What is Discretionary Income? & What Are WE Doing with It?



In our constant research of trending financial information, we came across this article from the Michigan Chronicle last week: (Michigan #1 for discretionary income in the United States and Detroit ranks as #5 city). The Trove Technology study that the article is based on covers the Metro Detroit region, and by doing so, offers a contrast to some of the census data and other things we have seen previously. If the information in this report (Official Name: The Trove Discretionary Income Study) is to be taken as truth, then we again must ask the question, “What are we doing with our money?”

A little background as we dive into this. By definition, Discretionary income describes the take home funds remaining after basic expenses and prior commitments have been paid. This money is what you would use to save, invest or spend. Many of us would consider this income “extra” money. So let’s think about this and ask again; “What are we doing with this “EXTRA” money?”

This article and the report it pulls from is telling us is that Michigan is at the top of the nation when it comes to having discretionary income over every occupation as part of our budget and that should be used to take advantage of opportunities. Not only is our state the best in America in this matter, but the city of Detroit is number #5 across all occupations among the big city regions of this country based on affordable housing cost with expenses almost 28% percent below the national average. Now according to recent census data, this is still the most poverty stricken big city in the United States, so something is not adding up here. Could it be that we are spending without planning ahead, or forgetting to create an emergency fund for ourselves, or not considering our retirement years?

The best way to take advantage of discretionary income is to have an assignment for every dollar that comes through your hands. Make sure you are setting up an emergency fund for yourself, so emergencies don’t create a personal debt crisis. Put some money away for savings, some for retirement, for starting a business or even for taking advantage of investment opportunities. What we always advise our clients is to plan for everything you spend and pay attention. Even if you are going to buy something off the wall, just plan for it. If you are in position to have discretionary income, it would be a shame to waste it frivolously. Extra money is never really extra, it just has no home. Designate your funds for assignment to do something for you now and in the future. Give that money a home to work for you as hard as you worked to earn it.

Founded in 2015, DNA Financial Services LLC has pledged to Educate, Empower and Equip the financial DNA of its’ clients now and for generations to come. The company offers a number of financial services designed to bridge the gap in wealth building education while aiding and advocating for the financial literacy of people from all walks of life.

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