Disposable Income

Disposable Income (known as Discretionary Income in the United States) is simply the difference between what you earn and what you spend. If for instance, you had a net salary (after tax) of roughly two thousand pounds per month and your outgoings are thirteen hundred pounds, the amount that you have at your 'disposal' is seven hundred pounds per month. People do a wide variety of things with this disposable income, some spend it and some put it into ISAs and other savings accounts, to save for a rainy day.

Whenever discussing financial matters with the bank, they will often want to know what your disposable income is. This represents the amount of money that you can do something with and banks and building societies will want to capitalise on this.

If you are considering a loan or mortgage, the amount of disposable income that you declare informs the financial institution of whether you are likely to be able to afford to make the repayment and interest rate at which the loan or mortgage product is being offered. Likewise, when calculating some form of debt relief, the advisors helping you will want to know how much you can reasonably afford to pay back. This calculation again takes into account your income and expenditure to work out your outgoings and your disposable income level.