Discover

'Disposable income' is the total amount of income an individual makes after direct taxes.

Contents

Disposable/Discretionary

Poverty

See also

External links

Disposable/Discretionary

Another concept that is often confused with disposable income is 'discretionary income'. This is equal to disposable income ''minus'' the cost of the fixed expenses of life (such as rent/mortgage, food, car payments, insurance, etc.). It is income that can be saved or spent on goods and services ''wanted'', not ''needed''. Disposable income is gross pay minus taxes and deductions. In other words, disposable income is the same as "net pay". Unfortunately, the definition of discretionary income is fuzzier than that of disposable income, making it harder to measure.
When applying for a loan or a mortgage, banks often take into consideration the applicant's disposable income in order to assess the loan repayment capacity of the applicant.

Poverty

People that are living at or below the poverty line have no discretionary income.

See also

★ Household consumption expenditures

External links

★ A simple discretionary income calculator -- even though this says it's measuring "disposable income," using the economist's language, it's discretionary income.

★ US Bureau of Economic Analysis - Chart of American Disposable Income