Disposable income is the aggregate of income received by households in the form of wages and other income from various activities. For example, dividends, profits from renting real estate, selling shares and bonds. In this case, this type of income should be distinguished from the nominal. What is the difference?
How to determine disposable income?
First of all, it should be emphasized that it can be directed to the personal needs of consumption or accumulated in the form of savings. The difference between nominal income and disposable income is that the latter is determined after deducting all taxes and obligatory payments from the former. Disposable income is equal, for example, nominal income minus expenses for utility bills, funds for servicing a loan, etc.
It is important to note that in assessing real family income, current prices for goods and services should be taken into account. And, in addition, an indicator of disposable income. In other words, the real income of each family can be expressed in the quantity of products that its members can purchase for the proceeds of nominal income.
Thus, you can find a clear relationship between the growth rate of disposable income and the consumer price index for goods and services for a specific period, on the one hand, and the level of real income, on the other. For each family, real income in the amount of already existing property and previous accumulations are one of the most important indicators of well-being and well-being. Disposable income is an eloquent indicator of family affluence.
Use of disposable income
These funds are usually used for two purposes. Either the consumption of goods and services, or the creation of savings. The acquisition of the final product represents the satisfaction of the individual or collective needs of people. It should be noted that total disposable income is the sum of similar household incomes across the country. This indicator is a kind of litmus of the price level for goods and services. The following example can be given. A wealthy consumer looks at prices differently than a buyer with significantly lower real incomes.
For example, a family has an disposable income of 10,000 rubles per month. For this category of consumers, visiting a restaurant with an average bill at the level of this amount is akin to the event of the year. Whereas for a person with, for example, an annual real income of 10 million rubles, such a trip would be perceived as an ordinary business lunch. Disposable income - this is the real ability of a consumer to make purchases and create savings.
Impact on the economy
It should be noted that there are many different types of income. For example, personal and aggregate, national and gross, nominal and net, paid, real and disposable income. Indicators of the latter are one of the most important factors in assessing the standard of living of the population. Moreover, the average disposable income per person is taken into account.