Family Income
Family income is the total flow of money, goods, services and satisfactions available to the family. The exam tests types of income, sources, factors affecting income and the difference between gross and disposable income.
Core concepts
- Money income: salary, wages, rent, interest, dividend, profit, pension and fees.
- Real income: goods and services the family enjoys without direct payment, such as home-grown vegetables, own labour, gifts in kind, free school or health services and the use of owned durable goods.
- Psychic income: non-measurable satisfaction, prestige, security, love and health.
- Sources: primary (farm, business), secondary (salary, profession) and transfer payments (pension, scholarship, gifts).
- Gross income is total income before deductions; disposable income remains after taxes and compulsory deductions; discretionary income remains after essentials.
- Factors affecting income: education, skill, occupation, health, family size, location and economic conditions.
Worked example
A family earns a salary of ₹40,000, rent of ₹5,000, grows vegetables worth ₹2,000, receives a pension of ₹3,000 and values a grandmother's childcare at ₹5,000. Salary, rent and pension are money income; vegetables and childcare are real income; the respect earned by the family business is psychic income. If tax is ₹2,000, disposable money income is ₹40,000 + ₹5,000 + ₹3,000 − ₹2,000 = ₹46,000. The reasoning is to classify before adding and to keep real income separate because it is not cash.
Traps
Counting only cash; calling pension psychic income; treating real income as only farm produce; confusing gross with disposable income; adding psychic income to cash.