Glossary
Discretionary spending
Discretionary spending is money spent on things you chose rather than things you were committed to. It is the part of a budget that can change next month without renegotiating anything.
The distinction is about commitment: a gym membership on a twelve-month contract is not discretionary until the contract ends, and an expensive but cancellable subscription is.
It is the part of a budget you can change this month, which is why separating it from fixed expenses is the first useful cut in any category list.
Related terms
- Fixed expenseA fixed expense is a recurring cost of roughly the same amount each period: rent, a loan instalment, insurance, a subscription. It is predictable, which makes it easy to plan and easy to forget.Read
- 50/30/20 ruleThe 50/30/20 rule splits after-tax income into 50% needs, 30% wants and 20% savings or debt repayment. It is a starting allocation, not a law, and is meant to be adjusted to your cost of living.Read
- Cash flowCash flow is the money that came in minus the money that went out over a period. Positive cash flow means you finished the period with more than you started; negative means you drew down savings.Read
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