Discretionary Income

Like disposable income, discretionary income is a thing macroeconomists pay attention to when they play doctor to the economy, taking its vitals in the consumer spending organ. While disposable income is just all the income you get to keep after paying your taxes, discretionary income is the income you have after taxes and after basic necessities are covered.

So discretionary income is what you’re leftover with once the government takes its taxes, your landlord takes your rent (or the bank takes your mortgage payment), and you’ve paid for food, utilities, transportation, some clothes, and other things you buy on the reg that you need to survive in the modern economic jungle.

Economists keep an eye on how consumers are choosing to spend their discretionary income. Are they shopping at the malls (er, Amazon) for things? Are they putting it in their savings accounts, or perhaps investing it? Do they even have any discretionary income because student loans and rent are eating up most of their disposable income? Since consumers make the capitalistic world go ‘round, analyzing aggregate discretionary income and where it’s going is key to getting a pulse on the economy’s health.