Available funds

It's often a good idea to know your disposable income. If you don't, this article will help you understand how to calculate your disposable income and why it's a good idea to understand disposable income as a financial concept.

What is disposable income?

Your disposable income is the amount of money you have left after all your fixed expenses are paid. In other words, your disposable income is the amount of money you have left for yourself that you can use to cover your variable expenses, such as food, personal care, clothing, entertainment, etc.

The term is primarily used in personal finance and not in business economics.

It is often banks and other lenders that actively work with the concept, but it is also important that you as an individual know your own disposable income.

How is the disposable income calculated?

Calculating disposable income is easy! The formula to calculate a disposable income is:

Income - Fixed expenses = Available funds

Income includes salaries, social benefits, grants, and the like.

Fixed expenses cover items such as rent, electricity, water, heating, insurance, etc.

If you use a budget where you have entered all your income and all your fixed expenses, you will quickly see what you have available for your variable expenses, and thus your disposable income.

If you don't have an overview of your income and fixed expenses, we recommend that you get an overview as soon as possible - and possibly seek help from friends and family if you can't get an overview yourself.

We always recommend that you create a budget to get the best overview of your finances. The budget should be made in Excel so it's easy to update with new income and expenses.

How big should a disposable income be?

The amount of disposable income varies depending on whether you are single, single, part of a family or have children.

The amount of disposable income is individual. Some people have a lot of variable expenses, while others have fewer.

Often, when talking about the amount of disposable income, the bank or lender sets an amount that they believe the borrower should have available after paying fixed expenses. This disposable income is used by the bank or lender in their overall credit assessment of the borrower.

There is no fixed answer to what a single person or a family with two children should have in disposable income, but you can often get recommendations from your bank on what you should have available when all your fixed expenses are paid.

We recommend that you try to follow your bank's recommendations for a disposable income as much as possible.