What Is Gross Monthly Income—A Definition and Considerations
Updated · May 06, 2022
When it comes to personal finance, there are a lot of terms and concepts that can be confusing, but it’s important to come to grips with them in order to plan your finances wisely.
One of these concepts is gross monthly income (GMI).
It might seem a bit confusing at first, but after reading our guide, you’ll see it’s actually quite simple.
What is Gross Monthly Income
Gross monthly income is the total amount of money you earn in a month before any deductions are made. The deductions you make will ultimately decide how much you pay in taxes.
This income includes any compensation you receive from all sources, such as your job, passive sources like investments, and side hustles.
An easy way to remember the gross monthly income definition is that “gross” simply means “without deduction”.
It’s also slang used to refer to something “unnerving”, and the fact that you’re gonna have to do some tax calculations should give you that feeling.
What Is Part of Gross Monthly Income
As you can see gross monthly pay is basically all of the money you receive each month, including both your wages and any other sources of personal income.
This can include things like dividends from stocks or interest from savings accounts, as well as things like benefits from unemployment insurance or government assistance programs.
Other common sources of gross monthly income include rental payments and money received from investors or other individuals.
In general, any type of income that is paid on a regular basis can be considered part of gross monthly income.
Why Is Gross Monthly Income Important?
Understanding what exactly is included in monthly income before taxes is critical for anyone who wants to responsibly manage their finances.
It's a good way to track your overall financial progress. If your GMI is increasing month after month, that's a good sign that you're on the right track.
It’s also vital for determining your budget for the month or considering a new investment opportunity.
Additionally, knowing your GMI can be helpful when it comes to budgeting and setting financial goals.
By knowing the exact amount of money you have coming in each month, you can make sure that your spending aligns with your long-term goals.
What Is Gross Household Monthly Income?
Gross household monthly income is the combination of each individual in a household’s gross monthly income. It’s good for financial planning.
By understanding it, a family or couple can get an accurate idea of their finances and can make better decisions about buying a car, doing renovations, and so on.
What Is Adjusted Gross Income?
Adjusted gross income is your income after you’ve made deductions. This will then give you your taxable income.
Common deductions include:
- Mortgage interest up to a certain amount.
- Contributions to retirement accounts.
- Contributions to medical and dental expenses.
- Self-employment expenses.
- Charitable donations
- Investment and gambling losses.
Note that deductions can differ by state and country. The above are generally deductible in the United States.
Some formally deductible expenses are no longer so. This includes:
- Alimony payments
- Professional membership fees
- Theft losses
- Moving expenses
This is a general overview of adjusted gross income criteria, so you should always seek information pertaining to you and your state’s laws. Knowing your monthly income can also give you a more granular view of your annual income.
Whether you're just starting out in your first career or are a seasoned earner, it's important to understand what gross monthly income is.
Now that you know the answer to the question “What is gross monthly income”, it’s time to learn about calculating it.
Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.