Disposable Income

Definition of 'Disposable Income'


Calculated as:

Disposable Income

Also known as "disposable personal income" (DPI).

Investopedia explains 'Disposable Income'

For example, let's assume your household personal income includes $100,000 from salaries and you are paying at the 35% tax rate. Your household's disposable income would then be $65,000 ($100,000 - $35,000). Economists use DPI to gauge households' rate of savings and spending.

In 2005, the average disposable personal income dipped into negative territory for the first time since 1933. This means that in 2005, Americans were spending their entire DPI and then tapping into debt for further spending.

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