Question

Carl and Nancy Johnson prepared a household budget in an attempt to manage their money better. As part of their budgeting process, Carl and Nancy prepared the following list: Monthly Income (after taxes) = $4,500; Monthly Expenses (Necessities), which include Rent: $550, Auto Loan: $250, Student Loan: $200, Savings: $500, Food: $200; Total Monthly Expenses = $1,700; Amount Left Over = $2,800. After totaling their necessary expenses, which equals $1,700, Carl and Nancy subtracted that amount from their monthly income of $4,500. The Johnsons were happy to realize that they had $2,800 left over, which is their __________.

Answer 1

Answer:

Discretionary income

Explanation:

Discretionary income can be described as the amount of money that an individual have left to save, spend, or invest after he has paid taxes and for necessities.

The necessities are food, clothing and shelter which are the most important needs of human beings.

Discretionary income is therefore spent on vacations, luxury goods, and other commodities that are not essential.

Therefore, the $2,800 left over for the Johnsons is their discretionary income.