Disposable Income


Hi guys, I wonder how you guys are spending your first weeks of a new semester! Most of you should be having fun meeting new colleagues and some of you must be having a hard time listening to abstruse lectures. But so what, whatever you are doing, be reminded that the days you are spending everyday are the, and should be the best days of your life!



Today’s topic is on disposable income, which is also called as personal disposable income sometimes. Before we get into deep let me tell you what a disposable income is. It is a residue of total personal income minus personal current taxes and non-tax payments (interests, non-living expenditures) and lastly adding transfer incomes (social security expenditures, pensions). You might think that this formula is a bit complicated; indeed I myself think exactly the same too. So I will tell you straightforward what this is. A disposable income = [personal consumptions + personal savings]. Financial authorities usually use these stats in order to figure out equality of income distribution in national economy.

Recently, there had been a saying that a low-creditor that has a credit rating of grade 7 or below, plus people with disposable income less than 500,000 Won are to be constrained to issue a credit card. I did explain what a disposable income above is, but let me clarify a bit more here. What is a disposable income that credit card companies have set this, as a standard of issuing a new credit card? For example, a businessman made $100 by selling hamburgers in his store, but after he has paid rent, utility bills, and labor expenses he has about $10 left which is his net income value. You could consider this net value as a disposable income here. Let take a look at another example. Let’s say household B has an income of $400 and household C has an income of $230. First, we will take a look at household B’s expenditures. Every month, B spends $85 as a mortgage expenses, and $50 for golf lessons and another $85 for club meetings. In reality, actual income of his isn’t $400 but $100. Unlike B, C gets $230 but has been saving $50 every month having composure too. This means that C has a $180 of disposable income.

Yes it would be great, if you will be able to save up bit by bit every month but most important thing you guys have to do from now on is to find your disposable income. First, think about your fixed income, and minus all the fixed expenditures such as communication charges, food expenses, book costs and whatever it is that you pay periodically, usually, people having instable income that have to design fiscal austerity, cut down their food expenses on top priority indeed. Cutting down fixed costs might be not a good idea, consider all the possibilities and other options to make best plans to maximize your disposable income!

By Tony Kwon


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