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Understanding Income: How to List and Track Your Money

By listing and categorizing income sources, you can gain clarity on your financial resources, prioritize saving, control spending, and allocate funds towards financial goals.

Income is money earned from employment and investments.

What is Income?

Income refers to the money you earn from various sources over a specific period, typically monthly or annually. It is a vital component of personal finances and is the primary means of sustaining one’s lifestyle, covering expenses, and achieving financial goals.

Types of Income

  1. Earned Income: Money earned through active participation in work or employment. This includes salaries, wages, bonuses, commissions, tips, and other compensation from employment-related activities.
  2. Passive Income: Income generated from investments, assets, or business activities in which the individual does not actively participate. Examples include rental income from properties, stock dividends, interest from savings accounts or bonds, and royalties from intellectual property.
  3. Portfolio Income: Money derived from investments in financial assets such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). It includes dividends, interest, and capital gains realized from buying and selling investments.
  4. Side Hustle Income: Money earned from part-time jobs, freelance work, gig economy platforms, or entrepreneurial ventures outside of traditional employment. Side hustles provide additional financial flexibility and can supplement primary sources of income.

Gross Income versus Net Income

Gross income refers to the total earnings an individual receives from all sources before deductions or taxes are withheld, including salaries, wages, bonuses, and other forms of compensation.

On the other hand, net income, also known as take-home pay, represents the amount of income after subtracting taxes and deductions from gross income, reflecting the actual amount of money received.

With budgeting, you will use net income as that is the true amount of money left for personal use. All other income sources can be listed as received (taxes are calculated when filing your tax returns).

Income Tracking for Budgeting

The first part of budgeting is listing your income to better understand your financial resources. Accurately tracking income sources helps to create a more effective spending plan.

Here’s how to track and list various types of income.

Source of IncomeDescriptionAmount ($)
SalaryMonthly net income from primary job4,000
Freelance EarningsIncome from freelance graphic design work500
Rental IncomeMonthly rent from investment property1,200
DividendsQuarterly dividends from stock portfolio150
Interest IncomeMonthly interest from savings account50
Side Hustle IncomeIncome from driving for a ride-sharing app300
Total Monthly Income6,200

Why is Tracking Income Important?

Let’s consider Eddie, who wants to create a budget to manage his finances effectively. He tracks his income by listing all sources:

  1. Salary: Eddie earns a monthly net income of $4,000 from his full-time job as a marketing manager.
  2. Freelance Earnings: Eddie also does freelance graphic design work, earning an additional $500 per month.
  3. Rental Income: Eddie owns a rental property and receives $1,200 in rent from his tenants each month.
  4. Dividends and Interest: Eddie earns $150 in dividends from his stock portfolio and $50 in interest from his savings account each month.
  5. Side Hustle Income: Eddie occasionally drives for a ride-sharing app and earns an extra $300 per month.

By listing and totaling these sources of income, Eddie calculates his total monthly income to be $6,200.

This comprehensive understanding of his income allows Eddie to create a budget that aligns with his goals and ensures he lives within his means.

Start tracking your income today to take control of your finances. Tracking all sources of income is essential for effective budgeting and is the first step in creating an income strategy.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of phroogal.com and thesmilelifestyle.com. His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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