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Posts Tagged estimating income

Estimating Income

I often listen to the Dave Ramsey podcast where people will call in with their money questions. Most of the time he’ll ask the caller what their estimated income is, and I am amazed (and not in a good way) at the number of people who aren’t sure.

When setting up our monthly family budget, the very first information I enter is our expected income. From that number, I then know how much I have to cover our monthly expenses and how much we can save for the future.

money

Let’s look at the three things to consider when estimating what your monthly income is going to be.

  1. Hang on to Those Pay Stubs: If you are a salaried employee (like myself), estimating your monthly income is a matter of looking at what you get paid each pay period and multiplying that by the number of pay periods that month. If you don’t have your pay stubs, go online and see what was last deposited into your bank by your employer.
  2.  Estimate your Monthly Average: If you have a variable income (meaning it may not be the same each pay period), you are going to want to find out what has been your average income. Look over your bank statements for the last year and total up your income (you could also look at last year’s tax information to determine your yearly income). You’ll next want to take that total amount and divide by 12 to figure out what your average monthly income would be.

adding up money

If you are in a field that varies greatly depending on the season, take a look at what you made this month last year to help you determine what you might make this month.

3. Don’t Forget All Sources: Your income does not just include money earned through your job. Don’t forget any other source of income you might have. Other sources of income may include, but are not limited to:

  • Government benefits
  • Investment earnings (if you are not reinvesting)
  • Rental income
  • Child support / alimony
  • Even that tax refund you might be expecting.

If you are self-employed, you may also be interested in what it means to estimate your income in a worst case scenario .

Your Turn!

  • How do you approach the budgeting process?

 

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