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How Discretionary Expenses Work


Identifying Discretionary Expenses
Manicures are definitely a discretionary expense that can be managed. A bottle of nail polish costs around $4; a manicure runs $20.
Manicures are definitely a discretionary expense that can be managed. A bottle of nail polish costs around $4; a manicure runs $20.
Jesse Grant/Getty Images

If you've read this far, you've taken the first step toward managing your discretionary expenses: You're getting more information so that you can determine which expenses you can actually get by without. Once you’ve identified those expenses, you’ll be able to save yourself some money, and hopefully, still have a little fun money left in your budget.

Most people have similar discretionary expenses:

  • movie packages on cable
  • regular manicures/pedicures, massages, et cetera
  • eating out
  • going to the movies
  • magazine subscriptions
  • concert tickets
  • cell phones
  • travel expenses
  • hobbies -- fishing, photography, golf, et cetera
  • novels

Of course, many other expenses can be labeled discretionary, based on whether you actually need the items you’re buying. To determine if an expense in your budget should be classified as discretionary, ask yourself these three questions:

  1. Do I really need it?
  2. Can I get a less costly version that will still function the way I need it to?
  3. Will I need it permanently, or could I borrow or rent it cheaper?

If you don't actually need an item, but you'd still like to have it, it’s definitely a discretionary expense. Likewise, if you need the item, but the one you want has far more features than you'll ever use, it’s a discretionary expense. For example, if you need a cell phone, you can take the one that comes free with your service plan instead of buying the one that has Internet, instant messaging and a camera.

Always determine whether an expense is necessary before handing over your money. Once you've identified an expense as discretionary, you can make a better judgment concerning its value. If you realize that it’s using up your fun money, you may be less likely to buy something that you won't really use.

Now that you can identify discretionary expenses, you need to find ways to cut out unnecessary spending. Read on to learn more about saving money without living like a hermit.

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