1. What is Discretionary Income?

Discretionary income is the amount of money left after subtracting essential expenses from total income. It represents funds available for spending, saving, or investing after necessary obligations are met.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Income \) — Total income before taxes (USD)
• \( Essential\ Expenses \) — Necessary living costs like rent, utilities, food, etc. (USD)

Explanation: This calculation shows how much money remains after covering basic needs, which can be used for discretionary purposes.

3. Importance of Discretionary Income

Details: Tracking discretionary income helps with budgeting, financial planning, and determining how much you can allocate to savings, investments, or leisure activities.

4. Using the Calculator

Tips: Enter your total income and essential expenses in USD. Both values must be positive numbers. The calculator will show your remaining discretionary funds.

5. Frequently Asked Questions (FAQ)

Q1: What counts as essential expenses?
A: Essential expenses include housing, utilities, food, transportation, insurance, minimum debt payments, and other necessary living costs.

Q2: How is this different from disposable income?
A: Disposable income is after-tax income, while discretionary income subtracts essential expenses from disposable income.

Q3: What's a good discretionary income amount?
A: This varies by individual circumstances, but generally 20-30% of income after essentials is considered healthy.

Q4: Should I include savings as an essential expense?
A: While savings are important, they're typically considered discretionary unless they're part of a mandatory retirement contribution.

Q5: How often should I calculate this?
A: Monthly calculations are most common, as they align with typical budgeting cycles.