About 19% of Americans think that they earn enough money. The cost of living continues to increase, while wages don’t move that much.
That means you have to take control of your finances more than ever. That starts with how to calculate your salary. You might know how much you earn per hour or per year. How can you use that to calculate a budget?
You don’t need a salary calculator. You just need to keep reading because this shows you how you can calculate your salary before taxes and after.
How to Calculate Your Salary
There are a couple of things that you need to know before you calculate your salary. The first is your gross income. This is your salary before taxes.
Your net income, or gross adjusted income, is your salary after taxes, health insurance premiums, and retirement contributions.
To calculate your salary before taxes for hourly workers, take the amount you get paid per hour. That’s listed at the top of your pay stub.
Take that hourly amount, multiply it by the hours you work per week. That’s 40 hours for full-time workers. Workers that earn $20 per hour for 40 hours a week make $800 a week.
To get your annual salary, multiply $800 by 52 weeks in a year. You’ll get $41,600. Calculate your monthly salary by dividing your annual salary by 12.
In this example, your monthly salary before taxes is $3466.66. For workers that get an annual salary, just divide your annual salary by 12 to get your gross income per month.
Calculating your salary after taxes is a bit tricky. There are a number of changing variables that influence the amount of taxes you pay.
These variables include your annual gross salary, the number of dependents, filing status, location, and tax status in your state.
You’ll automatically get 1.45% withheld for Medicare and 6.2% withheld for Social Security. You’ll want to check with the IRS Tax Withholding Tables to calculate federal tax withholdings.
Do the same for your state’s income tax. Be sure to check with your municipality for local taxes.
What Do You Do With This Information?
It’s time to make a budget with the salary numbers you calculated. Knowing what your salary is after taxes ensures you know how much is deposited into your account each month.
You can also double-check your withholdings to make sure the right amount of taxes are withheld. You don’t want to have to owe money for taxes.
Check your expenses and see if you’re able to save money or if you’re just breaking even. The guide at https://grantwydeven.com/personal-finance/how-to-budget/18-dollars-an-hour-is-how-much-a-year/ is a resource to reference if you make $18 an hour.
Adjust your spending if you find that you’re spending too much so you can save more or pay down debt.
Calculate Your Salary Before Taxes
No one likes to talk about money, but you need to take control of your finances. The first step is knowing how to calculate your salary.
Once you know your gross income and salary after taxes, you can create a budget. Check out the Personal Finance section of this site for more budget tips.