Household income is the money received into the home on a consistent basis, either through work or investments. Maximizing your household income ensures you have plenty of money when you need it. With multiple income sources, the impact of the loss of one income source is less on your overall portfolio. There are three main sources for household income: earned income, investment income and government assistance.
Wages and Salary
A steady paycheck from earned income is by far the most common form of household income. Your paycheck is earned through work, either as labor or selling your work product. You may earn an hourly wage or salary from a specific employer, which is paid on a regular basis. You may be self-employed, in which you own your business selling a product or service.
Make your money work for you with investments. You can earn additional household income through dividend payouts, interest and rental income. Buying and renting a property gives you a consistent rent payment each month. Placing your money in interest-bearing accounts, such as certificates of deposit and money market accounts, nets you earned interest on your money each month. Investing in the stock market may add household income in the form of regular dividend payouts.
When you fall on hard economic times, you may qualify for government assistance to bring in an additional income source. Unemployment benefits allow you to draw money from the government while you look for another job. When your income falls under specific poverty levels, you may qualify for welfare benefits, including food stamps and health insurance to help you get by. When you suffer a disability, you may draw Social Security disability benefits to help when you cannot work due to injury or disability.
Of course, retirement means you don’t have to go to a day job anymore. In retirement, your income comes from all three sources, including Social Security benefits, payouts from retirement accounts such as IRAs or 401(k)s and possibly a pension. A comfortable retirement requires careful planning to ensure you have enough income to survive without needing to work for a wage or salary.
- Ablestock.com/AbleStock.com/Getty Images