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".

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.

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. Balanced Budget

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

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

    The amount of an individual's income that is left for spending, ...
  6. Discretionary Account

    An account that allows a broker to buy and sell securities without ...
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. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
  8. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  9. Credit & Loans

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  10. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
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 formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  3. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!