Where Is Your Money Going?
Where Is Your Money Going?
Most people focus on their income ... on how much they make per month or per year, Although, this is important for a person'w financial well-being, it is equally important for them to focus on how much they spend and keep.
Expenses may be classified as either essential or discretionary spending. Households incur two types of expenses. Some expenses are either enforced by law (such as income taxes and health insurance) or are essential to keeping the household running (such as personal housing, food and clothing, and transportation costs). These expenses are essential expenses, as the income earner does not have the option of not paying them without incurring consequences. Simply said, such expenses are essential for survival and therefore may be defined as needs.
On the other hand, discretionary expenses are optional expenses that are not necessary to run a household. In other words, the income earner can pay for these goods or services at his or her own discretion. Discretionary expenses are most often defined as things that are “wants” rather than “needs”.
Although the definitions are clear, the concept of what is discretionary is subjective and may differ considerably among individuals. For some households, what may be classified as an essential expense in good times might be considered a discretionary expense in tough times. As an example, although a car is required for transportation, which is necessary, a household might decide to sell the car and use public transport instead to get out from a car loan.
Do you want to learn more on how to classify your expenses as discretionary or essential? Download my FREE eBook - The 4 Stages of Building Wealth .
Expenses may fall into any of the following types:
• Income taxes
• Food and clothing
• Medical insurance
• Property taxes / real estate taxes for personal home
• Home mortgage or rent
• Utilities
• Personal home maintenance
• Personal home insurance
• Personal home household improvements
• Student loan payments
• Charity
• Travel and leisure
• Credit card payments
• Car loan payments
• Personal loan payments
When I first saw the list in front of my eye, it was relatively straightforward to categorize expenses such as taxes, home mortgage, rent, utilities, home maintenance, insurance, education, food and clothing under essential expenses. Some expenses like household improvements, charity, travel and leisure were easily categorized as discretionary expenses. The remaining items on the list, which consisted of credit cards and other loans payments, required detailed examination to evaluate whether the items purchased were discretionary or essential.
Learn More!
Get The Employee Millionaire Audio Book For Free With 30 Day Audible Trial
Most people focus on their income ... on how much they make per month or per year, Although, this is important for a person'w financial well-being, it is equally important for them to focus on how much they spend and keep.
Expenses may be classified as either essential or discretionary spending. Households incur two types of expenses. Some expenses are either enforced by law (such as income taxes and health insurance) or are essential to keeping the household running (such as personal housing, food and clothing, and transportation costs). These expenses are essential expenses, as the income earner does not have the option of not paying them without incurring consequences. Simply said, such expenses are essential for survival and therefore may be defined as needs.
On the other hand, discretionary expenses are optional expenses that are not necessary to run a household. In other words, the income earner can pay for these goods or services at his or her own discretion. Discretionary expenses are most often defined as things that are “wants” rather than “needs”.
Although the definitions are clear, the concept of what is discretionary is subjective and may differ considerably among individuals. For some households, what may be classified as an essential expense in good times might be considered a discretionary expense in tough times. As an example, although a car is required for transportation, which is necessary, a household might decide to sell the car and use public transport instead to get out from a car loan.
Do you want to learn more on how to classify your expenses as discretionary or essential? Download my FREE eBook - The 4 Stages of Building Wealth .
Expenses may fall into any of the following types:
• Income taxes
• Food and clothing
• Medical insurance
• Property taxes / real estate taxes for personal home
• Home mortgage or rent
• Utilities
• Personal home maintenance
• Personal home insurance
• Personal home household improvements
• Student loan payments
• Charity
• Travel and leisure
• Credit card payments
• Car loan payments
• Personal loan payments
When I first saw the list in front of my eye, it was relatively straightforward to categorize expenses such as taxes, home mortgage, rent, utilities, home maintenance, insurance, education, food and clothing under essential expenses. Some expenses like household improvements, charity, travel and leisure were easily categorized as discretionary expenses. The remaining items on the list, which consisted of credit cards and other loans payments, required detailed examination to evaluate whether the items purchased were discretionary or essential.
Learn More!
Get The Employee Millionaire Audio Book For Free With 30 Day Audible Trial
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