Disposable Income
BudgetingGlossary term
Definition
The amount of money left after paying all essential living expenses and taxes. This is the money available for discretionary spending, additional saving, or investing. Growing disposable income is key to building wealth.
Related terms
- Net Income (Budgeting)Your take-home pay after all taxes, deductions, and withholdings are subtracted from gross income. This is the actual amount available for spending, saving, and investing, and should be the basis of your monthly budget.
- Discretionary SpendingNon-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.
- Savings RateThe percentage of income that is saved or invested rather than spent. Calculated by dividing total savings by total income. A higher savings rate accelerates progress toward financial goals and financial independence.
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