Explanation

Disposable income is the income left after taxes, which can be used for consumption or saving. Disposable income is the money you have left after paying taxes and other required expenses. It’s the money you can use to pay for things you want or save. What does disposable income include? Wages and salaries, Income from investments, Income from pensions and other social benefits, and Income from self-employment and unincorporated enterprises. What does disposable income not include? Taxes on income, wealth, and social security Interest on financial liabilities Change in net equity of households in pension funds Why is disposable income important? Disposable income is an important factor in determining household energy decisions. Higher disposable income is typically associated with greater access to modern fuels and energy sources. How is disposable income calculated? Disposable income is calculated by subtracting taxes owed from an individual or household’s total income. Related terms Discretionary income is the money an individual has to spend after their financial obligations have been satisfied.