Discretionary Expense

DEFINITION of 'Discretionary Expense'

A discretionary expense is a cost which is not essential for the operation of a home or a business. For example, a business may allow employees to charge certain meal and entertainment costs to the company in order to promote goodwill with employees. In the home, discretionary expenses are most often defined as things which are "wants" rather than "needs".

BREAKING DOWN 'Discretionary Expense'

In tough economic times, it may be necessary for households and businesses to cut expenditures in response to decreases in income. Thus, it is often desirable to track discretionary expenses separately from essential expenses so that it is easy to see where and to what degree expenses can be reduced. The concept of what is discretionary is subjective and may differ considerably amongst individuals and businesses.

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