Discretionary Expense

AAA

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".

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Step Costs

    Business expenses that are constant for a given level of activity, ...
  2. Consumer Discretionary

    A sector of the economy that consists of businesses that sell ...
  3. Lifestyle Creep

    A situation where people's lifestyle or standard of living improves ...
  4. Balanced Budget

    A situation in financial planning or the budgeting process where ...
  5. Discretionary Cash Flow

    Discretionary cash flow is any money left over once all possible ...
  6. Discretionary Income

    The amount of an individual's income that is left for spending, ...
RELATED FAQS
  1. Which economic factors most affect the demand for consumer goods?

    The consumer goods sector includes a wide range of retail products purchased by consumers, from staples such as food and ... Read Full Answer >>
  2. What is the difference between carrying value and fair value?

    Carrying value and fair value are two different accounting measures used to determine the value of a company's assets and ... Read Full Answer >>
  3. How can I calculate the leverage ratio using tier 1 capital?

    The tier 1 leverage ratio is used to determine the capital adequacy of a bank or a holding company, and it places constraints ... Read Full Answer >>
  4. Are noncurrent assets depreciated?

    Depreciation is an accounting method that allocates a tangible asset's cost over its life. Companies usually depreciate noncurrent, ... Read Full Answer >>
  5. How does analyzing a bank's financial statements differ from companies in other sectors?

    Just like a nonfinancial service company, a bank has to manage the trade-off between its profits and risks. However, two ... Read Full Answer >>
  6. What is the difference between current and noncurrent assets?

    Assets can be divided into two categories: current and noncurrent. Current assets are items listed on a company's balance ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Investing In Fine Wine

    If you fail to uncork profits in this market, you can always toast your loss.
  2. Budgeting

    The Beauty Of Budgeting

    Make it to the end of the month, before you run out of money.
  3. Taxes

    8 Financial Tips For Young Adults

    You don't need an MBA to learn how to save money and invest in your future.
  4. Entrepreneurship

    Run Your Finances Like A Business

    Think of yourself as your own little company. To make it run smoothly, you need to take a look at your books.
  5. Budgeting

    The Economics Of Pet Ownership

    Before you bring a furry friend into your household, make sure you can handle the hefty financial commitment.
  6. Options & Futures

    3 Money-Saving Cruise Ship Tips

    Many cruise costs are fixed, but it's the little extras that will put a big dent in your pocketbook.
  7. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  8. Investing

    Free Cash Flow vs EBITDA: Which Should You Analyze?

    FCF and EBITDA are two ways of looking at the earnings of a business. EBITDA might be better for comparison purposes, while FCF is good for valuation.
  9. Investing

    Key Financial Ratios For The Retail Industry

    The retail industry is measured on sales growth in existing store, forecasted based on foot traffic and ticket data, and the impact on profitability ratios.
  10. Professionals

    Know Key Financial Data Before Betting On Airlines

    The airline industry is highly cyclical. Investors need to understand where the industry is in the cycle in order to assign appropriate valuations.

You May Also Like

Hot Definitions
  1. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  2. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  3. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  4. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  5. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
  6. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
Trading Center