It is the duty of every family to fulfill the needs of its family members and provide them all the comforts and facilities. Human needs are of three types: Necessities, comforts and luxuries. It is not possible to meet these needs without resources. Money is an important resource to meet these needs.
Standard of living depends on the income. More income leads to higher standards of living and less income to lower one. Therefore, it is very essential to earn money in order to meet the needs of the family, discharge the family responsibilities, and maintain the standard of living.
Money management means a balance in the income and expenditure of family income to meet the maximum requirements and achieve the goals of the family.
In modern times, money management is an important problem for families because money is a limited resource. It is very difficult to maintain a balance between income and expenditure with the limited income. Now we will see how to manage money so that balance is maintained between income and expenditure. To understand money management, first it is essential to know the meaning of income and expenditure.
Usually the earnings of a person is known as his income whereas this is only a part of his income. Perks and benefits which come at no price/cost are also indirectly become a part of his income. Use of human resources too becomes a part of the indirect income. Family income includes all those facilities and services which are obtained in a given period of time.
According to Gross and Crandall, “Family income is that stream of money, goods, services and satisfactions that comes under the control of family, to be used by them to satisfy needs, desires and to discharge obligations.”
Family income can be divided into three categories:
1. Money income
2. Real income
3. Psychic income
1. Money income
Income that family acquires in the form of money over a fixed period of time is called money income. According to Gross and Crandall, “Money income is defined as the purchasing power of the flow of money available over a given period of time.”
Money income is the money acquired by the family members after putting efforts. Money income can be earned in different ways like pay, wages, bonus, pension, interest, profit, gifts and levies, rent, royalties, etc. Money earned in this manner may be used for purchasing and engaging services. Spending money income gives satisfaction.
2. Real income
Real income is obtained from the efforts of family members or by spending money. According to Gross and Crandall, “Real income is a flow of commodities and services available for the satisfaction of human wants, needs over a given period of time.”
It includes all the goods, services and comforts which can be obtained by either spending money or by other means. Real income is of two types:
(a) Direct income
(b) Indirect income
(a) Real direct income.
It includes those services and facilities which the family uses without spending money. In absence of these, services and facilities, the family has to spend their money income. Sources of real direct income to a family are:
(i) Use of human resources.
Family members can earn income by using their human resources like knowledge, skills, interest, etc. For example,
• By producing vegetables in the kitchen garden.
• By doing household chores like cooking, cleaning, laundering, etc.
• Teaching children at home instead of sending them for tuition.
• By repairing electrical appliances, etc. In case these jobs are not done by family members, then they have to spend money on them. This savings become a part of our income.
(ii) Services and facilities provided by the Government.
• Free education in Government schools and colleges.
• Use of free health services in a Government hospital.
• Instead of spending money to buy books, magazines, newspaper, etc. from the market, borrowing them from public school or college library.
• Organising marriage ceremony or any other function in public place or community centre instead of in a hotel. Use of these facilities also saves money which becomes a part of our income.
(iii) Judicious use of family assets
• If you own a house, you can live in it and save money.
• If you have land in a village, you can grow fruits, vegetables, etc.
• You can rent a portion of your house or land which will add to your money income.
(b) Real indirect income
It in all those services and facilities which we by spending money or by doing extra e
(i) Fringe benefits. If a person extra benefits from his place of work, it to his income for example,
• Free accommodation in addition to
• Free conveyance
• Telephone facility
• Free education for children
• Servant, gardener to work at home,
(ii) Barter system
Exchange of a modify or service also adds to income, e.g.
• Helena knits sweater of her friend See: son and Seema in return teaches He daughter. Both are saving money w’ becomes a part of their income.
• In village, a farm labourer gets a part the crop in lieu of his wages. This is indirect real income.
(iii) Services of electricity, telephone internet, etc. may be availed after paying money for these.
Let us make the concept of income clear with the help of an example.
Seamier who works in a company has monthly income of? 50,000. This is his dir: income. Seamier uses his company’s bus to j to the office without paying any money, fare of the bus which he does not pay bear a part of his indirect income. Seamier does n pay any rent for the house as he lives in father’s house.
Therefore, the rent of the hour which he saves becomes his direct incomer medical assistance which he gets from his com1 pony is also his direct income. Simmer’s wife teaches her children, this saves tuition this saving is her direct income. Therefore, we can say that the family income of Seamier is not only? 50,000 per month but it also includes saving on account of bus fare, rent of house, tuition fee and medical assistance.
3. Psychic income
The satisfaction, person gets by spending money income and real income is called psychic income.
According to Gross and Crandall, “Psychic income consists of satisfaction which person derives from his real income.”
Psychic income is completely personal. It can differ for each individual and for (each family because it depends upon view and values of the individual. Each person gets different levels of satisfaction by using same goods under similar conditions. For example, some person may get total satisfaction by eating in a restaurant I while some other may not. It is difficult to estimate the level of satisfaction one gets by spending money. But judicious spending does help in increasing the psychic income.
It is clear from the above discussion that every family has different psychic income that helps in meeting the needs of the family. Irrespective of income, one gets satisfaction from the way the money is spent.