When I was in graduate school, I made a whopping $550 a month from my part-time job, maybe a little more if I took other people’s shifts. I was rolling in the dough, you know what I mean? 🙂
Surviving on that amount of money was tough. While my parents were generous enough to pay for my rent, everything else was up to me, including utilities, food, and books. Discretionary income and splurging, when it did occur, was more likely on $2 taco happy hour specials than anything else.
Since then, my income has increased and, by default, so have my lifestyle expenses. The uniform of t-shirts and jeans are not acceptable at my current job, so clothing expenses are but one way my expenses have increased – not that I mind a great deal, because I like clothes.
On the other hand, I do fear lifestyle inflation too much. Personally, keeping my discretionary expenses low and controlling lifestyle inflation is something I’m very aware of, and I think I do spend too much money on “fun” things. Apparently, I’m not normal – many people have much more to spend on discretionary things than I do!
Discretionary Income Spending
According to these graphs by the Motley Fool, I should have anywhere between $14,000 and $19,000 in discretionary income to spend per year, based on my income and age. Discretionary income, according to these graphs, does not mean food, clothes, or healthcare – your own definition of discretionary income may be slightly different.
I have to say, my own opinion of discretionary income is radically different from this. I would say about half, or $6,000, would be considered discretionary spending in my budget annually. That’s because I don’t consider retirement savings as part of discretionary income; that’s a non-negotiable saving that comes before any “fun money.” That’s also because I just don’t have that much money laying around at the end of the year. $14,000 for discretionary income? Not unless I’m not paying my student loan bills!
Establishing Your Lifestyle Inflation Tipping Point
Many people may disagree with me. For people who’ve gone from making $20,000 a year to $60,000, increasing their lifestyle may be worth it to them. Some people can justify leasing brand new cars every 2 years, while others choose to spend their discretionary income elsewhere.
While there’s no one right way to spend your discretionary income, here are some things to keep in mind before justifying new ways to increase your lifestyle expenses:
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- Do these new expenses make me happy? If you’ve received a raise and want to go backpacking across Europe with your spouse, that might be a great way to spend your discretionary income. Making memories with a loved one is something you’ll treasure forever, as opposed to a pricey cable package.
- Will these new expenses improve my life? Many people swear by exercise classes, or meal delivery services, and can justify their expense. I’ve attended some life-changing exercise classes and, while I haven’t made them a regular part of my lifestyle, I occasionally allocate some discretionary spending to them sometimes. Maintaining a healthy lifestyle will certainly improve your life, and will save you money by keeping you healthier over a longer period of time.
- Will it make my life easier? Some things are worth learning to do the hard way, but sometimes it’s just easier to hire out jobs to someone else. Unless you love to spend time outdoors maintaining your backyard, you might consider hiring a lawn service to take care of regular maintenance. This can save you time to pursue more lucrative endeavors, like a side hustle, or let you spend more time with your family.
Everyone’s definition of discretionary income is slightly different. While many people do increase their lifestyles as their income increases, there are ways to do it reasonably without spending a lot of money. I’d like to know: how much would you say your discretionary expenses amount to every year? Also, how has lifestyle inflation impacted you, for better or for worse?