There Is No Such Thing as Disposable IncomeNovember 8th, 2010 by Michael Kwan
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?
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
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?
Filed under Money.