, including:
Income from businesses or other jobs
Why knowing your gross monthly income is important
Your gross monthly income is an important number that banks and other lending agencies use to determine the size of loans you may be entitled to, as well as the interest rate on your loan repayment.
Knowing your gross monthly income can also help you prepare monthly budgets and file your taxes. This information is vital for effective financial planning.
Read more: How to Negotiate Your Salary During COVID-19
How to calculate your gross monthly income
Here's how to calculate your gross monthly income:
For full-time employees
For full-time employees who are paid a fixed monthly or yearly salary, your gross monthly income is very easy to calculate. If you are paid on a yearly basis, you can determine your gross monthly income by dividing your annual earnings by 12. For example, if you make $60,000 per year, your gross monthly income would be $5,000.
$60,000 ÷ 12 = $5,000.
For those paid by the hour
If you're a freelancer, an independent contractor or any other worker who's paid wages by the hour, you should first calculate your weekly income. Multiply your hourly wage by the number of hours you work per week, then multiply that figure by 4 for your gross monthly income.
To calculate the gross monthly income of a business entity, deduct the cost of goods sold (COGS) from the gross revenue.
Gross monthly income = Gross monthly revenue - Cost of goods sold
Examples of gross monthly income calculations
Here are a few examples to help you calculate your gross monthly income:
A full-time employee with an extra part-time job
Janet is a full-time manager at a digital marketing firm with an annual salary of $56,000. She also works 2 hours 5 days a week at her father's noodle shop, making $12 an hour.
To determine her gross monthly income, Janet must find out how much she earns annually and divide that figure by 12.
First, she calculates her weekly income from her part-time job at her father's noodle shop.
Janet works for 10 hours per week at her father's shop. Therefore, her weekly income is:
10 x $12 = $120
Therefore, her annual income from that part-time job is:
$120 x 52 = $6,240
Her total annual income, including her earnings from her full-time job, is:
$56,000 + $6,240 = $62,240
Therefore, her gross monthly income is:
$62,240 ÷12 = $5,186.7
Jimmy Lam's fish processing company recently acquired a used fishing boat which increased its revenues by $400,000 in its first month of operation. In purchasing the new boat and making it operational, the company incurred the following expenses:
$55,000 on the purchase
$12,000 on repairs
$10,000 on coastguard permits
$15,000 on the recruitment of a boat crew and purchase of fishing gear
Before investing in the new boat, the company only made $250,000 in monthly revenues. The company now needs to calculate its new gross monthly income to evaluate the financial impact of the new boat.
First, we need to calculate the cost of goods sold (COGS).
Fishing boat expenses:
$55,000 + $12,000 + $10,000 + $15,000 = $92,000
Now deduct the COGS from the total monthly revenue.
Gross monthly revenue:
$250,000 + $400,000 - $92,000 = $558,000
The gross monthly income for Jimmy Lam's fish processing company is now $558,000. This represents a $308,000 increase.
Please note that none of the companies, institutions or organisations mentioned in this article is affiliated with Indeed. The models shown are for illustration purposes only.
Explore more articles
- How to Become a Trauma Surgeon (With a Listed Guide)
- What Does a Service Delivery Manager Do? (With Salary Info)
- What Is Wholesale Trade? (Definition, Examples and Benefits)
- What Does an Interior Architect Do and What Do They Earn?
- The HR Career Path: Roles, Responsibilities and Tips
- What Does a Solution Architect Do? (With Skills and Salary)
- 11 Essential Sustainability Manager Skills (Plus Roles)
- How to Become a Therapist: Types, Salaries and FAQs
- What Is the Gig Economy? (Definition, Benefits and Tips)
- What Is A KYC Analyst? Duties, Requirements and Salary
- What Does a Medical Technologist Do? (With Salary and Skills)
- Audit Associate Job Description (With Duties and Skills)