There is a myth that once you earn a certain amount of money, you have what is called a disposable income. Well, I’m here to bust 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 a limited number of times and then discarded”
And if you search for synonyms for the word disposable, you may find words like unnecessary, unnecessary, trivial and unimportant. Another synonym you might come across, and the one that bothers me the most, is… useless.
I don’t know about you, but I don’t think of my money as trivial, useless, or something I’d just like to throw away. To me, all my money is important and, more importantly, has a purpose.
Now, I know what you’re thinking. Disposable income is not money that you throw in a garbage can and set on fire. It is meant to denote money that is not needed to pay for necessities, I understand. By the literal definition of the term, yes, you are right.
I also agree that at a certain salary or income level, you have money that doesn’t need to be spent paying your bills, building an emergency fund, investing, or other financial resources that you post on a personal finance blog like this one. All work and no play makes Jack a boring kid, right?
However, that doesn’t mean you shouldn’t think hard and consider where that money is going and what it’s being used for, even when it comes to non-essential expenses.
To call this money disposable income still has a bit of a “it doesn’t really matter what I do with this money” feeling, right? I think a better term for this money could be extra income, auxiliary income, or better yet, multipurpose money.
I like multifunctional money the most. First, 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 spent on anything specific.
Let’s take a look at all the possible uses for multifunctional money. Since this is primarily a personal finance blog, let’s start with some of the more tax-efficient choices. You can budget this money to make additional payments on debt, such as your mortgage or car loan. Investing more money than you normally do is never a bad idea. You also can’t go wrong with pumping up the emergency fund.
Pfff, okay, you get the idea, even if you don’t have to use the money for supplies or other monetary obligations, it certainly doesn’t hurt to do this with your multipurpose money (I’m telling you, this will catch On)
Okay, okay, I get it. The money is not needed to pay for food, rent, cars or anything else essential, time to have fun with it, right? To that I say, sure!
But wait, isn’t that still disposable income? New! Even if you’re spending money on non-essentials, it’s not a good idea to throw it lightly. With your disposal… excuse me… multipurpose money, you should improve your life or somehow bring you joy.
Perhaps you will take guitar lessons or learn another skill. Maybe you’re going on a trip to a place 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 will all bring you joy in one way or another.
The point is, your budgeting still needs to factor in additional revenue and where it’s spent. If we start thinking of our money as a disposable item, we have the wrong mindset. Even before you spend multipurpose money, think about whether the purchase has value for you and will bring you joy. If not, it was really throwaway money, useless.
Jeff is a fan of all things finance. When he’s not changing the world with his blog, you can find him on a run, playing a Mets game, playing video games, or just playing with his kids.
This post Disposable Income: The Money, The Myth, The Legend
was original published at “https://haveyourdollarsmakesense.com/disposable-income-the-money-the-myth-the-legend/”
