How to Calculate Spendable Income

Keep track of your spendable income to stay in the black.

When planning your budget, it is important to calculate your spendable income so you can stay within your limits and not overstep your financial bounds. Spendable income is also called after-tax cash flow or disposable income, because it represents the money you have to spend after taxes and other allowances.

Instructions

1. Figure out your gross income before taxes or any kind of deductions. Your gross income is how much money you make before anything comes out. This is the amount in your job description, company salary list or pay stub.

2. Subtract taxes and tax-sheltered deductions to determine your net spendable income. Tax-sheltered deductions include 401K payments, insurance payments or other withdrawals that you don't pay taxes on. If you receive Social Security or disability payments, you don't have to subtract anything.

3. Plan your budget according to your spendable income. Figure up your monthly bills for utilities, rent and insurance. Then, estimate how much you spend per month on groceries, travel, entertainment or clothes.

Tips & Warnings

• Another definition of spendable income calls for subtraction of costs of food, childcare, debt payments or other absolute necessities, leaving only extra money for entertainment or personal luxuries.

References

• All Business: Business Definition for Spendable Income
• U.S. Department of State: Department of State Standardized Regulations
• Fair Debt Collection: Disposable Income Explained
• Free Advice: What is Disposable Income?