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The second guideline in money income to see how it flows in to the family treasury during short and long periods.
A family has to maximize value of the income hence it has to recognize that the some of the short time flow makes up the long time stream. The process of fitting the use of short time income year by year into long time picture in order to make the long time stream meet predictable needs is the real essence of these guidelines.
Planned approach to finance family living requires that the families should foresee future needs based on knowledge of how the family will develop and arrange to have funds to meet these needs.
In analyzing the financial gains the current quantity of income, certainty of source and pattern of income flow are predicted over a period of time i.e. a year (Annual income).
Occupational choices affect the regularity and characteristic flow of income and the financial planning i.e possible. The standard of living that can be exchanged for financial resources is dependent not only on how much income is available, but even more importantly on the regularity and stability of income. For salaried workers with a regular employment, money income is usually predictable, not only by the year but also over life time. Both time periods must be considered to be realistic for those who have really to manage irregular income and with uncertain employment planning is more difficult and more necessary.
Income profiles: Few people are fortunate enough to have monthly expenditure demands that exactly parallel monthly income. Examining the characteristics of annual income through the use of a profile makes it possible to visualize the essential process of reconciling periodic monetary inflow and expenditure. Income profiles are more effective if they can be made for the year ahead to construct a personal annual income profile, list income from all sources on a form and chart the monthly totals on graph paper. The horizontal axis represents months and the vertical axis represent money.
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Months
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Income sources
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Total family income
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Salary
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Interest
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Dividends
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January
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February
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March
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Types of Income profiles;
Profile 1: This is typical of income derived from wages or salary that is constant throughout a year. People with retirement pensions or social security often have this type of annual profile. This income pattern is the easiest to budget and to focus on goals because it is highly predictable.
Money income is constant throughout a
Profile 2: This represents an increase in pays that continues throughout the remaining year.
Money income increases during the year
This profile is typical of any steady salaried worker who receives a rise in pay at some time during the year. The income during the remaining part of the year will be same and is predictable. A salary decrease would be represented by a deep line in profile line requiring downward adjustment in the expenditure pattern. However, the flow of income would still remain predictable and controlling its use would still be relatively certain.
Profile 3: represents a constant wage or salary for part of the year and nothing for the rest of the year. Periods of no income occur regularly and are predictable.
Savings can be accumulated during the remaining months to accommodate ordinary living expenses.
There is no money income during part of the year.
Profile 4: Also depicts the periods of income and no income but differs from profile 3. Here the time of unemployment is not regular. It is usually related to seasonal worker in agriculture and construction sectors. They have seasonal employment or may be unemployed at unpredictable periods when business is slow and have annual income that flow in this manner. The periods of no income are usually a cause for concern because they add difficulties in financial management. Long range goals are pushed aside in favour of immediate needs for food and housing, transportation and medical case. If income is low during months of employment, there is nothing to save for the unemployed period.
There is no money income at several intervals during the
Profile 5: This illustrates the income of a professional or business person whose income fluctuates with productivity or number of clients.
Some persons receive a salary with commission, with others; the irregular income is augmented by earnings from investments. When income flow in this manner, a definite spendable income is often declared/decided for planning the budget.
Money income is irregular
Profile 6: It represents an income with two major peaks and lower, more steady income throughout the year. Income of farm families derived mainly from sale of agricultural produce, dairy products is an example for this profile.
The income base throughout the year includes monitory value of real income obtained by the farm and used for the family as well as cash income from the weekly sale of produce.
Annual income profile 6: Seasonal peaks of Income are steadied by a lower constant income
7. Profile 7: It shows the probable income pattern of groups such as artists, writers, inventors, promoters etc. Who may have one or few sales a year but no regular base income as in profile 6. There is one single point of productivity when a large sum is received.
One brief period of money income during the year.
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