What is disposable income?

Disposable income is the income that households have available for spending and saving after taxes have been paid. It is a key metric for economists because it provides insight into consumer behavior and overall economic activity.

There are two ways to measure disposable income: gross disposable income and net disposable income. Gross disposable income includes all sources of income (wages, salaries, interest, dividends, etc.), while net disposable income takes into account taxes and other deductions.

Disposable personal income (DPI) is a measure of the disposable income of individuals. It includes wages, salaries, pensions, and other sources of income after taxes and social security contributions have been deducted. DPI is a key metric for economics because it provides insight into consumer behavior and overall economic activity.

There are two ways to measure DPI: gross DPI and net DPI. Gross DPI includes all sources of income (wages, salaries, interest, dividends, etc.), while net DPI takes into account taxes and other deductions.

Special Considerations

The federal government uses a slightly different method to calculate disposable income, which is why the numbers you see from the Bureau of Economic Analysis (BEA) may be different from those reported by the Census Bureau.

In general, BEA figures will be higher because they exclude some types of income that are included in the Census Bureau’s definition. For example, the BEA does not include social security benefits in its calculation of disposable income, while the Census Bureau does.

The BEA also uses a different methodology to adjust for inflation. The resulting numbers are not directly comparable, but they provide a good general sense of trends in household income.

Definition of household disposable income:

Household disposable income is the total income of households after taxes and social security contributions have been deducted. It includes wages, salaries, pensions, and other sources of income.

Disposable income formula and example

The disposable income formula is:

Disposable Income = Gross Income – Taxes – Social Security Contributions

For example, if a household has a gross income of $50,000 and pays $10,000 in taxes and $5,000 in social security contributions, then their disposable income would be $35,000.

Tell me the average disposable income in the United States?

According to the U.S. Bureau of Economic Analysis, the average disposable income in the United States was $49,977 in 2016. This is the most recent data available.

What is the difference between disposable income and discretionary income?

***

How disposable income impacts your budget?

Your disposable income can impact your budget in a number of ways. If you have a low disposable income, you may need to cut back on your spending in order to make ends meet. If you have a high disposable income, you may be able to save more money or make bigger purchases.

Disposable income is important to consider when creating a budget. Be sure to take into account your taxes and other deductions when determining your disposable income. This will help you make the most of your budget.

What is Discretionary Income?

Discretionary income is the income that households have available for spending and saving after taxes have been paid and necessary expenses (such as food, shelter, and medical care) have been taken care of. It is a key metric for economists because it provides insight into consumer behavior and overall economic activity.

There are two ways to measure discretionary income: gross discretionary income and net discretionary income. Gross discretionary income includes all sources of income (wages, salaries, interest, dividends, etc.), while net discretionary income takes into account taxes and other deductions.

What is the difference between disposable income and discretionary income?

Discretionary income is the amount of money that households have available for spending after taxes and essential expenses (such as food, shelter, and transportation) have been paid. It is a key metric for economists because it provides insight into consumer behavior and overall economic activity.

What is Marginal Propensity to Consume?

The marginal propensity to consume (MPC) is the proportion of an increase in disposable income that is spent on consumption. It is a key metric for economists because it provides insight into how changes in income affect spending and saving behavior.

The MPC can be calculated using either gross disposable income or net disposable income. The gross MPC is the proportion of an increase in gross disposable income that is spent on consumption, while the net MPC is the proportion of an increase in net disposable income that is spent on consumption.

What is the Marginal Propensity to Save?

The marginal propensity to save (MPS) is the proportion of an increase in disposable income that is saved. It is a key metric for economists because it provides insight into how changes in income affect spending and saving behavior.

The MPS can be calculated using either gross disposable income or net disposable income. The gross MPS is the proportion of an increase in gross disposable income that is saved, while the net MPS is the proportion of an increase in net disposable income that is saved.