Disposable Income

Disposable Income

Once you have a realistic budget the next step is to take an no non-sense view of your current financial situation and to start a plan that will ease your financial woes.

The following is a tutorial on how to gauge your financial well-being based on your budget. If you have not already completed a budget form please proceed to Step 1: Organize.


There are several key pieces of information to consider when reviewing your budget. The following items are especially important. When reviewing these items you should be able to gain a good outlook of your financial health.


Disposable income is the total amount of money that is left over from your net monthly income once you have paid all of your monthly expenses.


Your expense-to-income-ratio is the measurement of your monthly expenses versus your total income.

Example, if your take home pay is

$3,000 and your monthly bills and payments are

$2,200 then your disposable income (left over) is

$800 ($3,000 – $2,200 = $800)

($2,200 divided by $3,000 = 73.33% expense-to-income ratio).

This means that you have $800 left over each month after you have paid your expenses and you use 73.33% of your income each month.

If your total monthly living expenses are greater than your net monthly income then you have a deficit (also called a loss or a negative budget). A loss clearly shows the need for a change in spending habits, as long-terms deficits will almost certainly result in severe financial difficulties. Even if your expense-to-income ratio is below the deficit level, you may need to alter your spending habits. As a general rule of thumb, a healthy budget will have an expense-to-income ratio that is less than 90%.


There are several important factors to consider when reviewing your credit card accounts:

  • Are my accounts current? Being past due on any of your accounts is a surefire sign of financial distress. If you are late or over-limit on your accounts and you have very little disposable income or a deficit then it will be extremely difficult to bring your account(s) current without a change in your spending habits or professional help.
  • What are my interest rates? Likewise, if you are current on your accounts but have a lot of outstanding credit than you may be in an equally difficult situation. High interest rates make it extremely difficult to pay down balances, because most of your payment is going to the interest charged and not the balance due.
  • Am I able to pay more than the minimum payments on my accounts? This question is critical. You should never make only the minimum payment on an account. Paying the minimum payments on your high interest accounts may end up spending thousands of dollars more than you initially borrowed. If you are unable to pay more than the minimum payment on a consistent basis, then you may need to adjust your spending habits or seek financial assistance.


After reviewing your budget you should have a general idea of your financial health. If your budget and/or your credit card accounts show signs of potential financial distress, it is imperative that you take action immediately. For advice on how to take control of your financial situation please continue to the final section of this tutorial.


If you are unsure on what steps you need to take to improve your financial health you may benefit from our professional advice. Do not hesitate to contact CCMS for a comprehensive budget analysis. Our counselors have been trained to review your current financial situation, answer your questions and provide you with compassionate, professional assistance to help you meet your financial needs. All counseling sessions and personal information is kept strictly confidential.

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