What Is Discretionary Spending?

Discretionary and non-discretionary spending are two ways of describing the types of expenditures we make each day. Think of these categories as what we “really want” versus what we “really need” in terms of the expenditures we make each day.

It’s good to know the difference, and it’s especially important that we recognize how we clarify our own spending. Muddling our spending priorities can land us in financial hot water before we know it.

What is discretionary spending?

In this infograph explaining discretionary spending, there's a breakdown of what is a luxury versus what is a necessity.

Discretionary spending refers to everything you spend your money on that is not basic or necessary. Think:

  • Entertainment
  • Leisure activities
  • Fast food
  • Hobbies
  • Eating out
  • Vacations
  • Gifts

Your non-discretionary spending covers essential expenses or your basic needs, and you don’t have a lot of control over this kind of spending. Think:

  • Food
  • Housing costs
  • Clothing
  • Rent
  • Utilities
  • Gas
  • Essential medical costs

Why Is Discretionary Spending Important?

Image of income and expenses in the Nav.it app. Gains include income. Expenses include groceries, healthcare, restaurants, pharmacies, and unsorted.

In order to take control (or take back control) of your spending and finances, you need to be able to distinguish between discretionary and non-discretionary spending. With so much pressure to show up in the world in a certain way, managing spending isn’t easy.

It’s easy to let ourselves stray from a budget or become overwhelmed by the urge to spend impulsively.

However, by firmly categorizing our spending and sticking to it, we can actually put the brakes on bad habits.

Remember, the term “discretionary” refers to anything that you choose to buy. For example, if you decide to eat out every Saturday night, that’s a discretionary expense.

If you decide to go on vacation, that’s another one. Your new TV is a “discretionary” item, which means that you decided to buy it on your own.

Your discretionary spending is the part of your budget that is most unpredictable and will fluctuate the most. It is also the most flexible part. When you prioritize your budget and locate expenses you could change, you’ll notice they’ll all be discretionary expenses.

However, don’t think that cutting out all of your “fun” spendings is the purpose of a budget. The real goal is to find the freedom to shift focus, change plans, and set new priorities.

And remember that just because your discretionary spending can be reduced, that does not mean you have to keep it that way. The beauty of non-essential spending is its compliance: it serves your immediate needs the way you want it to.

Why Discretionary and Non-Discretionary Expenses Matter

Scrutinizing our expenses is essential because knowing where our money is going illustrates our progress toward our financial objectives.

Knowing the difference between discretionary and non-discretionary spending is also essential if you want to save money.

For instance, our discretionary costs are more flexible. It is easiest (and quickest) to save money through discretionary spending when your financial circumstances change or you want to commit funds to something new.

Being able to distinguish discretionary spending means we can assess how important our discretionary costs are and whether (or when) we can change them to allow something new to happen.

Why You Should Track Discretionary Expenses

In today’s economy, many people are struggling to keep up with the rising cost of living. If you want to make sure you don’t overspend, it’s important to track every dollar, especially those that aren’t spent on necessities.

Try writing down your discretionary expenses. This includes anything you spend money on that isn’t required for basic and safe daily living.

If you’ve been putting off budgeting because you feel overwhelmed, there’s no reason to wait anymore.

Here are a few ideas on how to track your discretionary expenses.

1) Make a list

Start by recording everything you spend money on each month. including things like eating out, entertainment, shopping, travel, subscriptions, etc.

Be honest about what you spend money on, including items that you think might seem frivolous. When you complete this step, you’ll be surprised at just how much money you actually spend on unnecessary purchases.

2) Check your receipts

Once you know exactly what you spend money on each week, take a look at your receipts. This will give you a good idea of where your money goes each week.

For example, did you go grocery shopping more often than usual? Did you eat out more frequently than normal? Were you buying clothes? These questions can help you figure out how you can reduce spending.

3) Prioritize your expenses

Prioritizing our expenses means ordering them in terms of their importance to us. You’ll find the top priority expenses will be your non-discretionary costs.

Lower down the list, your discretionary spending can be ranked in terms of its value to your life. It is these expenses that are most available in terms of changing focus or plans.

4) Use a money tracking app like Nav.it that makes it easier

By connecting your accounts through a secure connection, you can reflect on your purchases daily and categorize your expenses and discretionary spending.

How to Track Your Discretionary and Non-Discretionary Expenses

Image of a cell phone showing a payment of $91.07 to Dog Gone Holistic Monday, 21 June. The text above the image reads Transaction Swiping. Track what you spend. *Fall in love* with your progress.

The average American does not track how much they spend on food, for example, or distinguish which expenses they might easily cut back on. You can start tracking your discretionary and non-discretionary expenditures by starting with a list.

Start by writing down how you spend your money each month. This includes eating out, groceries, household items, entertainment, and clothing. Next, divide those expenses into categories such as “eating out,” “groceries,” “household items,” “entertainment,” and “clothing.”

Then, add up the total amount spent in each category. Finally, examine how you might be able to cut costs. For example, take what you spend on groceries each week and try to reduce it without sacrificing quality.

How much do you spend on unused subscriptions? If you find yourself constantly buying expensive items, consider selling some of them. Is there anything you can buy second-hand? What do you pay for cable TV? Thinking in this way can help you identify areas where you can cut spending.

Have a go at eliminating one expense every three months. This way, you’ll gradually build your savings while still living an enjoyable life.

Pro-tip: With the Nav.it money app , you can reflect on your daily purchases, connecting how you feel with what you spend.


So, your non-discretionary spending includes things you really don’t have control over, like rent, utilities, health care, and groceries. Your discretionary spending is everything else. It includes eating out, going to the movies, buying clothes, and your trumpet lessons.

Why should we care about this? Well, mostly because we spend our money through these two categories whether we know it or not. And knowing about it means having control over it.

From here, our best advice is to take a look at Nav.it, a brilliant money mindfulness app that can help you cut unnecessary costs and budget your money.

Learn more button links to Nav.it for employees page.
We’re here to help you break free from the paycheck-to-paycheck cycle and navigate your financial journey, one day at a time. Nav.it At Work gives you the tools to take control of your financial future.


Get it on Google Play button links to Nav.it At Work on the Google store on android.
Get it on Apple Store button links to Nav.it At Work on the Apple Store.
More Stories
In the money coaching app image, three screenshots of phones show ways of managing money so you can stress less and improve your spending habits.
Best Mindfulness Tools and Apps to Improve Quality of Life
%d bloggers like this: