It's probably one of the most oft-repeated phrases in homes across the country: "We can't afford it."
"Both my husband and I work and with two kids and we can hardly make it," says Kim Mealey, grocery shopping for her family at a Northwest Baltimore County store.
As for discretionary income, Ms. Mealey says, "There is no extra money. We have to keep a roof over the kids' heads and food in their stomachs." It's because of the economy, she says. "I can sum up the economy in two words: it's terrible."
But think again, say Cheryl Russell and Thomas G. Exter, who wrote "The Official Guide to American Incomes," (Ithaca: New Strategist Publications and Consulting, 1993).
The two demographers scrutinized American income and spending habits and then figured out how to squeeze extra cash from even recessionary paychecks after doling out for necessary items, such as shelter, bills and food.
The book is primarily targeted to marketers and business owners who obviously have a strong interest in America's discretionary income.
But consumers who want to beat them at their own game would also benefit from the demographers' lessons.
How to manage money is the great unsolved mystery for most people.
"We feel there's hardly any money left over after paying the bills," says Cheryl Bonacci who works for the government and is raising two children in the Baltimore metropolitan area with her husband Nick.
But Ms. Russell, Mr. Exter and most financial advisers say, "Look harder. The money's there, but you have to know how to find it." (The Bonaccis agreed to let a financial planner analyze their cash flow to see if this is true. The results are on 2D).
The last comprehensive estimates of collective U.S. discretionary income were done about six years ago, Ms. Russell says in a telephone conversation from her office in Ithaca, N.Y. "So we felt it was time for an update. We wanted to get a feel for how much money is out there."
"We were surprised. We found that . . . although they may not realize it, about 64 percent of households had discretionary income," Ms. Russell says.
"All told, Americans had $689 billion burning holes in their respective pockets that year, and the total has no doubt risen since then," the authors say in their book.
To compute that figure, they took information from the government census bureau and marketing surveys on American income and spending for the year 1991. Then, they devised their own formula for determining how much discretionary income people had.
Crunching the numbers
First they used the amount of total income before taxes on the 1991 census bureau report.
Next, they subtracted the taxes. From the census bureau, they got the average amount of taxes households pay for each income level and totaled them.
What's left is disposable income.
Then they estimated basic household expenses from the Bureau of Labor Statistics' 1991 Consumer Expenditure Survey.
Food, housing, child-care cost, clothing, transportation and health care were considered basic expenses. Money spent on these items was subtracted from after-tax income.
"Our definition of basic expenses is not precise," the demographers wrote in an American Demographics magazine article in July.
But "our estimates of discretionary income are conservative," Ms. Russell says.
Just how much was left over, of course, was directly related to the amount of income. The greater the household income, the greater the amount of discretionary income. For instance, 74 percent of households with incomes in the $50,000 to just-under- $60,000 range had more than $11,000 in discretionary income. While 52 percent of households with incomes of $10,000 to just under $20,000 had an average of $3,656 in discretionary income.
"That was the thing that really surprised us," Ms. Russell says. "Even in a recessionary year like 1991, people had plenty of discretionary income."
But defining what is "discretionary" can get tricky.
What's discretionary for one person may be a necessity for another, Ms. Russell says.
"Some food spending can be discretionary," she explains, "such as dinners for special occasions at expensive restaurants."
Certain items such as toothpaste and shampoo were considered discretionary by the authors although it can be argued they are necessary to most Americans. However, Ms. Russell says defining some personal care items as non-essential is balanced by placing all food in the basic necessities category.
"The textbook definition of discretionary income is that it is an individual's income that's not allocated to necessary items such as food clothing and shelter," says Geraldine D. Leder, a vice president at Legg Mason, a banking investment firm.
"Discretionary income means a lot of different things to a lot of different people," says Charles F. "Bud" Imhoff, a certified financial planner and owner of Chesapeake Planning, Inc. in Towson.