What Is Your Household Income?

Your household income is money that you receive, mostly that you've earned by the sweat of your brow. Technically, every bit of money that you get is classified as income, but you don't need to count that $10 Aunty Sue gave you for your birthday. Go and splurge that on some fun thing - unless you need to buy food because you have no other money!

When thinking in terms of budgeting, you must include all money that you get, whether it is regular or irregular and whether it is the same amount or variable. To find out your income, gather up all your old pay stubs and bank statements for the last twelve months. Add them up and divide them by 12 to calculate your average monthly income.

But what if you have only been working for 6 months and have no household income before that? Then add up the 6 months worth and double it before you divide by 12. This will give you an approximate amount, something that you can work out a budget on.

What Should NOT Go Into This Home Income Calculation?

    Birthday money, because you don't know if you'll get the same amount (or any) next year.

    An inheritance - if it is a one-time thing. If a specific amount is paid to you every year, then you should include it. Note - one-off amounts for anything should be included in your income for tax purposes, but not for budgeting. If you have to pay something off over several years, then a budget that includes a one-time payment for something won't reflect your true income and thus ability to make repayments in the other years.

    The sale of your house or car. You must keep a record of it of course, but don't include it for budgeting purposes because it won't happen again next year - unless you buy and sell houses and/or cars for a living.

What Should Go Into This Calculation?

• Your salary from a second job.
• Financial help from parents.
• Interest on savings.
• Non-taxable income.

When you are working out what money you will have available each month to pay your bills with, don't forget it must be the net amount, not the gross amount. The gross amount is what you make without any deductions taken out. Remember that state and federal taxes will be deducted from your pay. Social Security and Medicare taxes will also be taken out.

Details on how to track your spending and find extra money from your income are here.>>>