Identify the income sources to include (salary, hourly wages, bonuses, commissions, tips, interest, dividends, rental income, side income)
Use gross income amounts before taxes and deductions (or net income amounts after taxes—choose one method and stick to it)
For salaried income: divide annual salary by 12
For hourly income: multiply hourly rate by average weekly hours, then multiply by 4.33 (average weeks per month)
For commissions/bonuses: use an average of the last 3–12 months and convert to monthly totals
For irregular income: estimate a monthly average based on recent history
For self-employment income: use average monthly net profit (revenue minus business expenses) from recent returns or statements
For investment income: use average monthly interest/dividends (or last year total divided by 12)
For rental income: use average monthly rent minus average monthly vacancy and expenses
If income varies by month: compute each month separately using that month’s actual amounts, then average if needed
Add all monthly income components to get total monthly income
If calculating net monthly income: subtract monthly estimates of taxes, health insurance, retirement contributions, and other payroll deductions
If needed, exclude non-recurring items (one-time refunds, settlements) by averaging only recurring income streams
Record the final result as “Monthly gross income” or “Monthly net income” based on the method chosen