Discretionary Income: The Definition and Explanation

August 10, 2023 | Categories: Home, Personal Finance

What Exactly Is Discretionary Income?

Discretionary income is defined as the cash you have available to spend after your necessary payments are covered. Those necessities are typically made up of basic living expenses, such as housing, utilities, food, healthcare, and insurance costs. (In some cases, minimum payments toward debt may also be included.)

So what does discretionary income equal in daily life? It’s the post-tax money you can put toward things like eating out, entertainment, travel, clothing, electronics, and gym memberships. You might think of discretionary income as paying for the wants in life vs. the needs.

In this Guide, you’ll learn more about the definition of discretionary income, read examples of this type of income and how to use it, and understand how to calculate this money in your budget at Sofi.

It can be an important number to know, as you’ll see, especially if you’re repaying student loans.

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