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Disposable income
From Wikipedia, the free encyclopedia
Disposable income is the total amount of income an individual makes after direct taxes.
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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 refer to the customer's "disposable income" — based on the information here, the term they should be using is actually "discretionary income."
People that are living at or below the poverty line have no discretionary income.
- A simple discretionary income calculator -- even though this says it's measuring "disposable income," using the economist's language, it's discretionary income.
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