When you start a job, your salary may seem quite simple. You’re usually told either the pay you’ll receive on an hourly basis or the amount of your annual salary. But when you want to know how much you make on a weekly, monthly, and annual basis, things become more complicated.
All of this information is incredibly important to both saving and making sure you are sticking to a budget that is appropriate for your salary. Fortunately, by understanding some simple terms and using a salary calculator, calculating your salary is made much easier. Follow the steps below and use the best salary calculator to figure out the right budget for you.
What Is Your Gross Income?
If you’re bringing home a standard paycheck from your place of employment (as opposed to being an independent contractor), an important term you need to know is “gross income.”
It sounds complex, but the concept is a very simple one. Your gross income is the amount of money you earn at your job, whether that is through a salary, hourly wage, or some other means. It is the money before any deductions are made.
Salaried Employees
If you are an employee on a salary, your gross income is your salary divided by twelve. This calculation will tell you how much of that salary you earn each month.
However, be aware that a salaried employee’s first paycheck may be a prorated partial amount based on when the contract began during the month. Make sure to account for this as it is probably not a full month’s wage.
For example, your first $45,000 salary paycheck may only be $2,000, for example, if you didn’t start on the first of the month. However, your standard monthly gross income is $3,750 for your salary.
Hourly Employees
For hourly wages, simply multiply the wage you earn by how many hours you worked during a given time frame. Your calculation will depend on whether you’re computing daily, weekly, or even yearly income.
By calculating your earnings, you can verify your paychecks and confirm that you are actually receiving the amount that you have been promised. Just be aware that any pay changes or special circumstances need to be taken into account when calculating.
Best Salary Calculator
The easiest way to calculate your gross weekly, monthly, and annual income is to use the salary calculator below. To use the calculator, simply enter your current salary or hourly wage and adjust your pay period to match. Whether you are a salaried or hourly worker, it is important to enter how many hours you work weekly.
Understanding Your Results
The results of the Salary Calculator are broken down into several categories. Each one corresponds to a different time period.
Weekly pay is how much you make each week according to your salary, while bi-weekly pay is how much you make during two work weeks. Semi-monthly pay is how much you make in half a month.
The two longest time periods the calculator provides are your monthly salary and annual salary. Your annual salary is what you make each year and is very important to understand.
What the calculator does not take into account is things like overtime pay, bonuses, and your net income. These are important things to take into consideration when calculating your budget.
Gross Income vs. Net Income
Knowing the difference between gross and net income is one of the first steps in gaining a deeper understanding of your salary.
Your gross income is not the actual amount that you get to take home. This amount is called the “net income” or “take-home pay.”
There can be a substantial difference between your gross and net income. For instance, the take-home amount on a $105K salary could be closer to $75,000 in some states. The question is, where did the money between those two lines go?
Withholding
A large chunk of that missing money goes to taxes. This is called “withholding” because you are setting aside that money for your annual taxes. This ensures that you don’t have to face a huge tax bill when the collector comes around.
When you file your taxes, the amount of taxes paid from your paychecks is considered against what you owe. You either get money back as a refund if you paid more than required or get another bill if you were short.
You may see withholdings for state taxes as well, depending on the state in which you reside.
How to Regross Withholding Taxes
You may find yourself in a situation where you get a special payment, such as relocation expenses. To provide you with the maximum benefit of that amount, an employer can gross-up that total, which means they include the amount that the employee is likely to pay in taxes on that gross amount.
In short, that means that the employer is offsetting the taxes you will have to pay by paying you the tax amount in addition to the original amount. To compute this regross:
-
-
- Determine the total tax rate taking into account both federal and state taxes
- Subtract that total from 100 to get the actual tax percentage
- Divide the planned payment amount by that percentage to determine what the actual tax will be on that total
- Add that tax on top of the payment
-
Calculating a Budget
Now that you understand your salary and net income, let’s learn how to use them to figure out your budget.
The calculator provides a detailed breakdown of how much you earn in a given time period. Once you add to this figure any bonuses or overtime pay you received and subtract taxes and other fees, you can get a sense of your weekly, monthly, and annual budgets.
Subtract your monthly living expenses from your monthly pay to understand how much money you have left over each month. This is the money that can go towards investing, savings, projects, or big purchases. For example, if you want to save up to buy a used car at the end of the year, you need to figure out how much you can put aside each week or month.
There are tons of benefits to knowing your weekly, monthly, and annual budget. By using the best salary calculator to figure out how much you earn in any given period, you can take control of your budget and manage your money responsibly.
Final Thoughts
While understanding the breakdown of your salary will not affect how much you are actually making, it can allow you to save money and budget appropriately. This calculation can help with setting a weekly grocery limit, figuring out how much of your salary is spent on rent, or saving for a down payment on a home.
