Disposable income and discretionary income are key economic indicators used to gauge companies' and individuals' financial stability.

However, they are different. Disposableꦚ income is what you have left over after taxes. Discretionary is what you have left over after taxes and necessities, such as a mortgage payment or rent.

Disposable Income

Disposable income is the amount of net income a household or individual has available to invest, save, or spend after 澳洲幸运5官方开奖结果体彩网:income taxes. When you receive a paycheck, disposable income is the net amount you receive in your check. Disposable incom🎃e minus all necessary payments equals discretionary income.

Disposable Income and the Stock Market

In the U.S., a large 澳洲幸运5官方开奖结果体彩网:increase in household disposable i𝐆ncome typically leads to a rising stock market, as jobs are🌱 plentiful and spending is up. An increase in demand for goods and services boosts the manufacturing and service industries' production and output.

Consumer spending is critical to the strength of the stock market and the United States' 澳洲幸运5官方开奖结果体彩网:gross domestic product (GDP). When disposable income rises, households may decide to invest and save (for instance, in an 澳洲幸运5官方开奖结🌟果体彩网:individual retirement account (IRA) or a 澳洲幸运5官方开奖结果体彩网:high-yield savings account) or spend on purchases.

When disposable income is down, consumers often spend and invest less, which will impact the stock market. When consumers are forced to become more thrifty, this may lead to a decrease in sales anꦏd earnings for corporations and businesses, causing stocks to slump.

Disposable Income Per Capita

Disposable income is a 澳洲幸运5官方开奖结果体彩网:key metric monitored by financial analysts and g﷽overnment officials because it provides a useful gauge for the overall strength of a country's economy. Disposable income is what economists use to monitor how much🍸 households are spending and saving.

The Organisation for Economic Co-operation and Development (O🎐ECD) compiles economic data for 37 nations, tracking and reporting the household disposable income per capita. Per capita income refers to the amount of money earned per person in a region or nation. The United States ranks at the top of the wealthiest countries with the highest disposable income per capita, at $51,147 per capita, according to the OECD website. Other countries that rank in the top ten with 澳洲幸运5官方开奖结果体彩网:high disposable incomes per capita include Luxembourg, Switzerland, Germany, and Australia.

Discretionary Income

澳洲幸运5官方开奖结果体彩网:Discretionary income is the amount of income a household or individual has to invest, save, or spend after taxes and necessities, are paid. (Necessities include 澳洲幸运5官方开奖结果体彩网:mortgages, rent payments, utilities, 澳洲幸运5官方开奖结果体彩网:student loans, and credit card debt.)

Discretionary Income Co⛦nsiderations for Student Loans

Understanding how your 澳洲幸运5官方开奖结果体彩网:discretionary inc𒅌ome impacts student loan debt can help you take advantage of federal student loan programs, such as income-based repayment plans.

There are four income-based plans offered by the federal government, each with discretionary income requirements. These plans set your student loan payment often below what you would owe on a standard plan. They offer a more affordable option that is based on income and family size. You must meet specific requirements in order to be eligible for these federal in🐻come-based repayment plans.

Saving on a Valuable Education (SAVE) Plan

This plan takes into account your disc🤪retionary income and allows you to pay approximately 10% of your income to your student loans.

Income-Based Repayment Plan (IBR Plan)

This plan accounts for 10% of your discretionary income, but only if you are a new borrower on or a𝐆fter July 1, 2014. Similar to the PAYE plan, you will not be charged more than the 10-year standard repayment plan amount. If you are a new borrower on or after July 1, 2014, the amount goes up to 15% but again, never more tha🦂n the 10-year standard repayment plan.

Income-Contingent Repayment Plan (ICR Plan)

This plan will charge you a repayment amount in whichever is the lesser amount, 20% of your discretionary income, "or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income."

I𝔍n this case, if your discretionary income goes up, so do your loan payments.

Note that when you are applying for a federal income-based student loan repayment plan, your discretionary income is calculated a little bit differently. Under SAVE, IBR, PAYE plans, your required monthly payment is generally a percentage of your discretionary income and it is tallied as such, according to the Federal Student Aid Office. "For all three plans, your required monthly payment is generally a percentage of your discretionary income. For the SAVE Plan, your discretionary income is the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services (HHS) Poverty Guideline amount for your family size and state. For the PAYE and IBR plans, your discretionary income is the difference between your AGI and 150% of the HHS Poverty Guideline amount for your family size and state." In addition, your payments are capped at a percentage depending on the program, your salary, and your family size.

How to Calculate Your Discretionary Income

澳洲幸运5官方开奖结果体彩网: When you calculate your discretio⛦nary income:

1. First begin with your disposable income: all the income left over after you pay taxes.
2. Next, you need to tally up and calculate all of your necessities like rent or a mortgage, utilities, loans, car payments, and food.
3. Don't forget to deduct taxes that will be owed.
4. Once you've paid all of those items, whatever you have left to save, spend, or invest is your discretionary income.
   

The Bottom Line

Disposable income and discretionary income both provide economists with data to measure consumer sp♓ending.

Your discretionary income comes out of your disposable income (after-tax money), which is used to pay for all necessities and ⭕non-essential goods and services. After you pay all your livin♓g expenses, the money left over to save, invest, or spend is your discretionary income.

If you are applying for federal student loan income-澳洲幸运5官方开奖结果体彩网:repayment plans, the U.S. government will calculate your discretionary income as the gross after-tax income for the year minus 225% of the poverty guidelines, as per your state and family size. It also takes into account any rise or fall in your income.