Annual household income is the amount of money brought in by an entire household within a calendar year. Annual household income values are used for numerous financial involvements, such as mortgages, taxes, budgets and savings plans. Typically the annual household income is calculated as a gross amount rather than net, which means before any taxes or withholdings are deducted. As long as you remember all of the detailed ways that you earn money, calculating your annual household income is somewhat simple.
Add up the wages from all the members of your household. This includes anyone living in your home and may include your spouse, children or parents. Wages generally consist of your annual salary. If you are paid by the hour and you typically work 40 hours a week, your annual salary would be calculated by multiplying your hourly wage by 40 hours. That amount would then be multiplied by 52 weeks. For example, if you made $20 an hour, and multiplied that by 40 hours, your weekly income would be $800. That amount multiplied by 52 weeks would mean that your annual salary is $41,600.
Calculate all of the income that you and the members of your household receive from other sources besides your salary. Income sources such as this typically include tips, rental income, interest, contract or freelance works, pensions and dividends.
Total the income derived from these different sources into one sum. This amount is your annual household income. For example, if you earned $70,000 in salary, $10,000 in rental income, your spouse made $70,000 a year and your daughter brought home $20,000 annually, your annual household income would be $170,000.
- Be careful when using your annual household income to develop a budget or savings plan; remember that this amount is before taxes or withholdings. It is better to develop spending plans from the amount of money that you actually take home, or the net amount. Planning a budget from the gross amount can cause you to think that you have more money than you actually do.
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