1. What is Income? Terminology to be discussed: Personal Income Employment Income Investment Income Gross Income Disposable Income Discretionary Income

2. Income Money that an individual or business receives from various sources, such as: wages or salaries for an individual Sales for a business Interest Dividends

3. Types of Personal Income 1. Employment Income Salaries and wages Commissions (earn a fixed % of a sale amount such as 3% on a sale of a $400,000 house which is equal to $12, 000) Piecework (earn a fixed amount per item produced) Profit sharing (earn fixed % or amount of a business’ profit) Benefits such as medical insurance, paid holidays, paid sick days, drug plan and dental benefits. 2. Investment Income Dividends Interest from savings accounts or other types of banking investments

4. Gross Income 3. Gross Income The total amount of income received by a person. AGI = Salary + Commissions + Dividends + Interest Earned ANNUAL GROSS INCOME = 90 000 + 10 000 + 1000 + 500 = 101 500 $ 1 000 $ 90 000 $ 500 $ 10 000

5. Gross Income Annual Gross Income = $101 500 Monthly Gross Income = $101 500 / 12 = $8458.33 BUT… You don’t take home or actually receive this amount. WHY… Deductions are made from your gross amount. Any many people would respond…But why

6. Gross Income Deductions Of the 90,000 gross salary, deductions are made as some of the money will go towards paying: 1. Federal income tax 2. into the Canada Pension Plan (CPP) 3. into government Employment Insurance (EI) 4. for any job benefits such as health insurance, a company’s pension plan, union dues, life insurance, etc.

7. Take-Home Pay aka – Disposable Income After deductions actual take home pay (disposable income) of $90 000 may be: Additional provincial taxes would also need to be deducted. Gross SalaryTake-Home Pay Annual$ 90 000$ 49 000 Monthly$ 7 500$ 4 083

8. 4. Disposable Income The amount of income that is left after taxes have been paid and any other deductions are made to gross income. Example: Disposable Income = Gross Income – Federal Taxes – Provincial Taxes – Property Taxes – EI Benefits – Health Benefits – Pension Deductions – other)

9. 2010 Federal Income Tax Brackets Taxable IncomeTax on this income $0 - $10,382 Nil $10 382+ - $40 970 15% $40 970+ - $81 941 22% $81 941+ - $127 021 26% Over $127 021+ 29% Canadian Revenue Agency. “What Are Income Tax Rates For Canada 2009.” 24 August 2009. 16 February 2010

10. 2010 Ontario’s Tax Brackets Taxable IncomeTax on this income $0 - $ 37 106 5.05% $37 108+ - 74 214 9.15% Over $74 214 11.16% Canadian Revenue Agency. “What Are Income Tax Rates For Canada 2009.” 24 August 2009. 16 February 2010 http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html#provincialhttp://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html#provincial

11. Gross vs Disposable (Take-Home) Income Example GrossDisposable Annual$ 101 500$ 57 510 Monthly$ 8 458.33$ 4 792.50

12. Note on Taxes Actual taxes and deductions may vary depending on a number of additional factors such as: 1. charitable donations 2. union dues 3. other pension payments 4. other forms of income received

13. What do we spend Disposable Income On? 1.Necessities in life - Life’s financial responsibilities - Mortgage payments, food, car payments, insurance, electricity, etc. 2.Discretionary purchases –Wants and luxury items –Vacations, eating out, the latest TV technology.

14. 5. Discretionary Income Money left over after paying for necessities that can be used to purchase luxury items

15. Budgeting How we allocate or distribute our disposable income amongst necessity spending and discretionary spending

16. Personal Money Management

17. Why We Buy? Five key factors that influence consumer buying decisions: 1. Disposable Income and Price 2. Status 3. Current Trends 4. Customs 5. Habits and Addictions 6. Promotions

18. 1. Disposable Income A low-income family spends a larger portion of its disposable income on necessities than a high-income family Depending on income level, people with young children or university and college bound children will have less discretionary money to spend Aging parents, and medical issues mean less discretionary income

19. Price Price affects the types of purchases and the quantity of purchases Some believe, the higher the price, the better the quality People will pay what they believe an item to be worth. If their perceived value is lower than the price, they won’t purchase the product or service.

20. 2. Status Some purchases are made to satisfy a desire to feel important Conspicuous Consumption Purchasing goods and services because of a desire to flaunt purchases and/or to impress others.

21. 3. Current Trends Fashion Clothing helps create an image May be an indicator of status, popularity or group identity Peer pressure can influence these purchasing decisions

22. Current Trends Technology Often comes into play with the phrase…”keeping up with the Jones’s” or in many cases, your friends. Keeping up to date for professional reasons Keeping up to date to identify with your children Individuals who love to play with the latest gizmo

23. 4. Customs and Habits Customs Family, religious, community and customs affect consumer choices. Examples include birthdays, Christmas, baptisms, barmitsfa, weddings, etc. Habits and Addictions Going to a movie every month, renting a movie every weekend, buying a monthly or weekly magazine, smoking

24. 5. Promotions Businesses spend a great deal of money on promotions and advertising to instill a desire and/or perceived need for a particular product and/or service. Businesses often use common insecurities to create a desire for their products.

25. The Wise Spender THE WISE SHOPPER 1. Compares what’s available from different stores and online 2. Looks for higher-quality products that will last 3. Makes sure a product has the right features before buying it 4. Asks the vendor about delivery and warranties 5. Does research before buying anything 6. Watches for clearance and promotional sales 7. Considers buying things second-hand 8. Avoids impulse buying

26. Planning and Comparing The following resources can help with your planning and comparing: 1. Visiting stores 2. Comparing catalogues and newspaper advertisements 3. Phoning stores or checking online 4. Customer references 5. Consumer Reports, MoneySense, and Globe and Mail

27. Source Wilson, Jack et al. The World of Business, 5 th Ed., Nelson Education Ltd., Canada, 2007