What is Personal Income?
Personal income refers to the income received by an individual / household in a country. It is a compensation received by an individual or household from different forms such as wages, salaries, and bonuses from employment or self-employment, Income from real estate investments in the form of rental receipts, dividends and distributions from number of investments, and income from businesses in the form of profit sharing.
- Personal income include dividends, employers’ contributions to 401k, salaries, bonuses, food stamps, profit-sharing collections, wages, and any other earning received by an individual.
- The national statistical organisations, analysts, economist track and determine the person income on a quarter basis or annually because consumers spending operates almost more than half of the economy.
- The personal income is used to refer the income of an individual or the total compensation get by an individual or a household.
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Understanding Personal Income
A personal is used to refer the income of an individual or the total compensation get by an individual or a household. The term personal income is often used at the time of taxation and calculation of national income. Personal income is also known as gross income as per the most of the jurisdictions. Personal income has a substantial impact on the consumption of a consumer. The national statistical organisations, analysts, economist track and determine the person income on a quarter basis or annually because consumers spending operates almost more than half of the economy.
In the US, the Bureau of Economic Analysis (BEA) tracks the personal income statistics of every individual or household on monthly basis and compares the result with the preceding month. The Bureau of Economic Analysis (BEA) also breaks the personal income of an individual in the different categories depending on the sources such income from business in the form of profit earning, income from employment or self-employment in the form of salary, wages and bonus, income from sole proprietorship, income from different investment in the form of dividends and distribution etc. By categorising the personal income of individuals of the country, the Bureau of Economic Analysis (BEA) agency make the analysis of the changes in the earning trends in an economy of the country.
In other words, personal income refers as the gross income of a household or an individual including all the received compensation or earning from different sources such as investments, wages, bonuses and salaries. In the concept of economics, personal income has a broader view as it define as the earnings from all the individuals or households in a country. Determining the level of domestic consumption is mandatory to understand the trending changes in an economy or as much of economy works by spending of the economy. Personal income include dividends, employers’ contributions to 401k, salaries, bonuses, food stamps, profit-sharing collections, wages, and any other earning received by an individual. Net pay is different from personal income; personal income is determined by adding the compensation of all individuals or households on a national level.
In economic terms, personal income defines as total earnings of an individual from investments, business, wages and other ventures. We can say that, personal income is the sum of all the earnings or income received by all the households or individuals in a country during a certain time period. It is the total amount of money received by the individuals or households in the form of either product or cash on monthly, quarterly and annually basis. Personal income is determined prior to subtracting personal taxes charged to the subject. Personal income is used an indicator that represents the real well-being of individuals and their ability to make payments before taxes. Personal income be apt to increase during the tome of economic expansion and move up or down slightly at the time of recession.
Frequently Asked Questions (FAQs)
How Personal Income and Personal Consumption Expenditures are different
Personal Income is the earnings that people received from wages, salaries, bonus, Social Security and other government benefits and also dividends, interest, profit from business, and other sources. Personal Income mostly compared with the personal consumption expenditures (PCE).
Personal consumption expenditures are used to measure the price changes in the consumer goods and service. Economists, agencies, and analysts use these changes to measure how the changes of personal income affect spending of consumers. For instance, if personal income rises significantly one month then personal consumption expenditures also rises, when consumers have more cash in their hands they also spend more on their basic goods and services.
Difference between personal income and Disposable Personal Income
There is a significant difference between the disposable personal income (DPI) and personal income. Disposable personal income (DPI) refers to the money has left in the pocket of the individuals or households in a country after the payments of taxes and it is determined by deducting personal tax and non-tax payments from personal income. On the other hand, personal income is a received income or earnings from the different sources including dividends, employers’ contributions to 401k, salaries, bonuses, food stamps, profit-sharing collections, wages, and any other. At the time of determination of personal income contributions to government social insurance it is not taken into account. Personal income is determined by adding the compensation of all individuals or households on a national level.