Budgeting & Savings (2024)

• Discretionary Income

  Discretionary income refers to a portion of an individual’s income that can be spent, invested, or saved after paying for personal necessities and taxes. In this context of discretionary income, “spending” is specifically for nonessential goods and services, such as jewelry or entertainment. Although credit cards can usually be used to purchase nonessential goods and services, accruing personal debt isn’t the same thing as having a discretionary income.
  

  Learn More

• Budget

  A budget is an estimate of what a person earns and spends within a specific time period (i.e., monthly, etc.). Budgets are useful tools for giving you a clearer picture of your finances and helping you identify any unnecessary or excessive expenditures. A budget also makes it easier to determine the timeline for long-term saving goals by calculating how much surplus savings you would have after a certain amount of time.

  Learn More

• Savings

  Savings refers to an amount of money remaining from an individual or household’s disposable income after paying all of their expenses and obligations for a specific time period (i.e., monthly, etc.). Savings includes both cash as well as cash equivalents, such as bank account holdings. Although savings can be put toward many different long-term life goals, it’s also crucial to have enough saved up for emergencies.

  Learn More

• Financial Health

  Financial health refers to the current state of a person’s monetary assets and liabilities. Although each person's financial circ*mstances are different, there are rough guidelines that can be used to measure anyone’s financial health. A financially healthy individual may have a steady flow of income, consistent expenses, and regularly increasing savings.

  Learn More

• Inflexible Expense

  An inflexible expense is a recurring expense that typically cannot be altered or eliminated. Inflexible expenses are often set at a fixed amount and payment schedule, such as a monthly rent payment. In addition to current sources of income, lenders closely examine monthly expenses when considering applicants for personal loans, mortgages, or auto loans.

  Learn More

• Quality of Life

  Quality of life refers to a non-financial measurement generally associated with job and life satisfaction. A person’s quality of life is highly subjective to their personal experience, though it is often tied to financial security (among other factors). The potential tradeoff between money and quality of life is typically taken into account when considering things like a career or a personal savings plan.

  Learn More

• Showrooming

  Showrooming is the act of visiting brick-and-mortar retailers in order to see products in person before buying them online for a cheaper price. This practice allows customers to try out an item before making a decision to buy it while also finding the best price, which also gives an edge to online retailers. Brick-and-mortar stores have used multiple different marketing tactics to combat showrooming.

  Learn More

• Average Propensity to Consume

  The average propensity to consume (APC) is a measurement of how much of an individual’s income is spent rather than saved. The APC is calculated by dividing average household consumption (i.e., spending) by average household income (i.e., earnings). On a broader economic level, a high APC can be a sign of a healthy economy, since consumer spending drives economic growth.

  Learn More

Page Sources

1. 50/30/20. "Income + Financial Stability in America." URL:http://fiftythirtytwenty.com/