4Calculating Net Income
Gross income is the amount you earn before taxes and other payroll deductions. Net income
is your take-home pay after taxes and other payroll deductions. Your net income, the amount
on your paycheck, is what’s used to make your budget.
4Step #1:
To calculate your annual net income, you need to
answer the following questions:
1) Are you paid weekly,
2) Bi-weekly,
3) Semi-monthly, (for example, on the
1st and the 15th) or
4) Monthly?
4Step #2:
•
If paid weekly, multiply your take home pay by 52
•
If paid bi-weekly, multiply your take home pay by 26
•
If paid semi-monthly, multiply your take home pay by 24
•
If paid monthly, multiply your take home by 12
This will provide you with your NET ANNUAL INCOME.
4Step #3:
To determine your NET MONTHLY INCOME divide your
NET ANNUAL INCOME by 12. Use this amount on your
budget form.
4Example Calculations of Net Monthly Income
Case #1:
Thomas is paid on the 1st and the 15th of every month. Therefore, he is paid semi-monthly.
His take home (net) is $1,235. Therefore, multiply $1,235 by 24 (semi-monthly) = $29,640
(net annual income).
$29,640 divided by 12 = $2470 (net monthly income).
Case #2:
Jeanne is paid weekly.
Her take home (net) is $519 per week. Therefore, multiply $519 by 52 (weekly) = $26,988
(net annual income).
$26,988 divided by 12 = $2,249 (net monthly income).