A friend of mine has recently created an interesting Web site called Disposable Income, which is worth visiting. Go to his site, enter the information specified, and find out what your approximately hourly wage really is and how much disposable income you have.

Now let's figure out how to really identify your disposable income. The following information is from the State of Michigan.

1. Keep track of your spending (how much you spend and what you buy) for one week in a journal. At the conclusion of the week, ask yourself if you found it hard to do. Most people say that they spent more money the previous week than they realized.


2. Now you should consider the difference between total income and disposable income. Total income is the amount received during a given period from all sources including, salaries, wages, profits, interest, dividends, rents, etc. Disposable income is the amount remaining for an individual after deductions are made for taxes and government retirement plans (Social Security, Medicare).
   
   You always have the choice of spending disposable income or saving it. When disposable income is saved, the money can be deposited in an interest bearing account, usually in a bank or credit union. The money can also be invested in mutual funds, stocks or bonds to attempt to earn more than an interest bearing account. Thus, as consumers we can choose to either spend our money or to save/invest it. One tool for planning how much to spend and save is to prepare and follow a personal budget.


3. Now go through the steps in making a personal budget: set goals, determine income, add up expenses, find where expenses can be reduced or income increased, and set the budget. One goal may be to spend somewhat less than what is earned or to save ten percent of one's income or to buy a stylish sweater.


4. Prepare a budget for one month based upon your disposable income, your needs, and your wants. (your One-Month Budget worksheet should be done as a computer spreadsheet). A budget allocates expenses to pay for needs and wants. Expenses to pay for needs are necessary items, e.g. lunches, transportation, personal business supplies that must be included in a budget. Expenses for wants are luxury expenses that can be included or eliminated for such things as snacks and entertainment.

These should help you get a better handle on your income / expenses and why your disposable income is at the level it's at, rather than a higher level. And don't forget that you should always allocate some money for savings, because you never know when you'll have a financial obstacle to overcome down the road.