What Is Discretionary Spending?

Discretionary spending encompasses all nonessential expenses. These are costs that are not necessary for your basic needs, such as rent, utilities, groceries, and debt payments. Examples of discretionary expenses include streaming service subscriptions, dining out, gym memberships, vacations, and more.

How Much Should You Budget for Discretionary Spending?

The amount you should budget for discretionary spending depends on your income, expenses, and financial goals. If your income is low or you have significant debt, it might be wise to cut back on discretionary spending to save more or pay down debt. Conversely, if you have a higher income, you may afford to spend more on your lifestyle.

Consider the 50/30/20 Approach

The 50/30/20 budget approach is a helpful guideline:

• Spend 50% of your monthly income on necessities.
• Spend 30% on discretionary expenses.
• Allocate 20% towards debt payments and savings.

This framework can be customized based on your financial situation and goals.

How to Reduce Discretionary Spending

If you find yourself overspending on nonessential items, here are some strategies to help you cut back:

Track Your Spending

Review your expenses for the past three months to identify where your money is going. Categorizing your expenses can help you pinpoint areas to reduce nonessential spending.

Cut Back on Unused Subscriptions

Cancel subscriptions you don’t use regularly. Consider keeping one streaming service active at a time and switching between them based on your viewing preferences.

Reduce Other Recurring Costs

Evaluate recurring costs like gym memberships or food delivery subscriptions. Cutting these can lead to significant savings.

Prepare for Impulse Spending

Stick to your shopping list when grocery shopping and add online items to a wish list before purchasing. This helps curb impulse buys.

Find Cheaper Alternatives

Look for ways to maintain your lifestyle at a lower cost. Share streaming subscriptions with friends or family, or borrow books from the library instead of buying new ones.

Build and Maintain Good Credit to Minimize Costs

Your credit score can indirectly affect your discretionary spending. High debt payments due to high-interest rates can limit your cash flow. Regularly review your credit score and report to identify areas for improvement. With good credit, you may refinance or consolidate debt at lower interest rates, freeing up more cash for other financial goals and discretionary spending.

Contact O1ne Mortgage for Expert Mortgage Services

At O1ne Mortgage, we understand the importance of managing your finances effectively. Whether you’re looking to refinance, consolidate debt, or need expert advice on mortgage services, we’re here to help. Call us today at 213-732-3074 to speak with one of our experienced loan officers. Let us help you achieve your financial goals and enjoy a balanced lifestyle.