How to Use Your Discretionary Income to Make the Most of Your Money


Have you ever wondered what your discretionary income is? How do you use it to your best advantage? It’s important to know how to make the most of your hard-earned money, especially since you can end up paying hefty fees on some of your banking products and services if you don’t know what you’re doing with your money. In order to make the most of your money, here are some ways to use your discretionary income wisely.

Save at least 5% of your income

It may sound like you’re not spending enough money in your budget, but many experts agree that 5% is a good place to start when it comes to saving. If you can get that much set aside each month, you’ll be on track toward hitting financial goals.

And if you have additional funds left over? That could mean it’s time for a financial reality check. Are there areas where you could lower your expenses?

Put yourself on a budget

Now that you’ve got a grasp on how much money you’re making, it’s time to get real about what your money is doing. If you haven’t already been tracking your spending, now is a good time to start.

Invest in long-term items

The money in your discretionary fund should be spent on big-ticket items—the kinds that you’d want to last for years, not months.


New cars, furniture, and appliances are great examples of smart purchases. Just remember, when it comes time to sell those items in a few years, you’ll likely lose money by selling them at a discount. So buy something with an eye toward quality over cost savings; it will last longer and sell more quickly down the road.

Put half of everything else into a savings account

The days of being able to spend every last penny on entertainment and shopping are over. If you want your savings account to grow, you need to put some money away. The best way is by setting up an automatic savings plan that’s at least half as much as your monthly income, so if you make $5,000 a month, set aside $2,500 for savings each month.

Treat yourself every once in a while

It’s important to treat yourself every once in a while. After all, you’ve worked hard and deserve it. In fact, making yourself a priority is essential when you want your finances to grow. So when it comes time for a trip or an indulgent purchase, just do it! You won’t regret it later.

Leverage your credit cards

The interest rate on your credit card can end up being very expensive if you’re not smart about how you use it.

The best way to avoid adding excessive amounts of debt onto your balance is by using your card for rewards or cashback and paying off your balance in full every month. You’ll get a great return on spending that doesn’t negatively impact your credit score.

Save more money with minimal effort

Prioritize your savings goals. Not all money is created equal. Cut out as many unnecessary expenses as possible, such as cable TV and eating out, so you can put more money towards your higher-priority goals, like a new laptop or paying off credit card debt.