July 31, 2025
What Is Discretionary Spending? Everything About It
By : Ellie Brown
Discretionary spending is about spending money on things that are not essential. These are entertainment, shopping, vacations, events, etc. This denotes the expenses that can be avoided or reduced anytime, as per financial priorities toward essential expenses.
Hence, tracking your expenses is vital as it can really affect your finances and stability considerably. Whether you are an individual, a business or even a government, discretionary spending finds its place everywhere. Hence, keeping a tap on the non-essential expenses is vital.
Key characteristics of discretionary spending
With the following features know that an expense is in the category of discretionary spending.
1. Non-essential
The most prominent nature of discretionary spending is that it is completely non-essential. Examples are – vacations, luxury shopping, dining out, entertainment subscriptions, etc. This is why, if you start spending too much on such things, your monthly budget may be affected badly. In fact, you may start missing your debt repayments, which can impact your credit. This makes it difficult for you to qualify for new loan deals in the future.
2. Depends on disposable income
Spending on not-so-important things depends completely on how much spare income you have. After paying for all the necessary things like rent, taxes, groceries, and utility bills, you can spend on leisure and luxury items. Wait, put the amount regularly in your emergency fund too before spending on fun things.
3. Flexible and variable
Yes, obviously. As spending for fun things is not a part of basic needs, these are always flexible and variable. You do not spend a specific amount on them. As per your financial comfort and capacity, these expenses can be managed. In fact, in a month you may even feel that this time you don’t want to discretionary spending at all. This is, in fact, vital if you want to work faster on your savings and investment goals.
4. Influenced by financial confidence
The stronger your financial confidence, the better you can spend. However, here confidence does not mean the intention only. A person may earn less but still can spend a major part of their income on unnecessary things. This will make him avoid the basic needs like groceries, utility bills, etc. Technically, financial confidence is about your ability to spend more after spending on necessary expenses.
What is the difference between discretionary and non-discretionary spending?
The dissimilarities between the two will let you understand better the effect of non-essential spending on your financial life.
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Discretionary spending |
Non-discretionary or essential spending |
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It is flexible and has options. You may or may not spend money on it as per your choice and mood. |
It is all about the necessary expenses that cannot be avoided. These are basically the things that are necessary for your survival. |
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Examples are vacation, mindless e-commerce shopping, gym membership, subscriptions, spa visits, etc., that won’t affect your survival if you avoid them. |
Examples -Rent, utility bills, daily commute expenses, medical bills, car repair, debt payments, etc. |
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This type of spending can be eliminated or adjusted as per your financial circumstances. |
This type of spending cannot be avoided. Your standard of living, as well as physical and mental well-being, depend on these expenses. Your future financial security also depends on these expenses. |
Why one should control discretionary spending?
For several potential reasons, it is vital to manage spending on non-essential things. These are –
- Budget control – Not managing the spending can affect your budget. Hence, when you make a budget, it is vital to keep an eye on how much you are spending on things that are actually not necessary. Controlling the expenses that do not relate to the basic needs of life is necessary to maintain a budget. Your budgeting decides your future success. It can help save and invest more. Gradually, you get addicted to using money sensibly.
- Debt reduction – To reduce debt, it is vital to make necessary payments on time. In fact, if you avoid spending on unnecessary expenses, you can pay off a debt party or fully. Especially if you have multiple debts, spending every single penny is vital. If you think about taking out a loan, your old debts need to be paid timely. Use extra money to pay off debts and not spend randomly.
- Financial flexibility – Everyone wants to attain financial flexibility and financial freedom in the end. For sure, you too have the same thinking. For that purpose, you should learn to manage expenses that specifically include not wasting your money on things randomly.
- Savings and investments – A secure future comes with mindful spending that does not include unnecessary expenses. Multiple short-term and long-term financial goals should be your priority. By not focusing on random expenses, you can achieve your investment and saving goals faster. Start early, save more, spend less and live a happy, stable life.
How to manage discretionary spending?
If you know you are spending on things that are extra or not basic. Try the following tips.
- Track your spending habits – Yes, it is significant to trace your spending. Do it weekly, monthly, and you will know where your hard-earned money is going. It helps you speed up financial goals and attain financial confidence. Usually, discretionary expenses are more about those tiny expenses that are difficult to notice. Initially, they do not feel like a burden. But if you do it consistently, for sure, your finances are going to be affected adversely.
- Create a detailed budget – Budgeting is a smart and sensible way to control your extra expenses. When you create a budget, it becomes easier to notice a considerable difference. Expenses when you don’t budget and expenses when you budget are completely at a different level. You can notice the difference, which inspires more to balance spending.
- Prioritize value-based spending – You already know which type of spending will add value to your life. If you want to ignore spending on unessential expenses, it is best to use your money wisely. For example, in place of dining out in an expensive restaurant, get your laptop repaired, which can help you earn.
- Use cash envelopes for extra expenses – As they say, cash transactions make us do mindful spending. Hence, prepare cash envelopes for leisure things like fast food, movies, etc. When you pay using cash, you will instantly feel a loss of money. Therefore, later this will help you easily control the aspects where you should not spend more.
- Set spending challenges – Challenge yourself to spend thoughtfully. Decide targets, follow them and track your progress. Every time you see a debit from your bank account, ask yourself if the expenses are useful or not. Try to make cash transactions; it will discipline you to use money wisely. In fact, save on groceries, fuel, daily commute or wherever possible.
Conclusion
The above information helps you differentiate between necessary and non-essential expenses. Discretionary spending becomes a vital part of our lives. It is not bad to use your money for fun, entertainment and relaxation. But this should not happen to the extent that it starts affecting your financial stability.
Following the above tips and you will see a considerable and positive change. Get closer to your money goals while using funds wisely. Save and invest more, make a secure future and then you can spend more freely on even useless things despite compromising stability.