Discretionary Spending

Discretionary spending refers to non-essential expenses that are not required for basic living needs. These expenses can be reduced or eliminated when trying to save money or during financial difficulties.

Examples of Discretionary Spending:

• Entertainment (movies, concerts, streaming services)
• Dining out and takeout
• Hobbies and recreational activities
• Luxury items and non-essential purchases
• Travel and vacations
• Gym memberships (if not essential)
• Subscriptions and memberships

Fixed vs. Discretionary:

• Fixed Expenses: Rent, mortgage, insurance, loan payments (hard to change)
• Discretionary Expenses: Entertainment, dining, hobbies (easily adjustable)

Why It Matters:

• First area to cut when facing financial difficulties
• Can significantly impact your budget
• Often the largest source of overspending
• Provides flexibility in financial planning

Managing Discretionary Spending:

• Set monthly limits for each category
• Use the envelope method for cash categories
• Track all discretionary purchases
• Review and adjust limits regularly
• Find free or low-cost alternatives

Budget Allocation:

• 50/30/20 Rule: 30% of income for wants (discretionary)
• Needs First: Cover fixed expenses before discretionary
• Savings Priority: Save before spending on wants
• Emergency Cuts: Discretionary spending is first to go

Tips for Reducing Discretionary Spending:

• Cook at home instead of dining out
• Use free entertainment options
• Cancel unused subscriptions
• Set spending limits for each category
• Wait 24 hours before non-essential purchases

The Balance: While discretionary spending should be managed carefully, completely eliminating it can lead to budget burnout. Allocate a reasonable amount for enjoyment and quality of life—just track it and stay within limits.