Discretionary spend, also known as discretionary income or disposable income, refers to the portion of an individual's or household's income that is available for non-essential expenses or for personal choices, after meeting all necessary obligations and expenses. This discretionary income can be used for various discretionary spending categories such as entertainment, leisure activities, vacations, luxury items, hobbies, non-essential goods and services, and other personal preferences.
Discretionary spend is typically the income that remains after essential expenditures like housing, utilities, groceries, transportation, debt repayments, insurance, and other necessary bills are satisfied. It represents the freedom and flexibility individuals or households have in determining how to allocate their financial resources.
The level of discretionary spend can vary greatly among individuals and households, depending on factors such as income level, living costs, debt obligations, financial commitments, and personal circumstances. It is influenced by factors such as employment status, wage levels, inflation, taxation, and interest rates.
For businesses, understanding the concept of discretionary spend is crucial in targeting specific market segments. Companies often develop marketing strategies and products/services that cater to consumers with discretionary income, aiming to entice them to spend on non-essential goods and experiences.
Overall, discretionary spend reflects the financial capacity and choices individuals or households have in allocating their income towards expenses that are non-essential or optional, allowing them to enhance their quality of life, pursue personal interests, and indulge in discretionary purchases.
