How Discretionary Income Changes During A Lifetime [Infographic]
Ahhh, discretionary income. What most Americans wouldn't do to have more of it. It's the amount of money we have left over after paying for life's necessities -- food, clothing, shelter -- that goes toward buying fun stuff, such as iPads, vacations, jewelry or new cars, and more serious things, such as health care and education.
The amount of discretionary income depends on how much you make, of course. Generally, the more you make, the more money you likely have to blow on the latest gadgets and widgets. But age is also a factor.
For example, those under 25 years old make much less than those older, but they have the greatest percentage of discretionary income -- 85 percent. That's not surprising since many people in their late teens and early 20s may still be living at home -- reducing the amount that they must lay out for rent, food and utilities, and they typically are in pretty good health. The largest portion of discretionary income -- 6.2 percent -- at this stage most likely goes toward clothing.
As young adults transition to work life, they begin earning considerably more money, but also start taking on financial obligations such as rent, mortgages and car loans. That means a smaller percentage of their income -- 63 percent -- is available for spending discretionary expenses, with the biggest expenditures equally divided between clothing and health care.
By the time they reach their mid-30s, many Americans begin to take on expenses related to raising children, further reducing the percentage of discretionary income that they have available. During these family years, incomes may rise, but that's no guarantee of more "pocket money"-- many may find that they have far less than they did just a few years ago. Clothing and health care remain the biggest outlays of discretionary income.
Fortunately, children do grow up, so by the time average Americans reach middle age they're once again able to spend a bit more freely on life's frivolities, with about half of their income available for discretionary spending. As much as 13 percent, however, goes toward health-care expenses.
Once in retirement, the percentage of income available for use on discretionary purchases is second only to the under-25 group. Not surprisingly, however, the greatest amount -- 17 percent -- is spent on health care.
For more on how Americans spend their income as they move through life, check out this inforgraphic from Milo, a local-shopping website.
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David Schepp has spent more than a dozen years covering business news for the electronic and print media, including Dow Jones Newswires, BBC News, Gannett Co., and most recently at AOL's DailyFinance. Nearly 10 years ago, he started writing a weekly People@Work column, looking in depth at issues facing workers in today's workplace. Follow David on Twitter. Email David at firstname.lastname@example.org. Add David to your Google+ circles.more...