Disposable Income

AAA

DEFINITION of 'Disposable Income'

The amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.

Calculated as:

 

Disposable Income

Also known as "disposable personal income" (DPI).

INVESTOPEDIA EXPLAINS 'Disposable Income'

For example, let's assume your household personal income includes $100,000 from salaries and you are paying at the 35% tax rate. Your household's disposable income would then be $65,000 ($100,000 - $35,000). Economists use DPI to gauge households' rate of savings and spending.

In 2005, the average disposable personal income dipped into negative territory for the first time since 1933. This means that in 2005, Americans were spending their entire DPI and then tapping into debt for further spending.

VIDEO

RELATED TERMS
  1. Upper Class

    A socioeconomic term used to describe individuals who reside ...
  2. Over-Selling

    This occurs when a salesperson continues their sales pitch after ...
  3. Discretionary Income

    The amount of an individual's income that is left for spending, ...
  4. Discretionary Cash Flow

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

    The consumption function is a mathematical formula laid out by ...
  6. Residual Income

    The amount of income that an individual has after all personal ...
Related Articles
  1. Disposable income is the money a person has left over after all taxes have been paid.
    Investing

    Disposable Income

    Disposable income is the money a person has left over after all taxes have been paid. Other deductions that may affect the amount of disposable income are employment deductions for things like ...
  2. Investing Basics

    The Seasons Of An Investor's Life

    From a tentative spring to a comfortable winter, learn how to weather the phases of your investing journey.
  3. Savings

    10 Tips For Achieving Financial Security

    Follow this sound advice and plan for a comfortable future.
  4. Options & Futures

    Bloated Budget? How To Trim The Fat

    Blood, sweat and tears should belong in the gym, but your money deserves some training time too.
  5. Options & Futures

    Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.
  6. Budgeting

    The Beauty Of Budgeting

    Make it to the end of the month, before you run out of money.
  7. Options & Futures

    Increase Your Disposable Income

    Here are four quick and easy ways to up your spending money.
  8. Budgeting

    Budgeting While You're In College

    Test your money management skills as you work your way through university.
  9. Budgeting

    Kids Or Cash: The Modern Marriage Dilemma

    It now costs nearly $300,000 to raise a child for 18 years. Are you sure you're up for it?
  10. Budgeting

    The Economics Of Pet Ownership

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

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center