Q:

# How Do You Calculate Your Yearly Income?

A:

To calculate yearly income, consider earnings from all sources, sum all of these items over a particular period, and then translate the data to represent an annual basis. Income streams can vary, and calculating yearly income can help with financial forecasting.

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1. Consider earnings from all sources

Earnings include wages, salaries, tips, dividends and interest. In most cases, donations or gifts received are not considered income. The frequency of income may not be consistent. For instance, salary may come in the form of a monthly pay check, whereas dividends may not be paid until the end of the quarter. Document income from all sources with information relating to amount and payment date.

2. Sum all earnings items over a particular period

A period can be any time frame, whether it is a day, week, month, quarter or year. This period should be reflective of the frequency at which earnings are received. For instance, if you receive your pay check on a weekly basis, your income earnings period should also be weekly. Once you determine this period, total all income that is generated within the period.

3. Translate the data to represent an annual basis

Extend the period defined to represent an annual basis. For example, \$100 earned monthly translates into \$1,200 over a year. In most instances, you must use a multiplier to translate the periodic data into an annual figure. Finally, subtract any expenses used to generate income from the total to arrive at net income.

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