Discretionary Income

Dictionary Says

Definition of 'Discretionary Income'


The amount of an individual's income that is left for spending, investing or saving after taxes and personal necessities (such as food, shelter, and clothing) have been paid. Discretionary income includes money spent on luxury items, vacations and non-essential goods and services.

Discretionary income is derived from disposable income, which equals gross income minus taxes.

Investopedia Says

Investopedia explains 'Discretionary Income'


Aggregate discretionary income levels for an economy will fluctuate over time, typically in line with business cycle activity. When economic output is strong (as measured by GDP or other gross measure), discretionary income levels tend to be high as well. If inflation occurs in the price of life's necessities, then discretionary income will fall, assuming that wages and taxes remain relatively constant.

Discretionary spending is an important part of a healthy economy - people will only spend money on things like travel, movies and consumer electronics if they have the funds to do so. Some people will use credit cards to purchase discretionary goods, but increasing personal debt is not the same as having discretionary income.


comments powered by Disqus
Hot Definitions
  1. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  2. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
Trading Center