💰 Knowing how to calculate your income is essential for budgeting, applying for loans, or understanding your financial health. Whether you’re a salaried employee, freelancer, or business owner, calculating your income gives you a clear picture of your earnings.
Let’s break it down and make it easy.
Table of Contents
🧮 What is Income?
Income refers to the money you earn regularly through employment, self-employment, investments, or other sources. It can be gross (before taxes and deductions) or net (after taxes and deductions).
📌 Types of Income
Earned Income 👔
Wages, salaries, bonuses, commissions, tips, freelance income
Passive Income 🏘️
Rental income, dividends, interest, royalties
Portfolio Income 📈
Capital gains from stocks, bonds, mutual funds
🧾 Formula to Calculate Income
The most common and practical income formula is:
Net Income = Gross Income − Taxes − Deductions
If you’re self-employed or own a business:
Net Income = Revenue − Expenses − Taxes
🌐 Example: Salary-Based Income Calculation
Jane earns $4,500 per month.
She pays $900 in taxes and has $300 in deductions (health insurance, retirement, etc.).
Net Income = $4,500 – $900 – $300 = $3,300
📊 Why Knowing Your Income Matters
✅ Helps with budgeting
✅ Necessary for loan applications
✅ Guides investment decisions
✅ Supports tax filing accuracy
✍️ Final Thoughts
Understanding your income empowers you to take control of your finances. Whether you’re a salaried employee or running a side hustle, keeping track of what you earn after deductions is essential.