How this calculator works
Disposable income is what remains after income tax and payroll deductions. Discretionary income goes one step further and subtracts the essentials a household must pay for: shelter, food, utilities, transport needed to work and any care that cannot be dropped. What is left is the money available for saving, extra debt repayment, recreation and other wants. The split is a budgeting judgement rather than a national-accounts concept, so the categories you count as essential matter. Two households with identical take-home pay can have very different discretionary income.
Formula
Discretionary income = disposable income - (housing + food + utilities + transport + child care + other essentials). The discretionary share is discretionary income / disposable income. A negative result means essentials exceed take-home pay and must be covered from savings or borrowing.
Worked example
Take-home income of $55,000 with $18,000 of housing, $9,000 of food, $3,600 of utilities, $6,000 of transport, $2,000 of child care and $2,000 of other essentials leaves $14,400 of discretionary income, or 26.18% of take-home pay.
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Frequently asked questions
How is this different from disposable income?
Disposable income is income after tax. Discretionary income is what remains after essential spending too, so it is the amount a household can truly choose how to use.
Should debt payments count as essential?
Only minimum required payments on debt can realistically be called essential. Discretionary repayment above the minimum comes out of discretionary income, so including it here would double-count it.
What counts as essential?
There is no fixed list. Housing, food, utilities and necessary transport are widely included. Recreation, dining out and subscriptions normally are not, though a phone or internet plan needed for work may be.