How to calculate disposable income?

Jet

I'm not sure which is the best board to put this on, so feel free to move if necessary.

I was wondering how "disposable" income is actually calculated. Is it net income less housing costs and getting to work costs? Or should you deduct costs for food and clothing?

lilac_lady

I calculate disposable income as what's left from net wages after living expenses that have to be paid every month are deducted.
Mortgage/rent
Council Tax
Gas
Electricity
TV Licence (if you have one)
Household insurance

You can then work out what you have left and deduct transport and food budgets (which can be adjusted if necessary)

Then deduct debt payments (if you have any)

What's left is yours. If you have children there'll not be much that's yours!

geordie_joe

Jet wrote: »

Or should you deduct costs for food and clothing?

Yes, you should include anything you have to pay, or spend in order to live. You need to buy food and clothes, also prescriptions if you have an illness or condition that requires them. travel costs to hospital if you have to go regularly can also count.

~Chameleon~

The clue is in the word "disposable"

It is any part of your income that is not used to pay for essential living items such as housing, utilities, food and clothing, although many people would also class "luxury" items such as tv/sky/internet/holidays etc as necessary thus reducing their disposable income even further, which is fine if they can afford it without getting into debt.

It's what people usually work out to see if they can afford to take on any further financial commitments so it's not really a "one-size fits all" type of thing, much more personal and individual.