Definition
The money you have left after paying for necessities like taxes and bills. This is the cash you can use for spending or saving.
What to consider
- Know how much money you have left after paying essentials.
- It’s the extra cash you can use for fun or savings.
- Monitor changes as your income or expenses shift.
Real world scenarios
- After taxes and bills, Tina calculates her disposable income for entertainment and hobbies. She chooses to save half and spend half on personal treats.
- Jackson sees a boost in disposable income after a raise, which he allocates to boosting his emergency fund and taking a weekend trip.
- By lowering monthly streaming subscriptions, Connie frees up more disposable income for investing in stocks or contributing to her 401K.
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