The amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.
The amount of income left to an individual after taxes have been paid, available for spending and saving.
Calculated as
After tax income, calculated quarterly, that consumers have available for spending or saving. Economists view changes in disposable income as an important indicator of the present and future health of the economy. Disposable income or surplus income is what you have left after taxes and other government obligations—i.e. what you have left to live on.
Disposable income Vs personal income
The pretax income of individuals and unincorporated businesses. Personal income is an inferior measure of the economy compared with disposable income; however, personal income is easier to compute and is made available on a monthly basis, while disposable income is calculated on a quarterly basic.
Factors affecting Diposable income;
1) Capital Gain,
2) Real Income
3) Personal income
4) Tax Rate
5) Inflation rate
6) Monetary policy Of Govt general
7) economic conditions,
8) level of employment,
9) salaries and wage rates,
10) interest rate,
11) "Rising commodity prices and the VAT increase mean inflation is high and outpacing normal pay growth, putting a real squeeze on real earnings,"
Impact of Disposable Income
v Influencing the purchasing capacity
v More inclination for Saving
v Loking for investment patterns
v the increase in disposable income and credit access will return to normal and the effects of monetary policy on private consumption will resurface
Ways to increase Disposable income:-
1) Start a Business
2) Get a Raise - or a Second Job
3) Investing Income
4) Spend Less