What Is Gross Monthly Income and How to Calculate It

Written By
G. Dautovic
June 28,2023

What is gross monthly income, you ask? Gross monthly income refers to how much money you make every month before any deductions, such as tax, come into play. Understanding your gross monthly income is essential, because it helps you budget effectively, and can also be required for credit and loan applications.

So, how do you calculate your gross monthly income? And, what are some of the things you can do to increase it? Read on to discover everything you need to know!

How to Calculate Your Gross Monthly Income

Here are the steps you can use to calculate your gross monthly income:

  1. Your hourly rate multiplied by the hours per week you work is your weekly pay.
  2. The weekly pay times 52 is your yearly salary.
  3. Your annual Salary divided by 12 gives you your gross individual income per month.

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What Should Be Included in Gross Monthly Income?

Along with your salary or expected hourly wage, you may have extra sources of income every month. For example, you could work full-time at a restaurant, but also make and sell crafts in your spare time. Therefore, when you calculate your monthly gross income, you need to include all of the earnings you make, including any additional sources of revenue.

Some of the sources that you should include in your gross monthly income are as follows:

  • Bonuses
  • Investments
  • Commission
  • Overtime
  • Income from a second or third job
  • Business income

People who have an account on eBay or any similar platform used for small exchanges, such as selling an old phone, should also include any money they earn this way. Also, if you attend car boot sales or participate in farmer’s markets to sell off any old goods, this all adds to the amount of money you earn per month.

Don’t forget to include it!

The Importance of Gross Monthly Income

Now that you know how to calculate your gross income, you may be wondering why it matters in the first place. Keeping track of this value is crucial because it affects any line of credit application, for example.

The amount a lender offers you will depend, in part, on the amount of your gross monthly income. Keeping records of your income is essential to demonstrate that you have money coming in every month that you can use to make loan repayments.

Why Gross Income Is Vital 

Let’s dig a little bit deeper so you can understand how knowing your gross income can help you:

Salary negotiations - Using a gross monthly income calculator will help you negotiate a higher salary, as you’ll know if the offer you’re getting is actually improving your net worth. You’re going to fall flat on your face if you do not understand your current earnings and the financial terminology associated with them.

Taxes - You need to know your gross income to calculate your taxes correctly. If you file your taxes yourself, you will already know that you are asked to input your gross income and add in all of your expenses. The tax software will then determine how much you owe.

It would simply be impossible to file your tax return if you didn’t know what your gross income was, and this is why it is imperative to keep records of your finances throughout the year.

Credit limit - Aside from the points we have mentioned so far, your gross income comes into play whenever you apply for products like credit cards. A credit card issuer will typically look at your gross earnings and use this information when determining the appropriate credit limit.

Renting property - Next, your gross monthly income also matters if you are a tenant or intend to rent a property in the future. Your potential landlord will want to make sure you have sufficient earnings to make the required payments every month.

To do that, they will usually look at your gross income and figure out if you can reasonably cover the expenses.

Loan qualification - Last but not least, we cannot talk about the importance of gross monthly income without mentioning loan qualification. If you want to apply for a personal loan, you will typically need to provide some documents to prove your identity and that you earn enough money. Your gross income is crucial for the loan decision-making process. Again, this will help the loan provider determine whether you will pay your loan bills on time.

The Difference Between Gross and Net Income

You may have heard of the term “net income” before, so you may be interested in learning how it differs from gross income. Net income is what’s left of the total amount of your gross pay once taxes and other required payments have been deducted. Gross income is your earnings without any deductions, whereas net income is the amount you actually keep.

Some deductions you may have to pay include:

  • Child support payments
  • Wage garnishments
  • Retirement contributions
  • Expenses relating to your job, from travel costs to uniforms
  • Health savings account contributions
  • Flexible spending account contributions
  • Voluntary benefits, for example, disability, critical injury, sickness, and accident
  • Life insurance premiums
  • Health insurance premiums

Deductions that reduce your taxable income are known as pre-tax deductions. Other deductions, for example, voluntary benefits and contributions, will not lower taxable income and are known as post-tax deductions.

Net income is often called disposable income or take-home pay, as it’s what remains for you to spend. Net income is what you can count on for your monthly budget. Debt payments, bills, living expenses, and other obligations all come out of your net income.

Do not ever use your gross income to calculate this, as you will end up being left short every month. This is because the money you have every month will always be reduced by your taxes and deductions, which is why your net income matters when it comes to everyday expenses.

Final Words

So there you have it: The answer to “What is gross monthly income?” and how to calculate it effectively. Although your gross income cannot and should not be used as part of your monthly budget calculations, it is still important to know what it is.

This is because your gross income is used to drive other areas of your financial existence, for example, your credit eligibility, and consequently, the amount of money you can borrow.


What does gross monthly income mean?


Your gross monthly income is the amount of money you earn every month prior to anything being taken out, for example, before any tax is paid and other deductions are removed.

How do I calculate my gross monthly income before taxes?


It’s not difficult to calculate your gross monthly income before being taxed. It’s the amount of money you bring in before your deductions and taxes. Therefore, all you need to do to determine your gross monthly income is divide the total salary you receive per year by 12.

What is the difference between gross monthly income and net monthly income?


Your net monthly income (NMI) refers to the earnings you take home after taxes and deductions, while gross monthly income (GMI) refers to the total amount of earnings made over a month before deductions and taxes.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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