What is disposable income?

Disposable income, also known as disposable personal income or disposable income, is the amount of money we have left when we subtract taxes and Social Security payments from our total household income. This type of income is considered the engine of demand and the private consumption, since it refers to the money we have to save or consume goods and services. Would you like to know all the details about this very important concept for the economía doméstica? Then do not hesitate to read on.

How is disposable income different from personal income?

Sometimes the meaning of disposable personal income and total personal income can be confusing. However, although both concepts refer to the income of individuals, the truth is that there is a small nuance that differentiates them from each other: while disposable income is the amount of money that families have for their expenses or savings , the personal income It is that received by individuals and companies not incorporated as a commercial company.

How to calculate disposable income?

Bearing in mind that disposable income is the part of the national income that families have to save and consume products, we can calculate it by subtracting from personal income the taxes paid directly by individuals (such as taxes on income from natural persons or Corporation tax), the profits not distributed by the companies and the social contributions.

Likewise, to find disposable income we will also have to add those elements that increase the purchasing power of families, such aspensions or contributory and non-contributory unemployment benefits.

In this way we will know what is the exact amount of money that we have for our private spending.

Leave a Comment