Smart Ways to Utilize Disposable Income

Financial Planning Services at Citadel

The term “disposable” income is a bit of a misnomer. It refers to the money left over from your salary after you have paid all federal, state, and local taxes. To think of this “left over” money as disposable, and therefore as something to be spent on frivolous or indulgent items, is a dangerous trap to fall into. For starters, you still need to pay off all your necessary charges, like your rent or mortgage, utility bills, and any other regular payments. Even then though, the “discretionary” income that’s left (as it’s technically known as) is still not to be spent lightly.

Sure, it’s important to have fun in life—splurging on holidays or nights out every once in a while is a great way to treat yourself and your family. However, there is so much more you can do with discretionary income (or “spending money”)—that will benefit your future more than your present. Even if it’s only $100 or $200, there are lots of sound ways to put that money to good use.

Pay Off Your Debt

Paying off credit card and other debt is not the most exciting way to spend your discretionary income, but it is one of the wisest options. Imagine that you’re paying 15% interest on a $3,000 credit card balance. Paying off that debt means you aren’t losing money unnecessarily, which will translate into even more change in your pocket. It doesn’t matter if you can’t pay the whole lot off at once. Every little bit you contribute will help lower the remaining balance, and therefore the amount of interest you’re paying.

Save for Your Future

One of the most logical things to do with discretionary income is to save it. And this doesn’t mean putting it in your sock drawer and leaving it for a rainy day; it means putting it in a bank account that will ensure your money grows. 34% of Americans admit to have no savings whatsoever, which is an unpleasant situation to be in when, inevitably, life throws you a lemon. By placing your discretionary income into a high-yield savings account, you will be maximizing its return without having to lift a finger. Having this money sitting safely out of reach means it’s available when you need to access money fast.

learn and plan

Citadel’s High Yield Savings Account gives you a great rate and access to your funds.

Learn More

Make a Smart Investment

Get rich quick schemes are just that: schemes. Look to the long-term and get rich slowly. Put your discretionary income into investments, whether bank products, mutual funds, stocks, bonds, real estate or other common asset categories. Many people believe that you need to have a lot of money to be able to invest, but that’s just not true. Nor is it true that all investing is risky. To find out more about your options and how to start growing your spare change, it’s best to talk to a professional who can help find an option that is perfectly suited to your unique situation.

Home Upgrades

For some people, their home is their single largest investment. It’s also the place you spend the bulk of your time. Spending money on a home upgrade not only helps when it comes time to sell but improves the quality of the life you spend within your dwelling. For example, upgrading old, leaky windows not only improves your home’s appearance, but saves on heating and air-conditioning costs.

Smart Ways to Utilize Disposable Income | Citadel

Invest in Education

Spending money on yourself is a great use of your discretionary income. Perhaps there are some courses you can take that will help you advance within your job. Or maybe you’re interested in setting out on an entirely different career path for which you will need to go back to school. Investing in your own education is a great way to not only boost your earning capacity, but to help you find a career that is both personally fulfilling and financially rewarding.

Similarly, if you’re a parent, you’re likely already concerned about college costs, even if your child isn’t yet in school. Investing your discretionary income in your child’s educational future by opening a tax-free 529 plan ensures your child can pay for tuition in the future. Continue to add money to the plan, and by time your child graduates from high school, they’ll have a nest egg put away.

Plan for Your Retirement

Saving for retirement can feel as though you are saving for someone else, and it can be difficult to put away money for the future when you feel that money could be better spent now. However, the earlier you start planning for retirement, the more comfortable that eventual retirement will be. The easiest way to get started is by investing in your 401(k) and opening an individual retirement account, or IRA. Many companies will even match employee contributions into their 401(k), which is akin to receiving free money.

Discretionary income should never be thought of as disposable. This money is key to growing your personal wealth, and when put to good use, it can offer an exceptional return on investment. Can a new pair of shoes do that? For help establishing a strong savings plan, contact the team at Citadel today.

Open a Citadel Certificate to earn more and reach your savings goal today!

Learn More