There’s something that irks me about the term “disposable income.” It seems to imply that I have an extra money lying around that I could just as easily toss into the trash bin. It sounds like this disposable income is something for you to throw away. Most people would likely agree that, no matter how much money they make, they’re probably not inclined to throw any amount of money into the garbage can.

Yes, it is absolutely true that when you make more money, you likely spend more money too. When you make more money, you’re more likely to eat out at fancy restaurants, buy the latest gadgetry, and partake a few more of life’s luxuries. That’s understandable. It still doesn’t mean that you have money that you wish to dispose, right?

Discretionary Income

This is why I’m much more inclined to talk about discretionary income instead. It’s a matter of semantics and connotation. This income is to be spent (or saved) at my discretion. This is a decision for me to make, which is quite different from having “throwaway” money. The money has value and, whether I choose to slot it away at the bank or blow it on a night on the town is up to me. It’s at my discretion.

Economists and financial experts may be inclined to point out the formal definitions of the terms. Disposable income is total income less personal taxes; Discretionary income is total income, minus taxes and necessities (like rent/mortgage and food) to maintain a certain standard of living.

Needs, Wants, and “Play” Money

In a more casual sense, though, the two terms of used interchangeably to refer to the “play money” that people have after taking care of the basics. You’d spend this cash to buy new video games, travel around the world, and enjoy a fancy steak dinner, for instance. These aren’t things that you need; they’re just things that you are nice to have.

If you feel so inclined, this “play” money can be put to better use. You can invest it in a retirement plan. You can give it to charity. Whatever your decision, the way the money is spent (or saved) is at your discretion. It’s not disposable.

What do you think? Am I nit-picking or do I have a legitimate beef here?