1. What is Discretionary Money?

Discretionary money refers to the amount of income left after subtracting all fixed costs (essential expenses) from total income. It represents the money available for savings, investments, or discretionary spending.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Total\ Income \) — All sources of income (salary, investments, etc.)
• \( Fixed\ Costs \) — Essential expenses (rent, utilities, loans, etc.)

Explanation: This calculation helps individuals understand how much money they have available for non-essential spending or saving after meeting all necessary financial obligations.

3. Importance of Calculating Discretionary Money

Details: Knowing your discretionary money is crucial for budgeting, financial planning, and achieving financial goals. It helps in making informed decisions about spending, saving, and investing.

4. Using the Calculator

Tips: Enter your total monthly or annual income and all fixed costs. The calculator will show how much money remains for discretionary use.

5. Frequently Asked Questions (FAQ)

Q1: What counts as fixed costs?
A: Fixed costs include rent/mortgage, utilities, loan payments, insurance, and other regular essential expenses.

Q2: How often should I calculate this?
A: Ideally monthly, as part of your regular budgeting process.

Q3: What's a good percentage of discretionary money?
A: Financial experts often recommend aiming for 20-30% of income as discretionary money, but this varies by individual circumstances.

Q4: Should I include taxes in fixed costs?
A: Yes, if your income is pre-tax. If using after-tax income, taxes are already accounted for.

Q5: How can I increase my discretionary money?
A: Either by increasing income or reducing fixed costs through budgeting and cost-cutting measures.