Discretionary Spending
Financial term in the Budgeting category
Definition
Non-essential expenses you choose to make, such as dining out, entertainment, subscriptions, and hobbies. This is the most flexible part of a budget and usually the first area to cut when trying to save more or reduce expenses.
Related Terms
Needs vs Wants
A fundamental budgeting concept distinguishing between essential expenses required for survival and well-being (needs) and non-essential expenses for comfort or enjoyment (wants). The 50/30/20 rule suggests allocating 50% to needs, 30% to wants, and 20% to savings.
Variable Expenses
Costs that fluctuate from month to month, such as groceries, utilities, gas, and entertainment. Tracking variable expenses closely helps identify spending patterns and opportunities to save.
Budget
A financial plan that outlines expected income and expenses over a specific period. Creating and following a budget is essential for managing money and achieving financial goals.
Frequently Asked Questions
What is Discretionary Spending?
Non-essential expenses you choose to make, such as dining out, entertainment, subscriptions, and hobbies. This is the most flexible part of a budget and usually the first area to cut when trying to save more or reduce expenses.
Why is Discretionary Spending important in personal finance?
Discretionary Spending is an important budgeting concept that helps individuals make better financial decisions. Understanding Discretionary Spending can improve your financial planning and help you achieve your money goals.
How does Discretionary Spending relate to Needs vs Wants?
Discretionary Spending and Needs vs Wants are related financial concepts. A fundamental budgeting concept distinguishing between essential expenses required for survival and well-being (needs) and non-essential expenses for comfort or enjoyment (wants). The 50/30/20 rule suggests allocating 50% to needs, 30% to wants, and 20% to savings.
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