Income refers to the money obtained by a person, family, or business in return for the provision of labor, services, investment, or profit. It is the basic determinant of expenditure, saving, and investment. There are different ways in which income is generated, such as:
Earning Income: It is a payment for job performed or work done associated with employment, business or self-employment.
Investing Income: Income earned by investment such as through profit sharing and interest from shares, bonds, real estate and so on.
Earning with No Active Efforts: This means making profits without actively seeking the profits for instance, profiting from buildings owned but not managed, receiving rights, or from a company one does not run.
Income Tax Disposable Funds by the Government: Welfare system-related payments such as unemployment and old age benefits, disability insurance benefits, and survivorship benefits.
Other Sources: Involves: insurance pensions, divorce settlements, child maintenance, etc., or any other periodic incoming cash flow.
Income is important in that it helps define which basic needs can be satisfied, how much can be set aside for future consumption, and how much, if any, is available for investment in self or other ventures. It is also important to manage judicious use of income by making a budget and saving some amounts for future purposes as doing necessary if one is to attain the financial goals within an expected long term period.
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