Disposable Income?

Ever notice that people say things without thinking about them first? I do this all the time and one phrase I’ve used, but will never use again, is “disposable income.” Why would you ever dispose of income?

The ridiculousness of this phrase was first presented to me in the book “Your Money or Your Life” by Joe Dominquez and Vicki Robin. They write “Even the language of modern economics promotes consumption. What else would you do with disposable income besides dispose of it…”

The concept of disposable income comes from the idea that after all your expenses are paid, presumably including savings, the money left over is for you to spend on anything you want. Maybe you choose to go out to diner with your “disposable income” or maybe you spend it on your favorite hobby. But aren’t those things just categories in a balanced spending plan? Isn’t every penny accounted for somewhere?

If you keep track of your spending, knowing exactly how much is coming in and precisely where it’s going, then there is nothing left over. You might have spent it all, and increasingly it seems, you might have spent more than all of it by racking up credit card debt, but none of it was disposable.

There are only two things you can do with money. You can either spend it or save it. Sure you can invest it but that is just another form of savings. I suppose you could just throw it away or burn it but like I said earlier who would do that?

Successful people think differently about money. Every time money leaves their hands, the decision to part with it has been thoroughly weighed against other options. On the other hand people who struggle with money every day aren’t as conscious of their spending and that makes all the difference.

So don’t dispose of any of your money, spend it but spend it wisely after considering what else you could have done with it.