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Understanding Gross Monthly Income - With Examples

Whenever you apply for any loan or a credit card, one of the first things a lender examines in your application is your gross monthly income. The gross monthly income, along with your credit score, helps the lender to determine whether you are eligible for the loan or credit card. Usually, a higher gross monthly income makes you eligible to get a higher loan or a credit card with a higher credit limit. 

That’s why knowing what is gross monthly income and learning how to calculate it can be helpful. Once you know your gross monthly income, you will be able to plan your finances and make the correct investment decisions. This article will help you understand what gross monthly income means and how to use the gross monthly income calculator to determine yours. 

What is gross monthly income?

Let’s begin by understanding what gross monthly income means. Simply put, your gross monthly income is the total income earned by you from all sources. It is a combination of your gross monthly salary or gross pay received from the employer before tax or any other deductions carried out by the employer, plus any other types of income you may have. 

This can even include any income you earn from various investments or a business, or any other activity. For instance, you are renting out a room in your apartment. This is your rental income, and it is considered as part of your gross monthly income. 

Deep diving into Gross Monthly Income Definition 

If you take up a new job, the gross monthly salary is the figure that is usually mentioned in the offer letter. Please bear in mind that the gross monthly salary will also include any bonuses, commissions, or overtime allowance paid to you by the employer. Depending on the taxation laws of the country where you work, certain categories of income may be excluded from the definition of gross monthly salary. For instance, if you are receiving any life insurance/death benefit from the employer, such an income will not be counted as a gross monthly salary and remain tax-exempted. 

It is also important to remember that gross monthly salary is different from the net monthly income. That’s the income you actually take home once necessary tax and other deductions are made. Therefore, it is possible that while your gross monthly salary is USD 5000, your net monthly income works out to be USD 3000.

What can be considered as part of gross monthly income 

Suppose you are working as a software developer, but you also sell your paintings online. The income generated from the sales will be considered as part of your gross monthly income.  That’s why it is imperative to understand what forms part of the umbrella term gross monthly income.

Typically, the following will be considered to calculate the gross monthly income:

  • Business income: If you operate a business, any income generated is considered as business income. For example, you have a spare bedroom in your apartment, and you rent it as a bed and breakfast. In this case, the rental income is your business income. 
  • Income from a second or third job: If you work a second job, your monthly salary from such a job will also count towards the gross monthly income.
  • Overtime: If you receive any additional payment from your employer for working beyond the regular working hours, such pay is called overtime salary or overtime pay. 
  • Commission: If you are working in a sales profile at a tech company, any commission received for making a sale will also count towards your paycheck. 
  • Investments: If you invest in financial instruments, any income such as dividends, interests, or capital gains, etc., are considered as investment income. 
  • Bonuses: if you receive any additional compensation from your employer based on your performance or fulfillment of any other condition, that is counted as a bonus. 

What is Gross Monthly Household Income?

This refers to the total monthly income of all the members living in a household. For example, if your spouse is working, your spouse’s monthly salary will be included for calculating the gross monthly income. Similarly, if your spouse is earning a separate business income or any income from investments, it will be counted towards the gross monthly household income. 

Please note that the components for calculating the gross monthly household income are the same as an individual’s gross monthly income. Adding up every member’s individual gross monthly income gives you the gross monthly household income. 

Why is gross monthly income essential?

Calculating the gross monthly income is the first step towards assessing your financial health. If you want to better plan your finances, knowing the gross monthly income can help you make necessary changes to your budget. Lenders or credit card companies also use gross monthly income as a tool to assess your financial viability when you are applying for a loan or a credit card. Moreover, knowing your gross monthly income also helps you identify the various tax deductions you are eligible for. For instance, investment in certain types of mutual funds is exempted from tax. 

How to calculate gross monthly income?

You may often wonder, ‘what is my gross monthly income?’, especially if your employer has not provided a detailed breakup. Whether you are on a salary or get paid on an hourly basis, you can use these steps as a gross monthly income calculator to effectively figure out your gross monthly income:


If you earn a monthly salary, divide your annual salary by 12 to work out your gross monthly salary

For instance, Linda earns USD 50,000 per year as a developer. Her gross monthly income will be USD 50,000/12, which is USD 4166.


In this case, you need first to determine your annual income. For instance, Jacob earns USD 50 per hour working as a software developer, and he works 20 hours each week. 

To determine his annual income, we need to calculate the weekly income.

The weekly income will be Hourly pay X total number of hours worked. That works out as USD 1000. To calculate the annual income, multiply the total weeks in a year by the weekly income. 

USD 1000 X 52 weeks =  USD 52,000.

Therefore, Jacob makes USD 52,000 per year. 

For calculating the gross monthly income, we divided the annual income by 12. 

52,000/ 12 = 4333

Therefore, Jacob about  USD 4333 per month as a developer.

Multiple projects 

Example 1: 

Natasha is a freelance software developer.  Currently, she has three different projects with different payout rates. The first project pays an hourly rate of USD 50 per hour, and she spends 10 hours a week on this. The second project pays her USD 60 per hour, and she clocks 6 hours a week for this. Her third project pays her USD 40 per hour, and she works 3 hours per week. To determine her gross monthly income, we need to determine the weekly income from each project. 

Weekly income a project: Payout per hour  X number of hours spent on a project

  • Weekly income from the first project: 50 x 10 = 500
  • Weekly income from the second project: 60 X 6 = 360
  • Weekly income from the third project: 40 X 3= 120

Annual income from a project: Weekly income X number of weeks in a year

  • Annual income from the first project: 500 X 52 = 26,000
  • Annual income from the second project: 360 X 52 = 18720
  • Annual income from the third project: 120 x 52=6240

Her total annual income: 26,000+ 18720+ 6240 = 50,960

Her gross monthly income : 50,960/12 = USD 4246.66

Example 2

Will earns a gross monthly salary of USD 5000 as an office manager. To supplement his income, he also takes up freelance coding assignments. He gets paid USD 100 per project and currently spends 5 hours per week. Let’s work out his gross monthly income:

Weekly income from the freelance assignment: Payout per hour  X number of hours spent on a project 

100 x 5 = 500

Annual income from the freelance assignment:  Weekly income X number of weeks in a year

 500 X 52 = 26,000

Annual income from the job as an office manager: monthly income X 12

5000 X 12 = 60,000

Total annual income = Annual income from freelance assignment + annual income from the job

60,000+ 26,000 = 86,000

 His gross monthly income will be the total annual income divided by 12

86,000/12= USD 7166.66

Example 3: 

Tina earns an annual salary of USD 60,000. She has also started a side business that pays USD 100 per week.

To calculate her gross monthly salary, she needs to divide the annual salary by 12.

60,000/12 = USD 5000 per month

To determine her annual income from the side hustle, she needs to multiply the weekly pay by 52

100 X 52 = USD 5200

Adding these figures will give her the gross monthly income.

USD 5000 + USD 5200 = USD 10,200

Example 4:

Rita has a job that pays her on an hourly basis. She gets paid USD 40 per hour and works 35 hours a week. Rita also teaches English online and earns USD 70 per class. She conducts 4 classes in a month.

To work out her gross monthly salary from the job, let’s multiply USD 40 by 35, which gives us USD 1400. Her annual salary will be USD 1400 multiplied by 52, which is USD 72,800.

To work out her gross monthly income from the English classes, let’s multiply USD 70 by 4, which gives us USD 280. Her annual income from the project will be USD 280 multiplied by 12, which is USD 3360.

Her gross annual income will be the annual income from her job and the yearly income from her English classes: USD 72,800 + USD 3360 = USD 76,160 

Finally, dividing this figure by 12 will give her the gross monthly income, which is USD 6346.66. 

Example 5:

Paul works two freelance jobs. One pays him USD 35 per hour, and he works about 20 hours per week. The other pays him on a per-project basis. He currently gets USD 200 per project and completes two projects every week. 

His gross monthly salary from the first job will be USD 35 multiplied by 20, which is 700. His annual salary will be USD 700 X 52, which is USD 36400. To work out his gross monthly salary, he needs to divide the total income ( USD 36,400) by 12, which works out to be USD 3,033.33.

His weekly income is USD 200 multiplied by 2, which is USD 400. The yearly income will be USD 400 multiplied by 52, which is US 20,800. The gross monthly income will be USD 20,800 divided by 12, which is USD 1,733.33. 

His total gross monthly income from both the job together is USD 3,033.33+ USD 1,733.33, which is USD 4,766.66.

What does net monthly income mean?

Net income refers to the income you are left with once all tax payments and deductions are made. In other words, net income is your total take-home pay. This is the amount of money you can actually spend. Standard deductions include income taxes, insurance premiums, loan installments, credit card payments, etc. In case you are paying alimony or child support, those amounts also need to be deducted from your gross pay. That’s why your gross monthly income or gross annual income is always more than your net income. Just like gross monthly income, knowing the net income helps you manage your finances better and determine the tax payments.

How to calculate what is net monthly income?

Start by working out the gross annual income, determine your gross yearly income by following the formula shared above. Subtract the tax deductions and other deductions such as insurance premiums, EMI payments, contribution to your retirement fund, other investments, if any. The amount that you are left with is your net monthly income

To put simply, Gross income – Taxes and Deductions = Net Income


Whether you are just starting your new job or planning to take up multiple projects, or an experienced professional, understanding your gross monthly income and net monthly income can help you make better investment decisions and look after your financial health. After all, everyone wants to make the most out of their hard-earned money. 

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