a. Main sources of income
- Payroll: Structure, parts and basic elements
Within the income of an employed person, the fundamental income is the one that they receive for their work, called salary.
The payslip is defined as the document with legal validity that the employees of the company receive, and in which the economic amount that the employee receives in exchange for their work is reflected.
The minimum content of the payslip must include:
- Identifying data of the company, and address of the work place.
- Basic data of the employee, type of contract, category and seniority in the company.
- Settlement period to which said payslip corresponds.
- Detail of the wage-related income and non-wage income that make up the gross remuneration of the employee.
- Detail of the withholdings and serial contribution that are made to the gross salary, well stipulated by the current legislation, or for another reason that must be applied to the payroll, such as advances or attachments on the payroll.
- Net amount to be received, since the payslip is considered a document certifying the payment of wages.
- Place of issue, signature and stamp by the company and the employee.
- Gross salary
The total money that an employee receives for the work they perform before the corresponding withholdings and contributions made on the payroll are deducted from it. Thus defined, the salary is a monetary remuneration, but the employee may receive other remuneration in kind (in the form of travel, use of a home, etc.).
- Net salary
It is the salary received by the employee once the aforementioned withholdings and contributions have been applied, that is, the money that the employee will actually receive in hand or that will be deposited into their account; therefore, the gross salary will always be greater than the net salary.
- Discounts
There are two different types of discounts: The discounts that are required by law and the discounts that must be applied under any other type of circumstances.
Discounts by law: They are established by law for tax or similar obligations corresponding to the employee; the company not only can, but it must make these discounts.
There are two different groups of withholdings: Those corresponding to Social Security contributions paid by the employee, and those corresponding to payments on advance of the employee’s income tax.
In the case of payments corresponding to income tax, a discount is madethrough the application of a percentage, which is considered a payment on account for the employee’s tax return.
In the event that the employee receives remuneration in kind, this is received according to the type of benefit, but the payment on account is deducted from the payroll.
- Allowances
Allowances include all those earnings that, not forming part of the base salary, are received by the employee due to certain circumstances that occur in their person, job, situation or results of the company:
- Personal allowances: They are received due to certain circumstances that concur in the person.
- Job position allowances: They are received due to certain circumstances that concur in the job that is performed, such as:
- Toxicity, hardship, dangerousness.
- Night time.
- Function performed.
- Allowances for quality or quantity of work: They are received by the employee because of carrying out a better or greater production than that determined as normal, such as:
- Incentives (bonus).
- Overtime.
- Contributions to a company pensions fund.
A pension is a social benefit granted by allocating a monthly or annual amount of money to a person who meets the requirements to be a beneficiary.
- Contributory pensions: Classes
They are economic benefits and generally of undetermined duration, the granting of which is usually subject to a prior legal relationship with Social Security (proving a minimum contribution period), provided that the other requirements are met.
Their amount is determined based on the contributions made by the employee and the employer, throughout the working life of the employee.
- Income from capital
Amounts received from the ownership of a financial or non-financial asset. The mere ownership of the asset or its transfer to a third party entails the right to receive certain income.
Although this type of income has normally less importance than the income from salary payments or pensions, it is necessary to consider it in order to prepare a comprehensive budget that includes all income items.
b. Main sources of expenses
- Current expenses
Current expenses are those in which a family unit ordinarily incurs throughout a financial year. These expenses are the ones that usually represent a greater percentage within the family budget, since they encompass every consumption expense that the family makes in a year. The current expenses include, among others, the following:
- Food.
- Housing.
- Leisure.
- Clothing and footwear.
- Energy.
- Transportation.
- Telecommunications.
- Taxes.
Throughout a year, a family unit must pay multiple taxes, directly or indirectly, to the Public Treasury. This expense item comprises, among others, the following taxes:
- Property tax: Taxes the value of real estate.
- Value added tax: Taxes the consumption of goods and services.
- Personal Income tax: Taxes the income received by an individual.
- Other taxes: This category includes other types of taxes such as taxes on alcohol, fuel, tobacco products, electricity, insurance premiums, mechanical traction vehicles, etc.
- Loans
A loan is a financial product that allows a person (borrower) to receive a certain amount of money (the so-called loan principal) from a credit institution (lender), in exchange for the commitment to return that amount, together with the corresponding interest, through regular payments (the so-called instalments).
Loans, whether personal or mortgage loans, are financial products whose financial burden usually represents a high expense in the budget of an average family.
- Insurance
An insurance is a contract by virtue of which, in exchange for the payment of a premium, the insurance company undertakes to compensate (indemnify) the policyholder in the event that they suffer any contingency in their person or their property provided for in the policy. It is, therefore, a protection mechanism against possible risks that may occur.
