How to Calculate Real Disposable Income

Calculate your disposable income

Disposable income is money that you have to spend after your taxes and all of your fixed expenses are paid. Your disposable income, in other words, is the money you have to spend on whatever you would like each month. It is important to calculate your disposable income so you'll know how to budget wisely.

Difficulty:

Moderate

Instructions

1. Add up the amount of money you bring home from your paychecks each month. This means if you bring home two paychecks, you want to add the amounts together. Since most bills are paid monthly, it is easiest to calculate disposable income on a monthly basis. Furthermore, unless you're self employed, your taxes are taken out of your paycheck by your employer and the amount you actually bring home in your paychecks is a good starting place for calculating real disposable income.

2. Add up your required expenses including rent or house payments, car payments, utilities, payments for credit cards or other debt and payments for anything else you are obligated to pay monthly. You can also include things like gym memberships if you are locked into a contract, since this is money you have already promised out and must pay.

3. Subtract your expenses from the actual income you bring home. This number is your disposable income.

Tips & Warnings

• Calculating real disposable income is more difficult for self-employed people, since taxes are not withheld from their paychecks. Those who are self employed need to estimate their tax burden based on their tax bracket and income and then subtract this from their monthly take-home pay to get their real disposable income.

References

• Extranet: Disposable Income Worksheet
• CCCSCO: What Is Your Daily Disposable Income?

Resources

• Read this Article in Spanish