Disposable/Discretionary income
- Disposable/Discretionary income
Disposable income is gross income minus income tax on that income. [ [http://www.bea.gov/regional/definitions/nextpage.cfm?key=Disposable%20Personal%20Income BEA : Disposable personal income ] ]
Discretionary income is income after subtracting taxes and normal expenses (such as rent or mortgage and food) to maintain a certain standard of living. [cite web |last=Linden |first=Fabian |title=A Marketer's Guide to Discretionary Income (abstract) |publisher=US Department of Education |date=1998 |url=http://www.eric.ed.gov/ERICWebPortal/custom/portlets/recordDetails/detailmini.jsp?_nfpb=true&_&ERICExtSearch_SearchValue_0=ED310997&ERICExtSearch_SearchType_0=no&accno=ED310997 |accessdate=2007-12-27] 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:
::Discretionary income = Gross income - taxes - necessities
Use of discretionary income in high-income loan applications
When applying for a loan (mortgage, consumer loan), lenders may take into consideration a high-income applicant's discretionary income in order to assess the loan repayment capacity of the applicant. Discretionary income provides the lender with more information on the applicant's 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 percent of available income may be smaller than normal standards would allow, but the actual amount of money is still large. [cite web |last=Donav |first=Stef |title=No-doc loans let you get a mortgage when you don't fit the mold |publisher=pmbgloans.com |date=undated |url=http://www.pmbgloans.com/pdfs/InterestdotcomKruger6-06.pdf |accessdate=2008-01-14]
References
External links
* [http://www.disposableincome.net/ A simple discretionary income calculator] -- even though this says it's measuring "disposable income," using the economist's language, it's discretionary income.
* [http://www.bea.gov/briefrm/percapin.htm US Bureau of Economic Analysis - Chart of American Disposable Income]
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Disposable and discretionary income — Disposable income redirects here. For the album by punk rock band Snuff, see Disposable Income (album). Disposable income is total personal income minus personal current taxes.[1] In national accounts definitions, personal income, minus personal… … Wikipedia
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discretionary income — noun income remaining after deduction of taxes, social security charges, and basic living costs. Compare with disposable income … English new terms dictionary
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disposable income — The amount of personal income an individual has after taxes and government fees, which can be spent on necessities, or non essentials, or be saved. Bloomberg Financial Dictionary * * * disposable income disposable income ➔ income * * * disposable … Financial and business terms
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disposable income — noun income remaining after deduction of taxes and social security charges, available to be spent or saved as one wishes. Compare with discretionary income … English new terms dictionary
disposable income — dis*pos a*ble in come, n. (Economics) that portion of income which is available for spending on discretionary purchases; for individuals, it is usually calculated as total income less taxes. National disposable income, which is the disposable… … The Collaborative International Dictionary of English
disposable income — 1. the part of a person s income remaining after deducting personal income taxes. 2. (in national income accounting) the total disposable income of all consumers. [1945 50] * * * Portion of an individual s income over which the recipient has… … Universalium
