Disposable/Discretionary income
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Disposable income is gross income minus income tax on that income.[1]
Discretionary income is income after subtracting taxes and normal expenses (such as rent or mortgage, food, car payments, and insurance) to maintain a certain standard of living.[2] It is the amount of an individual's income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of.
Gross income - taxes - necessities = Discretionary income
When applying for a loan (mortgage, consumer loan), lenders often take into consideration the applicant's disposable income in order to assess the loan repayment capacity of the applicant. This ratio gives a richer view of capacity to repay than the debt-to-income ratio in the case where the applicant has a lot of debt, but also a lot of income, such that the % of available income may be smaller than normal standards would allow, but the actual dollars are still large.[citation needed]
[edit] See also
[edit] References
- ^ http://www.bea.gov/regional/definitions/nextpage.cfm?key=Disposable%20Personal%20Income
- ^ Linden, Fabian (1998). A Marketer's Guide to Discretionary Income (abstract). US Department of Education. Retrieved on 2007-12-27.
[edit] External links
- A simple discretionary income calculator -- even though this says it's measuring "disposable income," using the economist's language, it's discretionary income.
ja:消費
