The Budgeting Basics page starts with “Do you earn a yearly salary?” However, this blog is targeted at high school, college, and just-graduated individuals, and on average, individuals matching those descriptions earn an hourly wage.

So, that’s where we’ll start.

There are two ways to approach figuring out your monthly income:

- You can use your paystubs and average them.
- You can reconstruct your average earnings.

Option 1 requires less math, but may be less accurate. Option 2 requires a bit more math, but may be more representative of what you actually earn in a month. Which route you chose is up to you. I’ll deal with both below.

For this process, you may want to grab a piece of paper, a pencil and a calculator (or your cell phone. :D).

## Option 1: Figuring Monthly income Using Your Pay Stubs

### How often do you get paid?

The first step is to determine how often you get paid. Do you get a paycheck once a week? Every two weeks? At the beginning (or end) of the month? On the 1st and 15th of the month?

Write down the number of paychecks your receive each month, on average. (Example: if you get a paycheck every two weeks, on average you’ll get two paycheck’s per month, but occasionally you’ll get three. Write down ‘2’.)

### How much do you earn each paycheck?

This is where the little bit of math comes in for this method of determining monthly income.

Gather your pay stubs for the last month. (You should be saving these for your records, to make sure you get paid for time worked.) If you don’t have any, start saving them as soon as you get your next one, and collect them for the next month.

Once you have your pay stubs, write down how much you earned from each one (the Net Amount, not the Gross Amount).

*Example:*Say you get paid every two weeks. The first paycheck this last month was for $450, and the second one was for $380.

To determine your monthly income, you average those two together: ($450 + $380) / 2 = $415. $415 is the average amount you earned for each paycheck that month, and since you got two paychecks, you multiply $415 x 2 = $830.

And, because you used the Net Amount earned, you don’t have to worry about taking out taxes because that’s already been done for you.

Note: Make sure to consider the hours you worked each pay period and whether or not it was a normal amount for you. If you took five days off to visit family, for example, that pay period will not really be representative of a typical month for you. If one of your paychecks is not representative of the amount you normally earn, you can either use a different month’s pay stubs, collect one more pay stub from the next pay period and use that for your calculations, or use the second method, described below.

## Option 2: Figuring Monthly Income Using Reconstruction

### How much do you earn per hour?

Start with your hourly wage. If you earn $7.25 (Federal minimum wage) or $15.00 (wouldn’t that be nice, :D), write that number down.

### How many hours do you work each week?

Full-time is 35-40 hours. Part-time is 20 hours or less. Personally, I average 30 hours a week, although sometimes it’s closer to 25, and sometimes it’s closer to 40, depending on how busy we were and if I got called in or picked up a shift. If I were doing these calculations, I would use 30 hours.

### Put the two numbers together

Say you make $9 per hour, and you work an average of 30 hours a week.

$9 x 30 hours a week = $270 a week.

Multiply that by four weeks in a month, and you get an average monthly income of:

$270 x 4 weeks = $1,080, before taxes.

Of course, if you sometimes work 15 hours, and sometimes work 30, and sometimes work 20-25, you could also figure the weekly income for each of those numbers, and add all four of them together.

*Example:*

$9 x 15 = $135

$9 x 20 = $180

$9 x 25 = $225

$9 x 30 = $270

Total monthly earnings: $135 + $180 + $225 + $270 = $810, before taxes

### Taxes, or But Wait There’s More

This is where this method gets slightly more complicated than the other.

Most people who earn an hourly wage (unless you make more than $15 an hour, and work more than $40 a week) will fall into the 15% federal income tax bracket (use the Federal Tax Bracket Calculator if you want to be sure).

Most state’s will add only 5-6% (check the State Income Tax Information if you want to be sure).

That means that most of you will be able to assume a 20% tax rate. If you really want to be safe, you could assume 25%.

But what does that mean?

Okay, so you’ve figured out how much you earn every month, before taxes. In the first example above, the monthly income, before taxes, was $1,080. Since we’re assume a 20% tax rate, we would multiply the monthly income by 0.8 (the decimal representation of 80%, which is 100%-20%):

$1,080 x 0.80 = $864 monthly income *after* taxes.

And you’re done!

**Congratulations, you now know how much you earn every month! You’re one step closer to having a budget. **

For the next step, stay tuned to the Budgeting Basics page I set up to archive all of this useful information.

And, of course, if you have any questions, or just can’t seem to get it to work for you, don’t hesitate to contact me. I’ll be happy to help.

{ 4 comments… read them below or add one }

Thank you,

This falls under the list of things you are never too old to learn. It was very helpful, although targeted for kids,(young adults, if you prefer) I think it would benefit everyone to take notes.

Well Done!

Thank you!

HELLO,

I’M CONTACTING YOU BECAUSE I’M IN NEED OF A NEW BUDGET FOR THIS UPCOMING YEAR. I DID THE MATH LISTED ABOVE I WOULD BE MAKING 1,792.00 A MONTH FROM MY NEW JOB (THANK YOU LORD) AND I GAVE BIRTH TO MY TWIN GIRLS 18MONTHS AGO. I WOULD LOVE TO MAKE A BUDGET FOR MYSELF. I HAVE BAD CREDIT (THANKS TO MY KIDS FATHER UGH) BUT WE LIVE TO LEARN RIGHT? SO MY PLAN FOR THE NEW YEAR IS TO GET OUT OF DEBT AND TO BUILD MY CREDIT UP, AND TO SPEND MY MONEY WISELY. WOULD YOU BE ABLE TO HELP ME WITH THIS?

THANKS,

TISHA

Hi Tisha,

I would be happy to help. It sounds like you’ve got things moving in the right direction. I recommend reading my post Budgeting Basics: The Very, Very Basics and Where to Go from Here if you haven’t already. If you don’t want to make your own budget using a spreadsheet or something similar, I would recommend signing up for a service like Mint.com. They do a good if somewhat simplistic job of tracking your spending and let you set a budget for items that you might overspend on (like groceries).

Feel free to reply if you need additional guidance or information. Or send me an email to megan@thefinancegeek.com.

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