Calculating Your Income

Discover how to accurately determine your total income by understanding the various elements of a compensation package. Knowing how to calculate your income is essential for budgeting and understanding your financial health. You'll want to understand your earned income or the money a person makes from work. Earned income comes in various forms, including wages, salaries, bonuses, commissions, and tips. You may also take on side hustles, freelance work, or be part of the gig economy to earn extra cash.

Unearned income is any money a person receives not from performing work but through other means, typically investments or assets. While starting these income streams requires effort or investment, maintaining them doesn't involve ongoing labor. This category includes various income types, such as business or rental income, dividends, interest, and capital gains earned on investments and savings.

Use this calculator to evaluate your current income situation so that you understand the baseline for any budgeting decisions you'll have to make now or in the future. If you're starting a career, you might not have any investment income yet. But that's where savings come in, allowing you to have your money work for you instead of earning all of your income based on your labor.

Turning on "Power Mode" will display the results of the calculations alongside the input fields. When "Power Mode" is off, descriptive information sits alongside the input fields for a more informative learning experience.
Employment Income
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A salary is a fixed regular payment provided by an employer, typically paid on a monthly or biweekly basis, but often expressed as an annual sum.

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An hourly wage is the fixed amount of money an employer pays an employee for each hour worked. Total hourly wages are based on the total number of hours employees worked during a given pay period, times their hourly wage.

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Tips, bonuses, and commissions are forms of additional compensation for employees. Tips are usually discretionary amounts given by clients, bonuses are extra payments awarded for meeting or surpassing specific goals, and commissions are a percentage of sales revenue the salesperson earns.

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Freelance & gig work work refers to temporary and flexible jobs as independent contractors rather than traditional employees. Pay is typically by assignment, project, task, or hour, without receiving the benefits granted to full-time employees.

Investment Income
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Dividends are cash payments or additional shares of stock made by corporations to their shareholders, usually as a distribution of profits. They are a way for investors to earn a return on their investment.

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Earned interest is the money gained over time through investments in interest-bearing financial instruments, such as savings accounts or bonds. It represents a return on the invested capital, growing the initial amount at a set interest rate over a specified period.

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Capital gains are the increase in value of an investment or real estate over its purchase price. When an asset is sold, the difference between the sale price and the original purchase price is the capital gain, which may be subject to taxation.

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Rental income is the money property owners earn from leasing out real estate or other assets to tenants. This income, which can be a significant source of revenue, is generally subject to taxation and must be reported on tax filings.

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Yearly Income Summary

Total Income
Employment Income Investment Income
Salary
Wage Income
Bonuses & Commissions
Freelance & Gig Work
Dividends
Interest
Capital Gains
Rental Income
Employment & Investment Total
Total Income

An important takeaway from this calculator exercise is that individuals can build a capital base when they save a portion of their current earned wages. To generate income, they can then invest this capital in assets such as stocks, bonds, real estate, or mutual funds. Over time, these investments can yield returns through interest, dividends, and capital gains. Individuals can reinvest this income to create a cycle of increasing wealth, utilizing the power of compound growth where the earnings generate further earnings, substantially increasing the value of the investment over a long period.