The SALT Blog has mashed up YouTube videos with money vocab to help you make sense of (and remember) financial terminology. Today, we’re looking at one of the pillars of any good budget: identifying discretionary expenses.
Over the past couple of weeks, “Gangnam Style” has K-Popped up on Saturday Night Live, Ellen, Today, and probably in your dreams. Today, we make the ubiquitous song truly famous by providing it with its own vidcabulary term.
Congratulations, PSY: You are now officially having a moment.
KNOW YOUR EXPENSE
“Gangnam Style” already features money-related commentary (and here you thought it was just about dancing like a horse). However, its video brings another financial term to mind: discretionary expenses.
Within a budget, every expense you have falls into one of three categories: fixed, flexible, and discretionary.
- Fixed expenses don’t change from month to month (e.g., payments on a car… or speedboat).
- Flexible expenses vary each month but are typically essential (e.g., clothes, though maybe not blue, black, and pink tuxedo jackets).
- Discretionary expenses vary each month and are generally non-essential or cost more than necessary (e.g., pretty much EVERYTHING else in this video).
SAVE SOME MONEY
When creating a budget, the first thing to do is identify where each of your expenses falls. For PSY, things like trips to the health club, amusement park, and stable likely go into his “discretionary” bucket.
So, if PSY made a budget and it came out on the negative side—meaning he was spending more than he was taking in—the first thing he’d want to do is review each of his expenses to see where he could make cuts.
To do this, he’d have to ask himself some tough questions about his spending habits. For instance:
- Am I driving when I could be saving money by riding the subway?
- Can I afford another night out at the club, considering I dance wherever I am?
- Do I need to pay for a yoga class if I’m just there to ogle women?
When it comes to making your own budget, think of PSY’s splurges and take an honest look at your discretionary expenses. This can be tough, but your goal should be to align your spending with your financial and personal goals.
That way, if all you want to do is dance around like a horse, you can avoid spending too much on things that don’t really help you achieve it. (Like creepily lounging in a children’s playground.)
Have an analogy that will help our readers remember what discretionary expenses are? Share it in the comments.