Disposable income is not only an important indicator of your financial situation, but also related to your quality of life. It can make the difference between buying new shoes that you've been dreaming of for a long time, enjoying a trip that you can say you want, or even saving some money for a "contingency" in the future. So, what is disposable income?How do you calculate disposable income?
What is disposable income?
Disposable income, as the name suggests, is the income that you can dispose of, that is, the money left over after your income minus necessary expenses. Disposable income reflects your actual purchasing power and also influences your spending and saving behavior.
Calculation of disposable income
So, how do you calculate disposable income?In general, disposable income is calculated using the following formula:
Disposable income = total income - personal income tax - social insurance premiums - other mandatory expenses.
Among them, total income includes various income such as salaries, bonuses, interest, dividends, rents, transfer income, etc. Individual income tax is calculated according to the tax rate and deduction standard set by the state. Social insurance premiums include endowment insurance, medical insurance, unemployment insurance, work-related injury insurance, maternity insurance, etc. Other mandatory expenses include housing provident fund, rent, utilities, transportation, etc.
For example, let's say your monthly income is $10,000, of which your salary is $8,000, interest is $1,000, and dividends are $1,000. You need to pay personal income tax, social insurance premiums, housing provident fund, etc., as follows:
Personal income tax: According to the tax rate and deduction standard of wages, the personal income tax you need to pay is 8000 3%-500 = 190 yuan;According to the tax rate of interest and dividends, the personal income tax you need to pay is (1000+1000) 20%=400 yuan. Therefore, the total personal income tax you need to pay is 190 + 400 = 590 yuan.
Social insurance premiums: According to national regulations, the social insurance premiums you need to pay are 8000 105% = 840 yuan.
Housing Provident Fund: According to national regulations, the housing provident fund you need to pay is 8000 12% = 960 yuan.
Well, your disposable income is:
Disposable income = 10,000-590-840-960 = 7,610 yuan.
In other words, you only have 7,610 yuan per month that you can spend freely for consumption or savings.
The meaning of disposable income
Disposable income is important for both individuals and countries. For individuals, disposable income determines your standard of living and wealth accumulation. You can create a reasonable spending and saving plan based on your disposable income to improve your quality of life and financial well-being.
For countries, disposable income reflects the economic well-being and social equity of its citizens. The state can affect people's disposable income by adjusting policies such as taxation, social security, and provident fund, thereby promoting economic growth and social stability.
In conclusion, disposable income is the income that you can dispose of, the money that is left over after your income minus the necessary expenses. Disposable income is important for both individuals and countries, reflecting your real purchasing power and influencing your spending and saving behavior.