How to find discretionary money in your current income
Are you looking for a way to find discretionary money in your current income? Before you can find discretionary money, you need to know what it is. Some people get discretionary money confused with disposable income. Disposable income by definition is the amount of after-tax income that is available to divide between spending and personal savings, or also known as your net income. Discretionary money is an individual's income that they really have left for spending on things wanted not needed after the necessities (like rent, food, clothing, car insurance, gas etc.)have been taken out.
It is a fact that 57 million U.S. households now have discretionary income. Discretionary income varies for different people. Something that an older person would think would be a luxury such as a cell phone; a person in a younger generation might consider it a necessity.
Here are a few steps to take to find out how to find discretionary money in your current income.
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1st Sit down with all your finances and figure out how much income you have coming in each month. Take in everything from your current job to your investments and anything else that brings in income. Some people don't know that they even have any extra income left over after they pay their essential bills, because they never take the time to sit down and figure out where they are over spending and what really needs to be paid.
2nd Go over your finances and figure out how much is going out for the essentials each month. Essentials are things that are absolutely needed to live (for example food, clothing, house payment or rent, etc.). And no that does not include that extra pair of new shoes or the new snowmobile you want; those things would be purchased with what is considered discretionary income.
3rd Make a list of all of your essential bills. Prioritize your list from most important, such as the house payment or rent, and insurance, these amounts usually stay the same every month. Then figure out your utilities and so on until you get down to money for food and gas this is where you can really budget and be more flexible and decide where you can cut back. For instance brown bag it for lunch instead of getting take out every day at work.
4th After you go over your finances and take out the essentials, you can see how much is left over. It could be anything from $5.00 to $500.00 (hopefully it is not in the negative. I hate it when that happens). Who knows, with the right budget you might have a lot more discretionary income then you thought. This is where you begin to decide how much you have left over, or in other words extra money or (here is that word again) discretionary money. This is the money you are not going to feel as guilty spending because you know that your other necessary bills have already been accounted for. This is the money you save, or use for Birthday gifts, Christmas etc.
Hint: You can get a little more discretionary income if you are able to stick to your budget and not over spend where it is unnecessary.
If you choose to invest your discretionary income you might want to take a couple of things into consideration. How do you want to invest it, how much do you want to invest, and do you know where you want to invest it. If you do not know where to start, you might want to think about researching a couple of financial advisors and seeing if they can help you out in finding what will match with you and what you have in mind.
What you choose to do with your discretionary income is your choice. Some might want to invest it, others might want to save it for that new snowmobile, while others might go out and buy that extra pair of new shoes. The possibilities are endless.
