1. What is Disposable Income?

Disposable income is the amount of money that households have available for spending and saving after income taxes and necessities have been accounted for. It's a key indicator of financial health in Canada.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• After-Tax Income — Your net income after all taxes and deductions (CAD)
• Necessities — Essential expenses like housing, food, utilities, etc. (CAD)

Explanation: This calculation shows how much money you have left after covering essential expenses.

3. Importance of Disposable Income Calculation

Details: Knowing your disposable income helps with budgeting, financial planning, and understanding your spending capacity for non-essential items.

4. Using the Calculator

Tips: Enter your after-tax income and necessities in Canadian dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What counts as necessities?
A: Necessities typically include housing, food, utilities, transportation, insurance, and minimum debt payments.

Q2: How is this different from discretionary income?
A: Disposable income is after-tax income minus necessities, while discretionary income may subtract additional fixed obligations.

Q3: What's a good disposable income percentage?
A: Generally, having 20-30% of after-tax income as disposable is considered healthy, but this varies by individual circumstances.

Q4: Does this account for regional cost differences?
A: No, this is a basic calculator. Users should adjust necessities based on their local cost of living in Canada.

Q5: Should I include savings in necessities?
A: Only include essential savings (like emergency fund contributions) in necessities. Discretionary savings come from disposable income.