Discretionary Income
Candlefocus EditorThe concept of disposable income is different from that of discretionary income. Disposable income is the total take-home pay of a person after taxes and other deductions. Disposable income is used to pay for all of a person's expenses - both essential and nonessential. Discretionary income, on the other hand, is the amount of money that remains after all necessary expenses are paid. It is this leftover money that can be used to pay for nonessential items.
Discretionary income has become an important gauge to measure the economic health of a nation or region. For example, an increase in discretionary income will indicate increased consumer spending, which serves as a strong indicator of an improving economy. On the other hand, a decrease in discretionary income will indicate reduced consumer spending, which serves as a red sign of decreased economic health.
Consequently, discretionary income has become an increasingly important factor in both personal and economic decision-making. It is important to keep track of this surplus of money when budgeting, as it will serve as a cushion in times of need or lead to increased consumer spending in an individual’s own local economy. To put it simply, discretionary income is the gateway to financial control, both for an individual and for an economy.