Disposable income is personal income that is available for spending after all taxes have been deducted. The term is used by economists to measure the ability of various demographics to pay for living expenses, make purchases and save for the future.
Regular Expenses and Discretionary Income
When an employee gets paid by their employer or a business owner draws personal income, there are numerous living expenses, commonly known as necessities, which need to be paid with this income. These expenses include electricity, water, gas, telephone, food basics, rent/mortgage payments and essential clothing. Any personal income that is left over after necessities are paid is known as discretionary income. There are many ways people choose to spend their discretionary income including saving or investing their money, hobby-related activities, recreational sports, entertainment, and vacation.
Impact on Binary Options Trading
Both disposable and discretionary income are very important for the economy and binary options trading. They have a direct impact on the price of commodities, stocks, indices and the value of currencies throughout the world as a result of the way people spend their money on essential and non-essential items. During a recession, businesses that sell or service necessities perform a lot better than businesses that sell or service luxuries because discretionary income usually shrinks significantly. However, the extent to which disposable income can be cut is more limited.
Savings and Investment
When people deposit money in a bank or invest in stocks, real estate, bonds or managed funds, they help the economy by encouraging money to flow and circulate freely.
Recreational Sports and Other Fitness Related Activities
Many people spend their leisure time participating in recreational sports and other fitness activities that include skiing, surfing, swimming, tennis or working out at a gym. Participation in these activities has a positive effect on the economy. This is attributed to the fact that more people are employed, such as sports equipment retailers, coaches and instructors. People are also employed due to the construction and maintenance of sporting facilities and the operation of snack and refreshment facilities at such locations.
There are many ways that people use discretionary income for entertainment purposes including buying non-essential items such as comics, televisions, DVD players and home stereo systems. Also included is the purchase of tickets to watch movies, theatre productions, live comedy and sports events.
People usually choose their vacations based on a variety of factors including budget, value and past experiences. The viability of a significant number of jobs and businesses of most local and national economies throughout the world are dependent on the tourism industry.
Many people are enthusiastic about a particular hobby and spend a significant portion of their disposable income on their favorite hobby. Common hobbies include stamp collecting, fishing, modifying sports cars, collecting artwork, photography, bird watching, reading, cooking and gardening.