Many times people use or hear the term “Disposable Income” and think – this is all the money that people have leftover to do whatever they please. Play money. Not play money is the Monopoly sense….but money with which to play.
Within Disposable Income all your expenses need to be accounted.
On the contrary – Discretionary Income is all the leftover money that one has after taxes and expenses have been taken out.
Discretionary income = (Gross income – taxes – necessities)
From both a personal and business standpoint, it is important to acknowledge both incomes.
For personal: Your disposable income needs to include things like food, mortgage, cars, utilities…all your normal expenses.
Then after all those are taken out – you can budget things like vacations, gifts, fun stuff from the discretionary income pile. $$$
From a small business owner aspect….you need to realize which income stream does your service or product fall into for your clients or customers.
It is pretty sweet if you are in the disposable income side. But don’t take that for granted. You need to keep yourself in a status that makes your service or product a “need” in their eyes.
If you happen to fall into the discretionary income part…that’s not a bad thing. People spend a lot of money of things they don’t technically need. And just because times are tough and people are cutting back, they aren’t cutting back on everything. Just make sure you are offering your service or product to the best of your ability, which will make it really hard to cut out of your customer’s lives.
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