How to Calculate Your Monthly Pay for Budgeting


Are you trying to create a budget, but having trouble figuring out your monthly income? Look no further!

Here is the complete guide to calculating your monthly pay, no matter how you earn your money. Remember to always use net income (or take home pay) when you are budgeting.

Monthly Income Calculation Guide by Pay Frequency

1. Monthly or Twice Monthly.

If you get paid monthly or twice monthly, the calculations are easy. But if your situation is more complex, then go to the next section.

Paid Once a Month: Monthly Budget Income = net pay amount on your monthly pay stub

Paid Twice a Month: Monthly Budget Income = net pay amount on paystub X 2

2. Hourly With Varying Hours:  

If hours are always the same each week: Monthly Budget Income = Net pay per hour X Hours per week X 4.3

(4.3 is the average number of weeks in a month based on the 12 month calendar.)

If hours are different each week: Monthly Budget Income = Calculate Net pay per hour X Hours per week for each week and add those totals together

Or look at past pay history and go with that.

3. Every Week:

Monthly Budget Income = Weekly net pay X 4.3

4. Bi-weekly or Every Other Week:  

Monthly Budget Income = Net Paycheck X 26 then divide total by 12

5. Annual Salary:  

Monthly Budget Income = Take your annual net salary and divide by 12

6. Base Plus Commission:

Monthly Budget Income = Calculate Base portion based on above frequency + commission portion

What to use for the commission portion: only list the amount you are sure you will get. For example if you have gotten a commission of at least $1000 every month for a while now, then count that amount, but not the amounts that are unusual or infrequent.

7. All Commission:

Monthly Budget Income = to the average commission you normally get each month based on one of the 3 methods below

  1. Calculate by adding up the last twelve months of commission pay and divide by twelve.
  2. Pick the monthly amount that is most common over the last twelve months.
  3. Look over your last year of paychecks and pick the month with the lowest commission to use in your budget. Using the lowest provides some protection against possible fluctuations in your pay.

8. Self-Employed:

Monthly Budget Income = calculate based on one of two options below

  1. Compare the month you are budgeting for to the same exact month of the year last year. Use the net income from that month as your expected net income for this month. You would have to do that each month.
  2. You can add your net income from the prior 12 months and divide by 12. This method is less accurate because it does not account for seasonal trends.

9. Other Options:

If none of the above methods work for your pay type. Take your paystubs from the entire prior 12 months. Add the net pay from all of them together and divide by 12.

10. Other Types of Income:

You should also count any of the following monthly amounts in your income for budgeting purposes: Child support, spousal maintenance, Social Security, cash dividends, pension or any other monthly inflows that provide you with the means to pay for things.

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The Modern Mom’s EPIC Guide to Easy Budgeting! 28 Page Workbook with 87 ideas to reduce expenses, 14 beautiful worksheets, 7 bonus lessons, and full, easy-to-follow instructions. Includes top advice from a professional accountant and university instructor.

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