It’s a no-brainer that your savings can be one of your most valuable assets when you’re faced with difficult financial situations. However, the best way to increase your savings is through a higher household income.
While cost-cutting or finding cheaper alternatives are some of the common money saving techniques, having a higher household income is a more effective way of saving more over the long run.
What Is Household Income?
Household income is the net or total amount of money earned by all the members of a household. This not only includes the gross annual salary of each member, but also income from other sources such as rent, interest, pension, freelance jobs etc.
These are all taken into account when determining the annual household income. To calculate the income of a household, members of the household need not be related to each other by birth or marriage. The only criterion is that they should live under the same roof.
Additional Reading: How To Take Stock Of Your Household Expenses
What Are The Important Factors That Affect Household Income And Savings?
The annual savings of a household is calculated by subtracting the total expenses incurred by the household from the annual household income. Here are four important factors that affect household income and savings:
Location: Where you live and the kind of work you do plays a huge role in determining your annual household income. If you live in a city that has a high demand for a specific skill set, which you happen to possess, then you have a good chance of earning a better salary.
The locality you stay in, the prices of commodities and services in the area you live in, cost of transportation etc deeply affect your savings. Thus, the location impacts both the household income and your savings.
Multiple Sources of Income: The number of people who earn in a household directly impact the household’s income and savings. If both you and your spouse are earning professionals, then your household income is bound to swell.
In case, your spouse is a home maker, then you could encourage him or her to search for ‘work from home’ opportunities like online data entry, freelance writing, local event planning, selling homemade food etc.
Apart from the salary you earn from your regular job, you can also try freelance jobs, renting out a room in your house or apartment etc to increase your source of income. The greater the source of income, the greater will the household income and savings.
Dependants: While multiple sources of income help increase savings, the number of dependents has an impact on the household income. The non-earning members of the household who rely on the income of earning professionals are deemed to be dependents. Spouses, children and old retired parents could all be classified as dependents.
Though retired parents don’t earn, they probably have retirement savings which could be invested wisely. Guide your parents to invest in Mutual Funds, stocks etc. Despite being dependents, senior citizens can certainly contribute to the income and savings of the household.
Healthcare: With the rise in inflation, costs of healthcare facilities have gone up considerably. Healthcare expenses can make a major dent in your savings, so it is certainly advisable to acquire a Group Health Insurance policy that is offered at many work places. By paying a nominal premium for group Health Insurance, one can enjoy a substantial amount of coverage for their spouse, children and parents as well.
Additional Reading: What Households Can Learn From The Union Budget
Now that you know how to increase your household income and savings, invest wisely and find ways to earn more money for a stable future.