Disposable Income: The Money, the Myth, the Legend

There’s this myth going around that once you make a certain amount of money, you’ll have what’s known as disposable income. Well, I’m here to debunk that myth because that’s all it is, a myth. You see, if you look up the word disposable in the dictionary you’ll find something similar to the following:

“designed to be used once or only a limited number of times and then thrown away”

And if you look up synonyms for the word disposable, you might find words like needless, unnecessary, trivial, and unimportant. Another synonym you might find, and the one that bothers me the most is…useless. 

I don’t know about you, but I don’t consider any of my money to be trivial, useless, or something I’d like to simply throw away. To me, all of my money is important and more importantly, has a purpose. 

Now, I know what you’re thinking. Disposable income isn’t money you are throwing into a garbage can somewhere and lighting on fire. It’s meant to signify money that isn’t needed to pay for necessities, I get it. By the literal definition of the term, yes you are correct.

I also agree, that with a certain salary or income level, you’ll have money that doesn’t need to be spent on paying your bills, building an emergency fund, investing, or toward any other financial staple you might find on a personal finance blog such as this one. All work and no play makes Jack a dull boy right?

However, that doesn’t mean you shouldn’t give careful thought and consideration to where that money is going and what it’s being used for, even if it’s toward non-essential spending. 

Calling this money disposable income still carries a bit of an “it doesn’t really matter what I do with this money” feeling, right? I think a better term for this money might be additional income, auxiliary income, or better yet, multi-purpose money.

I like multipurpose money the most. For one, alliterations are always fun, but it gives a better mindset about your money. Multipurpose money makes me think this money has a purpose, but it’s not dedicated to anything in particular. 

Let’s think of all the possible uses for multipurpose money. First, since this is first and foremost a personal finance blog, let’s start with some of the more fiscally responsible choices. You can budget this money to make additional payments on debts, like your mortgage or car loan. Investing more money than you normally do is never a bad idea either. You can’t go wrong pumping up the emergency fund either. 

Phew, okay, you get the idea, even though you don’t have to use the money toward necessities or other monetary obligations, it certainly doesn’t hurt to do so with your multipurpose money (I’m telling you, this will catch on)

Okay, okay, I get it. The money isn’t needed to pay for food, rent, cars, or anything else that is essential, time to have some fun with it right? To that, I say, sure!

But wait, isn’t that still disposable income then? No! Even when spending on non-essentials, it’s not a good idea to frivolously throw money around. Using your dispos…excuse me…multipurpose money, you should still improve your life or bring you joy in some way.

Maybe you’ll take guitar lessons, or learn another skill. Maybe you’ll take a trip to somewhere you’ve always wanted to go. There are a million ways to use the money to buy entertainment. Buying tickets to a concert, a video game, or a movie are all going to bring you joy in some way.

The point is, that your budgeting should still account for additional income and where it’s spent. When we begin to think of our money as disposable, then we have the wrong mindset. Even before spending multipurpose money, you need to think about if the purchase has value to you and will bring you joy. If not, then it truly was disposable money, useless.


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