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.

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.


Investment dictionary. . 2012.

Look at other dictionaries:

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  • discretionary income — dis.cretionary income n [U] the money remaining from your income after your bills have been paid, which can be spent on entertainment, holidays etc …   Dictionary of contemporary English

  • discretionary income — noun income remaining after deduction of taxes, social security charges, and basic living costs. Compare with disposable income …   English new terms dictionary

  • discretionary income — /dəsˌkrɛʃənri ˈɪnkʌm/ (say duhs.kreshuhnree inkum) noun income which is above that needed for subsistence and which may be spent at the earner s discretion. Compare disposable income …   Australian English dictionary

  • discretionary income — See income distribution …   Dictionary of sociology

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  • Disposable and discretionary income — Disposable income redirects here. For the album by punk rock band Snuff, see Disposable Income (album). Disposable income is total personal income minus personal current taxes.[1] In national accounts definitions, personal income, minus personal… …   Wikipedia

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  • income — money that is being earned by the business. Glossary of Business Terms * * * income in‧come [ˈɪŋkʌm, ˈɪn ] noun 1. [countable, uncountable] money that you earn from your job or that you receive from investments: • The family pays more than 50% of …   Financial and business terms

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