How to calculate my income?

Defining income sounds easy, but it actually isn’t. Even wikipedia has a hard time to define it, since the meaning differs from the perspective (law, economics, etc.).

To keep it simple you can add up every income source you have, like:

  1. Salaries
  2. Pension plan contributions
  3. Dividends
  4. Rents from stuff or real estate rented out
  5. Royalties
  6. Profits from owned businesses
  7. etc.

How to define the amount per Income source?

I take the value which is available to me, directly or indirectly. So if taxes or deductions are made which are not available to me, like unemployment insurance, I don’t count them in my income. To make it easy, use the amount which is credited in your bank account.

Be aware that it is relevant to know the “real” income of each source. The “real” income is what is left in your bank account after deducting every expense which is directly linked to the income source (which has not yet been paid when the income arrives in your bank account).

If your work contract states a salary of CHF 5’000 and you have direct deductions of CHF 500, CHF 1’000 income taxes and you need a car which costs CHF 500. You wouldn’t have these expenses without that job. If thats the case your real income is CHF 3’000.

Knowing the “real” income of each source will help you evaluate the value for you of each source. So don’t forget to add all expenses linked to the income sources as expenses and label them accordingly.

How to summarise and monitor my income?

I use a simple spreadsheet where I update the value of my income over time. You can create your own spreadsheet or use my personal FIRE template.

1 Comment How to calculate my income?

  1. Pingback: Financial optimisation – where to start? Giles.Money

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