When talking about finances, you can’t get far without running into the term ‘current monthly income’. It’s used by lenders, creditors, investors, and so much more – but what does it actually mean? Well, let’s break it down.
What Is Current Monthly Income?
In simple terms, current monthly income is the total income that an individual or household receives on a monthly basis. This includes all income sources, even those where tax is not withheld from your paycheck. Common examples include wages, commissions, and dividends, and benefits from specific government programs like Social Security and unemployment.
Why Is It Important?
The fact that current monthly income is a commonly used measure to determine what products or services an individual can access makes it an essential tool. It’s often used to determine eligibility for government aid programs, loan repayment options, and other financial services.
How Is it Calculated?
The method for calculating current monthly income varies depending on the service or type of aid you’re seeking, so it’s important to verify what formula is being used. Generally, you’ll need to add up your gross income for each source for the most recent month prior to your application. Any income from previous months should also be included separately. This will allow you to have a precise calculation that factors in any fluctuations in your income throughout the year.
That’s it! Now you know what current monthly income is, why it’s important, and how to calculate it. When going through loan applications, credit applications, or applying for government aid and other financial services, being able to accurately calculate your current monthly income is key.