For a growing number of people, tracking monthly income is a lot harder than it appears on the surface. Particularly with gig workers who get their income from a variety of sources, it can be hard to put the pieces together.
Considering there are now around 60 million people who take part in the gig economy, it’s time for a refresher course on how to track monthly income so the obligations of expenses, taxes, and planning for retirement can be met. Get out your calculators, and let’s go to work!
List All Income Sources
To accurately track your income, you’ll need to sit down and make a list of every company with whom you’ve done work. You don’t have to count up the dollars and cents just yet. Just go through the list and make sure they’re all accounted for.
Many of you might have W2 employment to throw into the mix as well. List everything!
Distinguish Net From Gross
Another obligation when you track your monthly income is to know the difference between gross and net incomes. Gross income is your pre-tax dollars. Net income is your income after taxes and any pre-tax deductions.
Knowing all these numbers is important because it will inform how you save and spend, whether you have enough money to meet your bills and expenses, and how much you need to save towards retirement.
Hold Out Taxes
When tracking your income in the gig economy, you’ll need to hold out taxes on your own. This can be tempting not to do when you get that full payment and see it can only go down from there (by about 30 percent of gross). If you go online, you can find a tax calculator to help you figure out how much of your income to delegate towards taxes.
Still, you’ll thank yourself for moving that money over to a separate account come tax filing season. Otherwise, you could end up getting hit with a big bill.
Write It Down
By now, you’ve probably made scribbles and notes to yourself. That’s not enough. You need a dedicated place where you can track your salary each month, whether it’s in written or electronic form.
As each payment comes in, mark it down along with any taxes that you need to remove. Add up the remainder to know what you have for living expenses, bills, saving, and spending.
The last part of how to track your income is to revisit it often. It’s quite easy to do if you have a full-time job but trickier when freelancing. As long as you revisit every month and add up what you’ve made over time and divide it by the number of months, you’ll grow more confident with what your approximate income is.
Lastly, use some form of technology to keep it all straight. W2 workers have it easy. Freelancers can if they realize it is easy to create pay stubs online. Find your platform, and put it to good use!
Knowing Monthly Income Will Empower You Financially
Your relationship with money can either be depressing or empowering. If you don’t know your monthly income, it’s likely to be the former instead of the latter.
You can stop that from happening by tracking your revenue streams, removing any due taxes ahead of time, keeping records, and revisiting often. For more financial tips and considerations, check out some of our additional posts!