Total income before any taxes or other costs are deducted.
Income after taxes and other deductions such as EI and CPP. This is the amount of money that gets deposited into your bank account.
Income should include any money you get paid from part time or full time jobs, if you receive monetary gifts, work side jobs, or receive any other supplemental income.
When calculating your income from your paycheques, donít forget that there will be deductions from your gross income on each paycheque, including income tax, Canada Pension Plan (CPP), Employment Insurance (EI), company pension plan contributions, and health, life, and disability insurance premiums. After these deductions are taken out you are left with what you take home - your net income. You will need to build a budget based on this number to make sure you can cover all of your expenses.
How to calculate income for my monthly budget:
Decide how you want to budget Ė do you want to do an average of your earnings over the year? Then divide your annual net income by 12 to get your amount earned averaged out over the month.
Net Income / 12 = Average Monthly Income
Do you want to do a monthly budget based on actual earnings each month? If you get paid bi-weekly, there will be 2 months where you will receive 3 pay cheques. Start by determining what your actual bi-weekly salary will be: Net Income / 26 (this is the number of bi-weekly pay cheques in a year) * number of pay weeks in the month.
Grab the calendar and work out where your 3 pay cheques months happen, and set your budget up accordingly. While these extra paycheques may seem like ďfree moneyĒ, they are still part of your overall budget. Here are some ideas of what to do with those extra paycheques:
- Pay down debts
- Create an emergency savings fund (or add this to your existing savings account)
- Invest it
Budgeting and saving money does not mean going without. It is ok to spend some of your hard earned money on fun! But be careful not to go overboard when a windfall like an extra pay cheque comes in!
For more information about payroll deductions, download our Sample Paystub and How to Read a Paystub brochure.