So here's where we get into the meat and potatoes. We're gonna start with a made up scenario. Here's Joe. Joe was overwhelmed with his money situation and decided that he needed to start a budget. He followed step one, and is now ready for step two. So first things first, we have to analyze what money Joe has coming in each month.
Now, sure, we could do this week to week or bi weekly to bi weekly, depending on how you pay your bills, and where you are in the process. But ultimately, I find it's easier to stick to a month to month. As you know, many companies like to get paid monthly. So sticking to the same plan provides uniformity and clarity. So Joe, he's married to a woman named Sally, and they have two children. Now to keep this example simple.
We're only going to talk about earned income. Earned income is money received In cash or kind for wages, salary, and commissions in exchange for performance of services by the employee. So income from an employer, we're not going to include unearned income which includes dividends and interest, lottery winnings, royalties, cash gifts, etc, etc. As you will see, these steps will work with unearned income, but I want to make sure you can crawl before you walk. As in you get the basic concepts before you include monies that are unpredictable. Okay, so back to Joe.
Joe is a garbage man and is paid $1,504 and 67 cents bi weekly. In most months, Joe will receive a check two times. So we multiply his $1,504 and 67 cents by two to get it to total monthly income of $3,009 and 34 cents. Now I want you to notice something here, you can choose to keep his total income at the $3,009 and 34 cents, or you can choose to round his income to the nearest $10. I like to round the numbers to create uniformity. So since this number is only $9 and 34 cents over 3000, I'm going to choose to round down, we're going to say that his total income is $3,000 a month.
In analyzing your income, you'll realize that such a small change will not affect your numbers enough to change the results. And on top of that, if you round down, you'll end up with extra money each month, even if it is only $9 and 34 cents. Okay, so next step, Sally. Sally has a part time job as a florist making $12 an hour. Now because Sally has a part time job in doesn't make a specific amount per month, we're going to find an average of Sally's last three paychecks. From Sally's paychecks, we see she worked 20 hours during the first pay period 28 hours during the second and 26 during the third.
We then get the average by adding those three numbers together and dividing them by three, giving Sally an average of 24.67 or 24. rounding down a week. Now, I want to point out that there are some months where this average isn't going to work. Sally isn't going to get an average of 24 hours, but those are months where you make adjustments. But for now, we will move forward using this average. Okay, next, we're going to multiply 12 by 24. To get Sally's average pay per period.
Which is 288. Sally gets paid once a week. So multiply the 280 by four, typically four weeks in a month, you get 1152. We then take Sally's income and add it to Joe's income, leaving them with a household income of 4152. And so now, we finished up to and we're ready to move on to the next step.