Chapter 3
Budgeting: Keeping Track of Your Money
71
Discretionary Income
After you total your expenses and subtract from your income, hopefully
you will have money left over. This extra money is called discretionary
income. Discretionary income is money that remains after you have paid for
regular or needed expenses. This is money that you can put in savings or use
for leisure or other activities. It is also called disposable income. If you do not
track your income and expenses using a budget, you may fi nd that you have
no discretionary income. To calculate discretionary income, subtract your total
fi xed and variable expenses from your income.
Income – Fixed and Variable Expenses = Discretionary Income
Example 3-3
In Example 3-1, you learned how to calculate weekly expenses. In the fi rst
example, the weekly expense total for Carlos Acosta was $92.99. Suppose
Carlos spends this much every week. Will he have enough money to cover his
expenses based on his September income as shown in Figure 3-1? What will be
the amount of his discretionary income?
Weekly spending $92.99
Number of weeks × 4
Total monthly expenses $371.96
Monthly income $493.42
Monthly expenses – 371.96
Discretionary income $121.46
You
Do the Math 3-3
In the You Do the Math 3-1 activity, you found the weekly expenses for
Carlos. If Carlos spends this much every week, will he have enough
money to cover his expenses based on his September income as shown
in Figure 3-1? What will be the amount of his discretionary income?
Weekly spending _________
Number of weeks _________
Total monthly expenses _________
Monthly income _________
Monthly expenses _________
Discretionary income _________
Money that
remains after
expenses are paid is
also referred to as a
surplus. When there
is not enough income
to pay all expenses,
this is called a deficit.
You may recognize
the terms surplus and
deficit from when
government spending
is discussed on TV.