examples of discretionary travel

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What does ‘discretionary travel’ mean?

The novel coronavirus outbreak has introduced some new terms to our everyday conversation: “social distancing,” “flattening the curve” and now “discretionary travel.”

President Trump has, as of Tuesday morning, not imposed any domestic travel bans, but guidelines issued by the White House advise avoiding all discretionary travel, along with now-familiar dictates like practicing good hygiene, avoiding social gatherings of more than 10 people and halting visits to nursing homes. The guidelines describe “discretionary travel” as shopping trips and social visits, but in these times of high anxiety, what qualifies as discretionary (or “nonessential,” in the Centers for Disease Control and Prevention’s literature) isn’t necessarily cut and dried. The fact that “discretionary travel” was among the most-searched terms on Google on Monday is testament to that.

Find the latest developments on The Post’s coronavirus live blog

According to the National Household Travel Survey , which the Federal Highway Administration has conducted periodically since 1969, discretionary travel falls into five categories: shopping, family or personal business, visits with family or friends, social or recreational gatherings, and medical or dental purposes. Nondiscretionary, meanwhile, refers to trips for work and school — anything that takes place at a set location and time.

But in a crisis, when work and school are vagaries at best, it comes down to one simple matter: accountability.

The main goal right now, scientists have been telling us, is flattening the curve of the contagion’s spread. Everyone has a role to play in that.

“The fundamental issue, as you’re hearing from all the authorities, is how we as individuals have a responsibility in mitigating against the spread of this disease. Without turning this into a horror show or downplaying the significance, we really want to blunt the pandemic spike,” said Robert Quigley, regional medical director and a senior vice president of International SOS, the world’s largest travel risk-mitigation organization, and a retired cardiothoracic surgeon.

When it comes to making decisions about travel, Quigley speculates that it’s a matter of time before the decisions are made for us.

“A lot of it is simplified by saying ‘Just avoid public transportation’ — buses, trains, airplanes. The beauty of where we are is that it’s likely going to be mandated before we know it. We haven’t seen the extent of what can happen on the municipal or state or federal level,” Quigley said.

But that’s not to say you have to lock yourself in your house.

“We’re concerned about public health and safety, but also about mental health,” Quigley said. “When cabin fever sets in, there’s nothing wrong with going for a walk, as long as you practice social distancing and don’t touch surfaces. It’s important for our psychic well-being. Just be accountable and be responsible so that we as a society can get hold of this.”

Weisstuch is a writer based in New York. Find her on Twitter and Instagram: @livingtheproof .

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Coronavirus: What you need to know

Covid isolation guidelines: Americans who test positive for the coronavirus no longer need to routinely stay home from work and school for five days under new guidance planned by the Centers for Disease Control and Prevention. The change has raised concerns among medically vulnerable people .

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Latest coronavirus booster: The CDC recommends that anyone 6 months or older gets an updated coronavirus shot , but the vaccine rollout has seen some hiccups , especially for children . Here’s what you need to know about the latest coronavirus vaccines , including when you should get it.

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Understanding Discretionary Expenses: What Are They and How to Manage Them?

In building your budget, you’ll often hear financial advisers suggest cutting back on discretionary expenses. In theory, that sounds good. But what exactly are discretionary expenses? The most common examples are a $6 coffee or avocado toast at a restaurant. While $6 per month is unlikely to make or break your budget, small decisions on where you spend money on anything other than essentials can have a big impact on your financial health over time. 

Discretionary spending is how you spend on anything other than basics like food, housing, and medical care. Learning what discretionary expenses are and how to build them into your budget and financial planning could help you save thousands a year. Read on to learn how.

What Are Discretionary Expenses?

Common types of discretionary expenses, the role of discretionary expenses in personal finance, tips for managing discretionary expenses, building your financial freedom, frequently asked questions.

First, essentials. Essential expenses are expenses you must make to live. They’re not necessarily fun but are, as the name implies, essential for living. This includes housing, food, transportation, utilities, insurance, medicine and debt repayment. Everything that doesn’t fall into the “essential” category is a discretionary expense. Discretionary expenses are “wants” rather than “needs.”

Wants mean you can choose to spend on that item or activity, but your accommodation, health or safety would not be affected if you opt out. Examples of discretionary expenses include everything from eating out to concert tickets, clothes, streaming services and recreational activities. 

Keep in mind that the goal isn’t to reach zero discretionary expenses. It’s to understand that you can choose how you use these funds, and allocating even a small amount each week to savings can have a big long-term effect. 

Discretionary expenses, collectively, could make up one-third or more of the average family’s spending. It’s important to understand how you’re using your money and whether it adds value to your life. 

For example, a more long-term discretionary expense could include saving for a special vacation. While investing doesn’t usually fall into definitions of discretionary expenses, you can always allocate more of your discretionary funds to investments or retirement savings . 

Examples of discretionary expenses are as diverse as individuals making the expenses. Here are some common discretionary categories:

• Vacations and travel expenses
• Automobiles — especially if you could take public transport
• Alcohol and tobacco
• Restaurant meals 
• Movie tickets, concert tickets, sports tickets and other entertainment-related expenses.
• Coffee and specialty beverages
• Hobbies such as crafting, sewing, knitting, woodworking or other creative pursuits
• Sports and gym memberships, such as tennis, golf, rock climbing or yoga
• Specialty foods or extra treats
• Personal care beyond the basics, such as luxury skincare or hair products

The impact of discretionary expenses on savings and financial goals is bigger than most consumers realize. Spending — or saving— an extra $30 per day adds up to over $10,000 in a year. Likewise, saving just $50 per week would result in $2,600 in additional savings; that’s just $7.14 a day or about the cost of that take-out coffee.

Most financial advisers will tell you that small expenses add up over time. It’s true and important to understand. But it’s equally important to understand how those discretionary expenses can bring extra joy or comfort to your day. If that $7 cup of take-out coffee is the best part of your day, don’t cut it out. Consider where else you could cut expenses without reducing your quality of life. 

You’ll also want to consider how you balance discretionary expenses with fixed expenses. Fixed expenses include regular monthly payments like a mortgage or rental payment as well as fixed payments like student or auto loans. 

While the exact amount of utility payments may vary slightly by month, most financial advisers consider utilities, insurance and regular medicine purchases in the category of fixed expenses as they are more or less the same every month. If you maintain a food budget, that could also fall into the category of fixed expenses. 

Practical tips for managing discretionary expenses start with knowing what you’re spending. You can consider using a budgeting app to track expenses. You can do this manually with pen and paper or in a simple spreadsheet. Once you’ve tracked your expenses for a month, look at where each percentage of your funds are going. How much are you spending on discretionary categories? 

Then, list where you can cut back and create a provisional budget . You can continue to adapt the budget as you adjust. Learn more about creating a budget or consider the 70-20-10 budget .  

Remember to make gradual changes. If you spent $500 in the first month eating out, start by reducing that amount by 20% to 50%, rather than declaring you’ll stop eating out altogether. Sustainable changes are easier to stick with long-term. 

Other strategies to reduce discretionary spending include:

• Make a list and stick to it when grocery shopping
• Reevaluate or pause recurring expenses like app subscriptions or streaming services
• Pay off credit cards to reduce interest payments
• Consider a no-spend challenge for one week to one month to avoid all discretionary spending for a period. This can give you a sense of which expenses add value and which you’re happy to cut out permanently. 
• Find free or low-cost activities in your area to replace some high-expense activities without sacrificing fun. 

Remember that there’s no single destination; it’s more like a dance in which you continuously adjust your expenses with savings goals to reach long-term financial stability. If you spend more in one category, you can always cut back on another. Like anything, with practice, it gets easier. If it seems daunting at first, set smaller goals and keep adjusting. 

Understanding discretionary expenses empowers you to use your money in a way that gives you the greatest value. The first step is to understand what you’re spending on now and look for opportunities to cut back. Even an extra $100 a week in savings is $5,200 a year. 

Start with small changes, surround yourself with others who have similar goals, and consider opportunities to add greater value to your life while spending less. You can also find more budgeting tips for young adults and come back to Benzinga Money for more financial information and tips to take control of your financial health.

Why should you monitor discretionary spending?

Monitoring your discretionary spending can help you save more money for things that are really important for you, like special vacations, college or retirement. Taking control of your finances and knowing where your dollars go can be empowering.

How much should I allocate to discretionary expenses?

Approximately 30% of your net income can go toward discretionary spending.

How can I reduce my discretionary expenses?

You can reduce discretionary spending by tracking spending, canceling recurring charges and subscriptions and putting a 24-hour to seven-day pause on any discretionary purchase to reduce impulse spending.

About Alison Plaut

Alison Plaut is a personal finance writer with a sustainable MBA, passionate about helping people learn more about financial basics for wealth building and financial freedom. She has more than 17 years of writing experience, focused on real estate and mortgage, business, personal finance, and investing. Her work has been published in The Motley Fool, MoneyLion, and she is a regular contributor for Benzinga. 

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Home / Mastering Nonessential Expenses: A Guide to Discretionary Spending

• Last updated: October 10, 2023
• Spend management , Travel and expense management

Co-founder & CCO, Yokoy

One common misconception about discretionary expenses is the belief that they are always expendable. This implies that you can cut discretionary spending without considering the consequences. 

The reality is more nuanced.

Discretionary expenses encompass costs that are optional and can be trimmed when necessary. However, they are far from being dispensable in all scenarios.

Let’s delve into this topic to gain insight into when it’s prudent to reduce these expenses and explore alternative solutions for effective business expense management.

What are discretionary expenses?

Discretionary expenses, also known as non-essential expenses, refer to the costs that a company incurs voluntarily.

These are the expenses that are not directly tied to the core operations of the business. They encompass various areas such as marketing, investments, company subscriptions, travel, team perks, and office improvements.

For example, branding campaigns or advertising campaigns aren’t “essential” per se. A company can perfectly survive without paying for advertising. However, such investments do benefit the organization in the long and short term, so “non-essential” or discretionary expenses doesn’t mean non-important.

Now that this is clear, let’s see what qualifies as essential spend.

Difference between discretionary spending and essential expenses

To comprehend the significance of discretionary expenses, it’s essential to differentiate them from essential expenses.

Essential expenditure, as it’s name implies, represents costs that are essential for a company’s survival and proper functioning or well being. These include costs such as rent, utilities, and employee salaries.

In contrast, discretionary or nonessential spending is optional and can be trimmed down or eliminated when necessary.

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Examples of discretionary expenses

To provide a clear picture of discretionary items, let’s explore some common categories:

Marketing expenses

Marketing is a fundamental aspect of any business. However, the budget allocated to marketing campaigns, advertising, and promotions is considered discretionary budget. Finance professionals need to assess the ROI of marketing expenses carefully.

Some examples of discretionary marketing expenses include:

Advertising

Collateral materials like business cards, posters, and flyers

Event participation – whether it’s attending or hosting events

Video production

Agency and freelancer fees

Public relations, including press release distribution

Now, please note that certain marketing expenses are instrumental for business growth. Cutting them indiscriminately can hamper revenue generation and market presence. The key is to optimize these expenses rather than eliminating them entirely.

Investments

Investing in various ventures, stocks, or bonds is a discretionary expense. It’s essential to have a well-defined investment strategy to ensure these expenses align with your financial goals.

However, it’s crucial to have a well-defined investment strategy to ensure that these expenses align with your financial objectives. Some examples include:

Real estate

Cryptocurrencies

Commodities

Company subscriptions

Subscriptions to services and software can be a significant discretionary expense. Evaluating the necessity and cost-effectiveness of each subscription is vital. Here are some examples of subscriptions a company might be using:

Software services

Cloud storage and web hosting services

Industry-specific software

Market research tools

Travel expenses

Business travel is a common discretionary cost. Managing travel expenses efficiently can significantly impact your company’s bottom line. Here are examples of non-essential travel costs:

Accommodations

Meals and dining out

Transportation

Conferences and trade shows

Client and staff entertainment

Travel insurance

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Yvonne Gross, VP of Finance & Operations, Daedalean

Team perks and office improvements fall within discretionary expenses. For example, offering employee perks such as gym memberships or wellness programs falls into the discretionary category.

While they may not be immediately necessary, they contribute to employee satisfaction and productivity. Neglecting these expenses can lead to reduced morale and lower retention rates.

Here are other examples of team perks that are non-essential expenses:

Gym memberships and wellness programs

Health insurance benefits

Education assistance and certifications

Transportation subsidies

Employee recognition programs

Again, it’s essential to strike a balance between employee satisfaction and the amount of money that goes into such perks, before deciding to invest more or to cut costs from this category of expenses.

Office improvements

Upgrading the office environment and infrastructure is discretionary. However, these improvements can enhance productivity and employee satisfaction, making them worth the investment.

Examples of essential expenses

As said, certain expenses such as rent, employee salaries, and specific insurance premiums are considered essential. Legal obligations require the consistent payment of these expenses each month, so these qualify as mandatory spending.

Failing to meet these financial obligations could result in severe consequences, including legal actions, fines, or even the need to cease business operations altogether.

These business costs include:

Employee salaries

Debt repayments, including loans and mortgages

Rent and inventory

Utility bills

Software that is essential for the company’s functioning

Necessary hardware

These examples demonstrate the diversity of discretionary expenses that finance professionals may encounter in their roles, highlighting the importance of strategic management in each category.

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How to manage discretionary spending effectively

Effectively managing discretionary spending is essential for maintaining financial control and optimizing resource allocation. Here are some guidelines to help you manage discretionary expenses efficiently:

1. Establish clear budgets

Create well-defined budgets that distinguish between essential and discretionary expenses. Allocate specific amounts for each discretionary category, setting clear spending limits. This proactive approach ensures cost control and accountability.

2. Perform regular expense reviews

Regularly review discretionary expenses, ideally on a monthly or quarterly basis. This allows you to identify areas where cost savings can be achieved. Look for redundant or underutilized expenses and consider eliminating or reducing them.

3. Prioritize spending based on impact

Prioritize discretionary expenses based on their impact on your business’s goals and objectives. Focus on investments or strategies that contribute significantly to revenue growth or cost savings. Not all discretionary expenses carry equal weight.

4. Use spend management software

Leverage automation and AI-driven solutions to streamline your spend or expense management. These technologies can help in tracking, reporting, and controlling discretionary spending more effectively, reducing manual errors and improving efficiency.

Before selecting a tool for managing your business expenses :

Define your needs: Identify your specific requirements for expense management software. Consider factors like scalability, integration with existing systems, mobile accessibility, and user-friendliness.

Research solutions: Explore different expense management software options available in the market. Look for user reviews, request demos, and assess their features against your needs.

Consider integrations: Ensure that the software can seamlessly integrate with accounting and financial systems, making the expense management process more efficient.

Create clear spend policies: Develop clear and comprehensive expense policies. These policies should detail what expenses are allowed, approval workflows, and documentation requirements.

If you’re ready to take this step, we’ve detailed the topic of selecting the right expense management software in the article below.

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How to Choose the Ideal Expense Management Software: Requirements and Features

How to choose the best expense management software for your company size. Improve efficiency and save costs with the right expense tracking solution.

Lars Mangelsdorf,  

Co-founder and CCO

5. Employee involvement

Educate your team about the importance of managing discretionary expenses and involve them in cost-saving initiatives.

Raise awareness of the company’s financial goals and encourage employees to identify areas where discretionary expenses can be reduced or optimized. Incentivize cost-conscious behavior through recognition or rewards.

This can lead to more conscientious spending decisions at all levels of the organization.

6. Vendor negotiations

Negotiate with vendors and service providers for better terms. Explore opportunities for volume discounts, extended contracts, or alternative pricing structures. Reducing the cost of subscriptions and services can significantly impact your discretionary spending.

7. ROI analysis

Conduct a return on investment (ROI) analysis for each discretionary expense. Assess how these investments contribute to the company’s bottom line. If an expense doesn’t deliver a clear return, consider reallocating those resources to more productive areas.

You can try out our ROI calculator below for a quick assessment of your potential savings.

ROI calculator

Calculate your savings

How much can you save annually if you choose Yokoy as your spend management suite? Our ROI calculator helps you quantify the return on investment, so you can build a solid case for finance transformation.

8. Benchmarking

Benchmark your discretionary spending against industry standards or competitors. This provides context and helps identify areas where you might be overspending or underinvesting in critical areas.

By following these strategies, you can effectively manage discretionary spending, reduce waste, and ensure that resources are allocated to areas that align with the company’s strategic objectives.

The misconception that discretionary expenses are always expendable can be detrimental to businesses. While they provide flexibility, they are not devoid of importance.

Effective expense management involves striking a balance between controlling costs and supporting growth, employee satisfaction, and long-term financial health.

If you’re curious to learn more, we recommend to read the article below.

From $456K Lost/Year, to Full Spend Control: Three Process Changes You Can Implement Today​

In the current economic context,  with inflation peaking and recession looming , finance departments are under pressure to control costs and cut unnecessary spending.  The fastest way to do this is to identify hidden costs – a task proves to be more challenging than it should. 

Thomas Inhelder , 

CFO at Yokoy

Simplify your spend management

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• Discretionary Expenses

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on July 05, 2023

Get Any Financial Question Answered

Table of contents, what are discretionary expenses.

Discretionary expenses refer to non-essential spending on goods and services that are not required to maintain basic living standards. These expenses are often associated with leisure, entertainment, and personal indulgence.

Proper management of discretionary expenses is crucial for maintaining financial stability and achieving financial goals. By controlling discretionary spending, individuals can prioritize savings, reduce debt, and allocate resources to essential needs.

Discretionary expenses can be divided into various categories, such as dining out, hobbies, travel, and personal care. Explore the common types of discretionary expenses, budgeting strategies, and tips for reducing discretionary spending while maintaining a balanced lifestyle.

Common Types of Discretionary Expenses

Dining out and entertainment.

Eating at restaurants, going to the movies, or attending concerts are examples of discretionary spending on dining out and entertainment. These expenses can add up quickly and have a significant impact on one's budget .

Hobbies and Recreation

Spending on hobbies and recreational activities, such as sports equipment, art supplies, or memberships to clubs, also falls under discretionary expenses. These costs can vary widely depending on individual interests and preferences.

Travel and Vacations

Travel and vacations are often significant discretionary expenses, including airfare, accommodation, and sightseeing. These costs can be managed through budgeting and planning, but they still represent non-essential spending.

Clothing and Accessories

While clothing is a necessity, spending on high-end brands, luxury items, or excessive purchases is considered discretionary. This category also includes accessories such as jewelry, handbags, and shoes.

Electronics and Gadgets

Purchasing the latest smartphones, tablets, or gaming consoles are examples of discretionary spending on electronics and gadgets. These items can be expensive and may need to be balanced against other financial priorities.

Personal Care and Beauty

Discretionary expenses in personal care and beauty include salon visits, spa treatments, and high-end cosmetics. These costs can be reduced through DIY alternatives or by finding less expensive options.

Budgeting for Discretionary Expenses

Creating a realistic budget.

To manage discretionary expenses, create a realistic budget that accounts for all sources of income and essential expenses. This process will help identify how much money can be allocated to discretionary spending without jeopardizing financial stability.

Allocating a Percentage of Income

One popular budgeting method is to allocate a specific percentage of income to discretionary expenses, such as the 50/30/20 rule . This approach suggests allocating 50% of income to essential needs, 30% to discretionary wants, and 20% to savings and debt repayment.

Separating Needs From Wants

Distinguish between essential needs and discretionary wants to better control spending. This distinction can help prioritize spending on necessities and allocate the remaining funds to discretionary expenses.

Setting Spending Limits

Establish spending limits for discretionary expense categories to maintain control over spending. Regularly review and adjust these limits to ensure they remain appropriate for current financial goals and circumstances.

Strategies for Reducing Discretionary Expenses

Comparison shopping.

When making discretionary purchases, compare prices across multiple retailers to find the best deals. This practice can help save money without sacrificing quality or enjoyment.

Utilizing Coupons and Discounts

Take advantage of coupons, discounts, and sales to reduce discretionary spending. These savings opportunities can be found online, in newspapers, or through mobile apps.

DIY and Home-Based Alternatives

Consider do-it-yourself or home-based alternatives to discretionary expenses, such as cooking at home, engaging in hobbies that require minimal investment , or exercising without a gym membership.

Cutting Back on Non-essential Items

Evaluate discretionary spending habits and identify areas where costs can be reduced. For example, limit dining out to special occasions, eliminate unnecessary subscriptions, or postpone non-essential purchases.

Tracking and Monitoring Discretionary Expenses

Importance of tracking spending.

Tracking discretionary spending is crucial for understanding where money is being spent and identifying opportunities to reduce costs. Regularly monitoring expenses can also help identify patterns and develop healthier spending habits.

Tools for Monitoring Discretionary Expenses

Various tools can help track and monitor discretionary expenses, such as budgeting apps, spreadsheets, or expense tracking software. These tools can provide valuable insights into spending habits and help individuals stay on track with their financial goals .

Regularly Reviewing and Adjusting Spending Habits

Consistently review discretionary spending and make adjustments as needed. This practice ensures that spending remains within budget limits and supports long-term financial goals.

Balancing Discretionary Expenses With Financial Goals

Prioritizing savings and debt repayment.

Ensure that discretionary spending does not impede progress towards savings and debt repayment goals. Prioritize setting aside funds for an emergency fund, retirement savings, or paying off high-interest debt before allocating money to discretionary expenses.

Establishing Short- and Long-Term Financial Goals

Set short- and long-term financial goals to provide a clear direction for discretionary spending decisions. These goals can help individuals determine how much money should be allocated to discretionary expenses and when to adjust spending habits.

Adjusting Discretionary Spending to Support Goals

If financial goals are not being met, evaluate discretionary spending habits and make necessary adjustments. This may involve cutting back on certain expenses, reallocating funds, or finding alternative sources of income .

The Role of Discretionary Expenses in Financial Planning

Discretionary expenses play a significant role in financial planning and overall quality of life. By managing these expenses effectively, individuals can enjoy the things they love while maintaining financial stability and working towards long-term financial success.

Importance of Balancing Enjoyment and Financial Responsibility

Finding the right balance between enjoyment and financial responsibility is crucial for maintaining a healthy financial life. By making informed decisions about discretionary spending, individuals can enjoy their preferred lifestyle without sacrificing financial security.

Developing Healthy Spending Habits for Long-Term Financial Success

Developing healthy spending habits and consistently monitoring discretionary expenses can lead to long-term financial success. By prioritizing financial goals and making thoughtful spending decisions, individuals can create a stable financial foundation and work towards achieving their dreams.

Discretionary Expenses FAQs

What are discretionary expenses.

Discretionary expenses are expenses that are not essential to daily living and can be postponed or avoided without affecting one's basic needs, such as food, shelter, and clothing. Examples of discretionary expenses include dining out, entertainment, travel, and luxury items.

Why is it important to track discretionary expenses?

Tracking discretionary expenses can help individuals or households identify areas where they can cut back on spending to save money and prioritize their financial goals. It can also provide insight into spending patterns and help to create a more realistic budget.

How can I reduce my discretionary expenses?

Some ways to reduce discretionary expenses include limiting the frequency of dining out, finding free or low-cost entertainment options, choosing less expensive travel options, and prioritizing needs over wants when making purchases.

How much of my income should I allocate to discretionary expenses?

The amount of income to allocate to discretionary expenses varies depending on an individual's financial situation and priorities. Some financial experts recommend using the 50/30/20 rule, which allocates 50% of income to necessities, 30% to discretionary expenses, and 20% to savings and debt repayment.

What are some strategies for managing discretionary expenses?

Some strategies for managing discretionary expenses include setting a monthly spending limit for certain categories, such as dining out or entertainment, using cash instead of credit to limit spending, and regularly reviewing spending patterns to identify areas where adjustments can be made. It's also important to prioritize financial goals and make sure discretionary expenses are not preventing progress toward those goals.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Discretionary Expenses: What Are They, Examples, and How To Control Them In Business

• Written by Rob Biedron
• 18 min read

KEY TAKEAWAYS

• In business and personal finance, many essential expenses are the same. These are what you have to pay to keep business running as usual (or to maintain a home, job, etc.)
• Discretionary spending is what you choose to spend – it’s not required to keep things running – but is nice to be able to do.
• Budgeting isn’t optional if you want to make the most of your money.

Discretionary expenses are costs that are not essential for the maintenance of a home or business.

These expenses can be adjusted or eliminated depending on an individual’s or a company’s financial situation and priorities. When finances are tight these will be the costs that you can cut when tightening your belt.

In this article, we will explore discretionary expenses in both personal and business contexts, including their definition, examples, and best practices for managing them.

Discretionary Expenses in Personal Finance

In a household setting, discretionary expenses are incurred for non-essential items such as entertainment, vacations, and hobbies.

These expenses are considered discretionary because they are unnecessary for maintaining a basic standard of living, unlike non-discretionary expenses such as housing, utilities, groceries, and transportation.

Some examples of discretionary spending, or non-essential expenses in households include:

Entertainment

Entertainment expenses can include many activities that provide enjoyment and relaxation.

These may consist of movie tickets, streaming service subscriptions, concert tickets, and other forms of amusement.

While entertainment is essential for personal well-being, it is not necessary for maintaining a basic standard of living, making it a discretionary expense.

Vacation expenses encompass all costs related to travel and leisure, such as hotel stays, airfare, car rentals, and sightseeing.

These expenses are considered discretionary because they are not required for day-to-day living and can be adjusted or postponed based on an individual’s financial situation.

Hobby-related expenses include the costs of pursuing personal interests and passions, such as art supplies, sports equipment, club memberships, and classes.

These expenses are discretionary because they are not essential for maintaining one’s basic needs and can be reduced or eliminated.

Essential Expenses

Essential expenses are the costs necessary for maintaining a basic standard of living. These expenses are fundamental to your well-being and cannot be eliminated without significantly impacting on your quality of life.

Examples of Essential Expenses

Rent or mortgage payments.

Rent or mortgage payments are essential expenses for maintaining a place to live. They represent the monthly cost of occupying a residence, whether a rental property or a home purchased through a mortgage loan.

Property Taxes

Property taxes are levied on homeowners by local governments and are based on the property’s assessed value. These taxes contribute to funding public services such as education, public safety, and infrastructure.

Homeowner’s Insurance

Homeowner’s insurance is a policy that provides financial protection against damage to your home and personal belongings due to events like fires, storms, or theft. It may also cover liability for accidents that occur on your property.

Utility Bills

This includes things like your electricity, water, gas, etc. Other essential utilities may include basic telephone service, trash removal, and sewer services.

Food Expenses

Groceries are an essential expense, as they provide the food necessary for daily sustenance and nutrition.

Basic dining expenses include occasional meals at affordable restaurants or takeout options. Luxury or non-essential dining experiences are considered discretionary expenses.

Travel Expenses

Costs associated with commuting to work may include public transit fares, carpooling fees, or parking expenses.

Car payments are a necessary expense if you have financed the purchase of a vehicle through a loan.

Fuel costs are essential for vehicle operation and depend on fuel efficiency and driving habits.

Auto insurance premiums provide financial protection in case of accidents or other incidents involving your vehicle.

Health Insurance Premiums

Health insurance premiums are paid to maintain coverage for medical expenses, including doctor visits, hospital stays, and prescription medications.

Medication and Specialized Treatments

Medication costs include prescription drugs and over-the-counter medicines required to maintain good health. You may also need to pay for medical devices, therapy, or other specialized treatments.

Minimum Payments on Credit Cards

Credit card debt payments are essential to avoid late fees, maintain a good credit score, and eventually eliminate debt.

Student Loans

Student loan payments are necessary to repay educational loans and avoid defaulting on the debt.

Many of these essential personal expenses also translate to the business world. You must pay for your building/offices/product facilities (whether through rental or mortgage), utilities, credit cards, loans, etc.

While you don’t necessarily have to pay for employee healthcare expenses but if you choose to offer benefits, that benefits package becomes an essential expense.

Discretionary Expenses in Business

In a business context, discretionary expenses are costs that can be adjusted or eliminated without directly impacting the company’s core operations. These expenses often vary across departments, such as marketing, human resources, and operations.

Examples of discretionary expenses in various business areas include:

Employee Perks and Benefits

Employee perks and benefits are incentives offered to employees beyond their regular salary.

These include gym memberships, team-building events, workplace wellness programs , tuition reimbursement, retirement planning, and flexible work arrangements.

While these perks can improve job satisfaction, employee engagement , and staff retention , they are considered discretionary because they are not essential for the day-to-day functioning of the business.

Office Decor and Aesthetics

Office decor and aesthetics involve the design and layout of your workspace, including furniture, artwork, and other decorative elements.

The basic elements of desks, chairs, and computers will be a required part of the office management setup to cover core business operations. Above and beyond that it will depend where the leadership team want to draw the line.

These expenses can create a comfortable and visually appealing work environment, positively impacting employee morale and productivity. However, they are considered discretionary expenses because they do not directly affect the business’s core operations.

Professional Development and Training Programs

Investing in professional development and training programs for your employees can enhance their skills, knowledge, and overall performance.

These programs may include workshops, seminars, conferences, or online courses.

While professional development can benefit your business in the long run, it is considered a discretionary expense because it is not essential for daily operations.

Non-Essential Software Subscriptions

Non-essential software subscriptions refer to tools and applications that are not crucial for the daily functioning of your business but may offer convenience or additional features.

Examples include project management tools, graphic design software, and social media scheduling platforms.

These might be paid for on behalf of the member of staff or handled by an expense reimbursement fulfilled based on a properly returned expense report .

While these subscriptions can provide value, they are considered discretionary expenses because they are not vital to your business’s core functions.

Business Travel and Entertainment Expenses

Business travel and entertainment expenses include attending conferences, networking events, trade shows, client meetings, employee outings, and recreational activities.

If travel and expense management practices are poor, or worse if there is no travel and expense policy in place, these expenses can get out of hand when financial circumstances are strong.

This makes them an ideal candidate for cutting back on when times are hard.

These expenses can help build relationships, foster collaboration, and expand your business network. There is a lot of value to the business created when this expenditure is managed correctly.

However, they are discretionary because they are not required for the business’s day-to-day operations.

Donations and Sponsorships

Donations and sponsorships are voluntary contributions a business makes to support charitable causes, community events, or industry initiatives.

These expenses can improve your company’s reputation and public image, but they are considered discretionary because they do not directly impact the core functions of your business.

Monitoring and controlling discretionary expenditures is crucial for businesses, as it can significantly impact overall expenses and help avoid potential financial setbacks.

Distinguishing Between Essential and Discretionary Expenses

The primary difference between essential and discretionary expenses lies in their necessity for maintaining a basic standard of living.

Necessary expenses are fundamental and cannot be eliminated without negatively impacting one’s quality of life. Discretionary costs, however, are non-essential and can be adjusted or eliminated based on an individual’s financial priorities.

To effectively manage your finances, it’s crucial to distinguish between these two types of expenses.

By categorizing your expenses as either essential or discretionary, you can better identify areas where spending can be reduced and allocate resources more effectively.

In most cases a split of direct and indirect expenditure is a good starting point. Indirect spend categories are where you likely find the majority of your discretionary expenses.

Improving how you manage indirect procurement will have a lot of benefits for your indirect procurement process now but can also help if you need to review what expenses you can cut out without impacting core operations.

In times of financial hardship, it’s crucial to prioritize essential expenses and cut back on discretionary spending.

Focus on maintaining the core functions of your business, including paying employees, keeping the lights on, and ensuring that your products or services are still available to customers.

Reducing non-essential spending can help your business weather the storm and emerge stronger when conditions improve.

Closely monitoring spending and comparing it to your budget can help control expenses.

Best Practices for Managing Discretionary Expenses

Create a clear budget.

Establishing a comprehensive and strategic budget is crucial for effectively managing discretionary expenses.

A detailed budget should outline all discretionary and non-discretionary expenses, making it easier to identify areas where spending can be reduced.

Both individuals and businesses can benefit from tracking their income and expenses, setting spending limits, and prioritizing financial goals.

Regularly Review Spending

Periodically assessing spending habits is essential for identifying and eliminating unnecessary expenses or areas of overspending.

By regularly reviewing bank statements, credit card transactions, and expense reports, individuals and businesses can gain better control over their finances and adjust as needed to stay within their budget.

For businesses, a dedicated spend management software , like Planergy, with automated spend analytics and drill down reporting makes this much easier.

Negotiate with Suppliers

Seeking better deals or alternative options for products and services can lead to significant cost savings for both individuals and businesses.

Negotiating with suppliers , comparing prices, and exploring different vendors can potentially secure more favorable terms and reduce discretionary expenses.

Encourage Employee Cost-Saving Efforts

Implementing company-wide initiatives that promote cost-saving behaviors among employees can help businesses manage their discretionary expenses more effectively.

These initiatives may include offering incentives for cost-saving ideas, providing training on expense management, and encouraging employees to be mindful of their spending habits.

By fostering a cost-conscious culture within the organization, businesses can reduce expenses and improve their financial health.

Using Software to Manage Discretionary Expenses

Software solutions, such as Planergy’s spend management software, can be instrumental in better management of discretionary costs .

By tracking spending, identifying areas of overspending, monitoring employee spending habits, and providing detailed reports for more accurate budgeting you can improve the management of discretionary spend.

Tools like this ensure you have enough money to cover mandatory spending and can appropriately plan for discretionary items. Some common questions about using software to manage discretionary expenses include:

Can the software integrate with existing financial systems?

Planergy, and many other expense management software, can integrate seamlessly with popular accounting systems and ERPs, making tracking and analyzing expenses easier.

How customizable are the reports?

Planergy offers customizable reporting options and dashboards, allowing businesses to focus on specific areas of concern or interest. Create standard reports, schedule them, and use spend analytics software to gain better insights.

This is not standard for all spend management software. Often they include basic reporting options without significant flexibility.

Is the software user-friendly?

Look for a solution that is easy to use and offers accessible customer support. If you fail to achieve user adoption across the company, you will be missing out on valuable data.

Understanding and managing discretionary expenses is vital for both individuals and businesses to maintain healthy finances.

By implementing best practices and utilizing tools such as expense management software, it is possible to gain control over discretionary spending and make informed decisions that benefit overall financial health.

Whether business or personal, financial planning and saving money when and wherever possible is important.

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Discretionary Expenses: The Extras, Not Essentials

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When it comes to spending money, there are things that you want to buy — and things you have to pay for. That's the line between discretionary expenses and everything else. Wants versus needs .

What are discretionary expenses?

A discretionary expense is voluntary spending. You want to buy something, but it isn't mandatory. Entertainment and recreational purchases fall into this category.

On the other hand, bills such as rent, mortgage payments and utilities are nondiscretionary expenses. You have to pay those. When working with a budget , discretionary spending is drawn from the money left over after paying the essential bills.

» MORE: Budget calculator

What are examples of discretionary expenses?

"I would describe discretionary spending as the fun stuff, the things you want to spend money on, such as going out to eat, buying clothes, gifts, hobbies, entertainment, vacations, things like that," says Amy Jo Lauber, a certified financial planner with Lauber Financial Planning in West Seneca, New York.

Like there are different types of finance , discretionary expenses can take many forms and may include:

Electronics, such as a television or a phone upgrade.

New furniture.

A new vehicle.

Appliance upgrades.

Travel for pleasure.

Home gym equipment, like a treadmill or Peloton bike .

Tickets to concerts and sporting events.

Charitable contributions.

Spa visits (including the tip for a massage ).

All of these items add to your quality of life but need to come after paying the bills and, optimally, after paying yourself .

How do discretionary expenses fit into a budget?

You may be spending more on wants than you realize. That can block you from putting aside enough money for emergency needs and retirement savings.

Accounting for discretionary expenses is a part of the 50/30/20 budget , a plan for controlled spending. In this system, up to half of your budget is allocated to needs, 30% to wants (the discretionary expenses we're talking about) and 20% to savings and debt repayment.

"I do like and use the 50/30/20 budget," Lauber says. "I think it works for people who don't want to feel guilty about spending on certain things and need guidance on saving. It provides a simple, reasonable framework free from the fuss of tracking spending in all the categories."

To start a simple budget, determine your monthly take-home pay, choose a budget plan that works for you and keep an eye on it. You may find it's easier than you thought.

» MORE: What is my take-home income?

Making good financial decisions

Thinking of money like this — in buckets of wants, needs and saving for the future — is part of a process for making good financial decisions.

"I encourage people to pay attention to all of their spending, not only discretionary, and moreover, to be intentional about their money, to make decisions with self-awareness, based on one's values and needs," Lauber says.

"This involves using the positive emotions such as hope, joy, delight, generosity, creativity and dreams to help us manage money in a way that is enjoyable and sustainable."

For example, try prioritizing the positive emotions tied to long-term plans, such as retirement or having no financial worries, rather than those related to the short-term satisfaction of impulse spending. Being thoughtful about today's discretionary expenses can feed your long-term wants and goals.

If you want to start getting a handle on your spending, NerdWallet has compiled the best expense tracking apps based on ratings and popularity among users.

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Discretionary Expenses: Definition, Types, and Budgeting

Table of Contents

Know the difference between your necessary and discretionary expenses – Alexa Von Tobel

Discretionary expenses are non-essential costs that don’t significantly impact the day-to-day operations of an organization. CFOs and accounting teams track and analyze this non-essential capital expenditure to reduce overall business expe nses , boost margins, and improve short-term profitability during a crisis. 

This article walks you through discretionary and non-discretionary expenses, how to budget for them, and ways to balance them with financial goals.

What is a discretionary expense?

A discretionary expense is voluntary spending that isn’t essential for core business operations. Organizations can survive without these non-essential expenses, which is why they are also known as non-essential spending.  

Most organizations spend discretionary costs to improve their reputation and customer and employee relationships. Common examples include expenses related to research and development, employee benefits, office improvement, and training. 

Discretionary expenses are born out of wants, whereas non-discretionary expenses arise from needs. Companies typically pay for these spending with discretionary income, the amount of money they have left after paying for necessities, including rent and tax. Tracking discretionary costs aids organizations in identifying and cutting unnecessary expenses during financial difficulties.

Suggested Reads: Expense Management

Importance of discretionary expenses

Keeping an eye on discretionary expenses enables business leaders to improve cash flow , maintain profitability, mitigate financial risks, and optimize resources for the long-term economic sustainability of their organizations. 

• Improved cash flow: Organizations tracking discretionary can quickly cut costs and reallocate that budget to revenue-generating activities. Analyzing discretionary spending patterns also enables them to avoid overspending and create emergency funds for economically turbulent situations. 
• Business profitability: Lowering discretionary business expenses allows organizations to offer competitive prices, reduce waste, and boost operational efficiency — all key to improving profit margins.
• Reduced financial risks: Businesses controlling discretionary cash outflow can free up funds for meeting financial obligations, paying interests, and reducing the cost of debt . They can also use the savings from reduced discretionary costs to create financial reserves, which can help them avoid liquidity crises during revenue shortfalls and market fluctuations.
• Strategic growth: Efficient discretionary cost management is also essential for efficient financial management and resource allocation to strategic areas such as marketing or employee training.

Now, let’s look at the different discretionary costs in business.

Types of discretionary expenses

While discretionary expenses are unique to every business depending on their industry and nature of work, here are some common discretionary items. 

• Marketing expenses: While the budget may vary, most companies spend quarterly on paid ads, inbound marketing, content production, public relations, brand design, and website design. These marketing activities are discretionary as an organization still offers its core services without them. 
• Investments: Business investments like mergers, buyouts, real estate, and research and development may help organizations increase profits but are discretionary. 
• Non-essential SaaS subscriptions: Enterprises use multiple tools for daily operations, including but not limited to project management tools, accounting software, and expense management software . An organization may use these solutions to boost ROI but can control how much they spend for them.
• Employee perks and benefits: Some organizations may offer employee perks (transport, gym memberships, fitness passes, pantry) or conduct team-building exercises. While these perks may be crucial for talent retention, companies can control how much they spend. 
• Business travel expenses: Large enterprises may offer generous T&E expenses for their traveling employees and sales teams, whereas smaller organizations may not be able to provide the same. The fact that organizations can regulate this spending with T&E policy makes it discretionary.  
• Office and workspace upgrades: Companies investing in workspace design and layouts can moderate the amount they spend toward these upgrades, making workspace enhancement expenses discretionary. 
• Professional training and development: Some organizations conduct workshops, offer online courses, and other professional development initiatives. These expenses are discretionary as they aren’t necessary for day-to-day operations.

Related Reads: Expense Category

Discretionary costs examples

Examples of these expenses include:

• Marketing and advertising 
• Employee training and development
• Business travel and entertainment
• Research and development
• Charitable contributions
• Employee perks and benefits
• Office upgrades and renovations
• Software technology investments

Now, let’s understand how these expenses differ from non-discretionary business spending.

Discretionary vs non-discretionary expenses

Discretionary expenses are non-essential spending, whereas non-discretionary spending is unavoidable capital expenditures necessary for business operations.

Non-discretionary expenses are fundamental costs an organization must pay to run daily operations, regardless of financial performance. Companies can’t quickly eliminate these costs as they are rigid and don’t change in the short run. Examples of non-discretionary spending include:

• Employee salaries, benefits, and retirement contributions.
• Utility costs for essential services like water, heating, and electricity.
• Rent for office spaces, manufacturing units, and production equipment.
• Premiums for property insurance, liability insurance, and workers’ compensation insurance.
• Income and property taxes payable to government regulations.

Suggested Reads: Non-operating Expenses

Fixed expenses vs discretionary expenses

Fixed expenses refer to fixed business costs that don’t change with production outputs or business activity levels. Businesses must pay these fixed costs to remain operational. Examples include phone service, utility bills, interest payments, property tax, and employee salaries. 

Discretionary expenses are non-essential costs that a business spends at its discretion. These costs have no bearing on the daily operations of an organization. Examples include expenses related to training and development, marketing, employee benefits, and software subscriptions. 

How to balance discretionary expenses with financial goals

Companies struggling to control discretionary expenses must start by creating short-term and long-term goals. The next step for them is to optimize discretionary spending, repay debts, and prioritize savings to achieve their goals.

• Set short and long-term financial goals: Setting financial goals is the foundation of robust financial planning . These goals provide organizations with clarity around how much discretionary spending they should allocate and when they should optimize discretionary expenses. 
• Adjust discretionary spending: The next step is to evaluate discretionary spending patterns. Based on that analysis, an organization can find areas to curtail spend and reallocate those funds to revenue-generating business areas. 
• Repay debt: Organizations should also consider repaying debts with high-interest rates faster or consolidating them to put aside funds for emergencies or invest in other high-growth areas.  

Now, let’s look at how companies can budget for discretionary expenses.

What is discretionary expense budgeting?

Discretionary expense budgeting refers to using financial systems for tracking and optimizing discretionary spending. It enables organizations to gather intelligence on how discretionary spending varies throughout the year.

How to budget for discretionary expenses

Organizations looking to excel at discretionary expense budgeting must focus on measuring expense ROI, categorizing discretionary spending trends, and creating and enforcing an expense management policy.

• Find qualitative or quantitative ways to measure expense ROI: Organizations spending on expenses don’t always receive the return on investment they expect. For example, an enterprise may spend thousands of rupees on a new SaaS tool subscription. Still, employees may not find the tool helpful. The result is wasted spending. That’s why it’s essential to measure the ROI of every recurring expense qualitatively or quantitatively. 
• Track discretionary expense trends: Businesses must track expenses to understand where they spend the most across categories, discover seasonal patterns, and reduce overspending. These insights are crucial for identifying problem areas and improving efficiency. Moreover, companies can also use historical data to predict future costs better. 
• Design and enforce expense policies: Well-defined expense policies set department-specific and category-specific spending limits based on discussion with relevant stakeholders. Implementing these policies enables companies to calculate margins even for the worst-case scenarios. Organizations also must automate expense approval so employees can focus on value-added tasks.  
• Create expense review processes: Regularly reviewing discretionary spending enables enterprises to optimize areas with high expenses and improve financial performance. 
• Create a cash margin of reserve: Most organizations put discretionary expenses under scrutiny after experiencing financial turbulence. That’s when they drastically cut costs, negatively impacting employee morale and vendor relationships. Creating a six-month cash margin of safety enables them to scale cost-cutting slowly without interrupting existing workflows.

While most businesses turn to cutting discretionary costs during a financial crisis, they can also use it for their strategic advantage; let’s see how.

Related Reads: Best Business Budgeting Software

Cutting discretionary costs during a financial crisis

Organizations cutting discretionary costs during a financial crisis must adopt a tactical financial strategy while balancing long-term vision. They must opt for a phased approach after considering the impact of each reduction. 

• List discretionary expenses: The first step involves finding existing discretionary costs and areas where an organization can reduce expenses without impacting daily operations.
• Impact assessment: Next, they must evaluate whether cutting expenses aids them in achieving business needs and goals in the short and long run. 
• Stakeholder collaboration: Organizations must ensure cross-departmental collaboration to prevent unintended consequences as the phased discretionary cost reduction begins. 
• Real-time monitoring: Companies should also use expense reporting tools to monitor the effects of cost-cutting and make necessary adjustments. 

When used right, discretionary expenses enable businesses to capture new opportunities and make strategic choices that translate into future success. At the end of the financial crisis, organizations rank discretionary expenses based on their ROI to meet business objectives.

Strategies for reducing discretionary expenses

Now, let’s go over strategies organizations can deploy to reduce discretionary spending. 

• Establish a strategic budget: A comprehensive business budget is essential for identifying which discretionary and non-discretionary expenses an organization can curtail. They should also prioritize financial goals by setting spending limits. 
• Assess spending periodically: Reviewing spending patterns at regular intervals can aid organizations in controlling finances and avoiding overspending.
• Negotiate with vendors: Comparing different suppliers and their prices gives businesses significant annual cost savings and a competitive procurement advantage. 
• Implement employee cost-saving initiatives: Organizations should also promote cost-saving behavior among employees. This cost-conscious culture ensures employees pay attention to their spending habits and improve the company’s financial health. 

Let’s look at the tools organizations use for managing discretionary expenses.

Read More About Best Expense Management Practices

Tools for monitoring discretionary expenses

Using spend management software is essential for businesses to track and manage discretionary costs efficiently. These tools enable finance and accounting teams to spot areas where employees overspend and their spending habits. Moreover, these platforms integrate with ERPs and accounting systems to help organizations gain insights into improving discretionary spending management. Some cloud-based solutions also let organizations set up a requisition approval process to keep costs under control.

Suggested Reads: Best Expense Management Software

All discretionary costs may not be optional for every organization, depending on their industry and the spending category. That’s why companies must set expense policies to analyze, approve, and track discretionary expenses. Using spend management systems helps them keep costs under control and spot savings opportunities.

Discretionary expense examples include charitable contributions, business travel costs, employee perks and benefits, workspace upgrades, and software technology investments.

Insurance premiums, employee salaries, property taxes, office space rent, and utility costs are non-discretionary expenses.

Discretionary in finance refers to expenses that aren’t essential for business continuity or operations. Non-discretionary expenses are costs an organization must pay to run its business smoothly.

Depreciation isn’t a discretionary cost, as an organization can’t determine depreciation at its discretion.

The 50-30-20 rule is a budgeting or financial planning rule that recommends putting 50% of income toward needs, 30% toward wants, and 20% toward savings.

Different types of discretionary expenses include marketing, investments, SaaS subscriptions, business travel, office upgrades, and employee training.

Total discretionary expenses refer to the sum of an organization’s optional expenses that aren’t necessary for operational continuity.

Fuel isn’t a discretionary expense, as individuals and companies require it to run operations. However, it’s a variable expense.

Common fixed costs are long-term and contractual expenses an organization must pay to remain operational. Examples include salaries, loan repayments, utility bills, mortgage payments, and rent costs. Discretionary expenses are optional spending that isn’t essential for business operations.

R&D is discretionary since it is optional and varies depending on an organization’s growth and objectives.

Discretionary costs are capital expenditures an organization can quickly curtail to improve its short-term profitability or cash flow. These costs aren’t essential for business operations.

Rent, property taxes, utility bills, and employee salaries are fixed expenses. In contrast, non-essential items like marketing, R&D, employee perks, and charitable contributions are discretionary expenses.

Fixed costs are business expenses an enterprise must pay regardless of production or sales output levels. These costs remain the same over a period.

Discretionary spending isn’t necessary for business continuity. Still, it enables organizations to improve brand awareness, market positioning, and relationships with employees and vendors. Tracking discretionary expenses enables organizations to mitigate unnecessary expenditures and improve the bottom line.

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Discretionary Expense

It encompass various choices that individuals make beyond essential living costs.

Master of Finance postgraduate from Kelley School of Business with a knack for Fintech, and Data Analytics. I come from a diverse industry background in pharma and supply chain management. I'm actively looking for roles in finance and hope you enjoy reading the articles here.

Elliot currently works as a Private Equity Associate at Greenridge Investment Partners, a middle market fund based in Austin, TX. He was previously an Analyst in  Piper Jaffray 's Leveraged Finance group, working across all industry verticals on  LBOs , acquisition financings, refinancings, and recapitalizations. Prior to Piper Jaffray, he spent 2 years at  Citi  in the Leveraged Finance Credit Portfolio group focused on origination and ongoing credit monitoring of outstanding loans and was also a member of the Columbia recruiting committee for the Investment Banking Division for incoming summer and full-time analysts.

Elliot has a Bachelor of Arts in Business Management from Columbia University.

What is a Discretionary Expense?

Understanding discretionary expenses, discretionary vs. non-discretionary expenses, managing discretionary expenses, discretionary expenses real-life applications.

Discretionary expenses encompass various choices that individuals make beyond essential living costs. These encompass amusement activities, travel, and non-crucial purchases of devices or fashion items. They are referred to as "wants."

Simply put, they are the non-crucial charges that reflect our way of life, presenting the potential for amusement and financially demanding situations. 

Human behavior plays a pivotal role in  discretionary spending . Consumerism, social pressures, and private values influence these selections, making it vital to delve into the mental elements that pressure such prices.

Prioritizing discretionary spending involves cautiously analyzing personal values and long-term economic desires. Allocating sources in alignment with those priorities guarantees that discretionary spending complements monetary well-being.

A carefully crafted budget could be very beneficial to manage discretionary prices effectively. Categorizing charges into fixed and discretionary lets individuals benefit from readability on their economic priorities.

A carefully crafted budget is beneficial to manage discretionary spending. Categorizing expenses into fixed and discretionary allows individuals to benefit from clarity on their monetary priorities.

Key Takeaways

• Discretionary costs embody non-vital purchases or “wants,” starting from eating out and enjoying luxury objects. 
• Discretionary spending can beautify our lifestyles, while unchecked spending may lead to economic strain. 
• Individuals can optimize their discretionary spending by carefully budgeting, prioritizing, and embracing frugality

These expenses are variable and can be adjusted based on personal preferences and financial circumstances.

Households and Individuals

Examples of Discretionary Expenses include: 

• Entertainment:  Concerts, movies, and sporting events.
• Travel:  Vacations and exotic weekend getaways.
• Dining Out:  Fine dining or ordering takeout.
• Luxury Items : High-end fashion and electronics.

Prioritizing spending involves inspecting personal values and long-term economic goals. Allocating resources to align with priorities guarantees that discretionary spending complements economic well-being.

Discretionary expenses can be adjusted based totally on strategic priorities, contributing to the general functioning and growth of the organization.

These expenses aren't fixed and may be adjusted primarily based on the enterprise's strategic priorities and financial circumstances.

Examples of Business Discretionary Expenses are:

• Marketing Initiatives : Promotional campaigns, advertising, and public relations activities.
• Employee Training and Development:  Non-mandatory training programs and professional development opportunities.
• Research and Development : Investments and development of new products or services.

Non-discretionary spending is vital for survival. Discretionary costs are non-compulsory and are adjusted based on financial conditions.

Recognizing when discretionary spending goes beyond reasonable limits is essential. Indicators of potential issues include consistently surpassing budget constraints, leaning on credit for non-essential purchases, and neglecting savings and investments.

• Warning Signs:  Are you consistently going over budget? If credit card spending becomes the primary source for non-essential items, it's time to reevaluate spending habits. Prioritizing non-essentials over savings is a signal to pause and reconsider.
• Set Spending Limits : Establish limits for discretionary spending within your overall budget. Break down discretionary spending categories, e.g., entertainment, for more specific limits.
• Establish an Emergency Fund : Build a financial safety net to cover unexpected expenses. Typically, a 5% allocation of savings is a good start.
• Budget Review : Analyze spending patterns and adjust your budgets. Prioritize savings and investments to ensure they take precedence.
• Strategic Use of Discretionary Spending : Explore investments aligned with personal or professional growth. You can evaluate trends and allocate funds wisely to activities or products with long-term value.
• Tracking and Categorizing Discretionary Expenses : Monitor spending, categorize expenses for insights, and identify areas for adjustment without compromising financial goals.

Examining case studies of individuals and taking financial modeling or budgeting courses to manage discretionary spending provides valuable insights into one's habits and areas of improvement.

From entrepreneurs to finance experts, understanding their approaches can inspire effective strategies for managing discretionary expenses.

In this digital age, numerous apps and tools also assist individuals in tracking and managing discretionary spending. Exploring technological solutions betters financial decision-making.

Learning about financial principles and investment strategies is fundamental to making informed decisions about discretionary expenses. 

Mastering discretionary expenses requires a combination of financial discipline, strategic planning, and a commitment to lifelong learning and applying rules and principles.

The control of discretionary spending is a pivotal element of sound economic planning, requiring a balanced and thoughtful technique. 

Recognizing warning signs, together with exceeding price range limits and neglecting financial savings, serves as an important first step in curbing immoderate discretionary costs.

Setting realistic spending limits and constantly reviewing budgets empowers individuals to stay within monetary limitations and prioritize essential goals.

Establishing an emergency fund acts as a safety internet, builds financial resilience, and stops the need to resort to credit for non-crucial purchases.

Furthermore, integrating discretionary spending strategically via aligning it with investments and long-term financial goals transforms it from a threat into a valuable economic tool. 

Whether investing in experiences or identifying trends in consumer behavior, discretionary spending can be harnessed to contribute to personal and financial growth. 

By monitoring and categorizing discretionary prices, people benefit from insights into their spending patterns, facilitating informed selection-making.

Education on investment opportunities and building a mindful spending habit further fortify one's financial foundation. 

Judiciously managing discretionary spending safeguards against financial pitfalls and unlocks the potential for strategic financial moves to pave the way for a more secure and prosperous financial future.

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Discretionary Expense Definition, Examples, Budgeting

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

Investopedia / NoNo Flores

What Is a Discretionary Expense?

A discretionary expense is a cost that a business or household can survive without, if necessary. Discretionary expenses are often defined as nonessential spending. This means a business or household is still able to maintain itself even if all discretionary consumer spending stops.

Meals at restaurants and entertainment costs are examples of discretionary expenses.

Key Takeaways

• A discretionary expense is a cost that is not essential for the operation of a home or a business.
• In a corporate environment, discretionary expenses are usually costs linked with improving a company’s reputation among its customers and employees.
• Tracking discretionary expenses enables businesses and households to identify where they can save money in times of financial difficulties.
• Discretionary expenses vary depending on the business or person.

Understanding Discretionary Expenses

Expenses are divided into several categories, namely non-discretionary and discretionary. While non-discretionary expenses are considered mandatory—housing, taxes , debt , and groceries—discretionary expenses are any costs incurred above and beyond what is deemed necessary. These are generally considered wants, while non-discretionary expenses are usually referred to as needs. As such, discretionary expenses rarely have anything to do with a business or household's day-to-day operations and, instead, have to do with lifestyle and choice.

Businesses and individuals pay for discretionary expenses with  discretionary income —the amount of money left over after paying for housing, food, taxes, and other necessities. When times are good, people have more money to spend, and they normally do so on things they don't need, such as luxury items and other services—cars, vacations, restaurants, entertainment, electronics, etc.

When times get tougher and short-term cash flow issues emerge, managers and individuals will first look to weed out any unnecessary costs. Discretionary expenses are normally the first to go because stopping them is unlikely to have a major impact on a business or household.

In a corporate environment, discretionary expenses are usually costs linked with promoting or boosting a company’s standing in the market . Buying the raw materials used to produce goods is usually considered essential. Spending money on employee training programs is not usually considered essential. 

Individuals may also encounter moments when it is necessary to consider which of their expenses they can live without. For example, a person who runs into financial difficulties is more likely to prioritize paying utility bills over financing a vacation.

Types of Discretionary Expenses

As mentioned above, discretionary expenses are any costs that a consumer or business wants rather than needs. Some common discretionary items include:

• Vacations and travel expenses
• Automobiles
• Alcohol and tobacco
• Restaurants and other entertainment-related expenses
• Coffee and specialty beverages
• Hobby and sports-related expenses, such as crafting, sewing, and gym memberships

It's important to point out again that what defines a discretionary expense depends on who's doing the buying. For instance, buying a new car may be considered a want for one person, but it may be considered essential for someone who has a long commute to work where driving is the only option.

Discretionary Expenses vs. Non-Discretionary Expenses

Expenses are divided into non-discretionary or discretionary costs. In other words, essential and non-essential expenses. Some expenses, such as vacation costs and luxury items, are not necessary to maintain a household and, thus, are classified as discretionary expenses.

In other words, the income-earner can pay for these goods or services at their own discretion. Certain expenses, though, must be paid to keep things running, such as housing costs, taxes, and health insurance for individuals and payroll, warehousing costs, and transport for businesses. These are considered essential expenses, as the income-earner must pay them on a regular basis or else suffer the consequences.

Ranking your discretionary expenses from least to most important can help you identify which costs you need to cut when times get tough.

Special Considerations

What constitutes a discretionary expense is subjective. As such, it may differ considerably among individuals and businesses. For example, a stable, well-established company could probably get away with slashing its advertising budget for a while if the need arises. A new company facing hardship, on the other hand, would probably need to make cutbacks elsewhere, being mindful that boosting exposure and getting its name out there is imperative to keeping the business afloat.

The same principle applies to individual consumers as well. Some people may only be able to afford a daily Starbucks run when things are going well. They may consider cutting out this expense when times are tough—or if they're saving up for a big expense, like a home or a car.

Budgeting for Discretionary Expenses

In tough economic times, it may be necessary for households and businesses to cut back on certain expenditures in response to decreases in income . That's why it's a good idea to track discretionary expenses separately from essential ones so that it is easy to see how costs can be reduced.

One helpful budgeting tactic is to rank discretionary expenses in order of importance from the least to most important. If a job loss or income reduction forces budget cuts, household members or a company's management team can easily identify the first discretionary expense to place on the chopping block.

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Home > Finance > Discretionary Expense Definition, Examples, Budgeting

Discretionary Expense Definition, Examples, Budgeting

Published: November 12, 2023

Discover the definition and examples of discretionary expenses in finance. Learn how to budget and manage your discretionary spending effectively.

• Definition starting with D

(Many of the links in this article redirect to a specific reviewed product. Your purchase of these products through affiliate links helps to generate commission for LiveWell, at no extra cost. Learn more )

Understanding Discretionary Expenses: Definition, Examples, and Budgeting

In our day-to-day lives, we have different types of expenses. Some are essential, like food and shelter, while others are more flexible and optional, known as discretionary expenses. But what exactly are discretionary expenses, and how can we manage them effectively in our budget? In this blog post, we will delve into the world of discretionary expenses, exploring their definition, providing examples, and offering practical tips for budgeting.

Key Takeaways:

• Discretionary expenses are non-essential purchases that provide enjoyment or personal satisfaction.
• Examples of discretionary expenses include dining out, vacations, entertainment, and hobbies.

What are Discretionary Expenses?

Discretionary expenses are expenditures that are not necessary for our basic needs but rather relate to our wants and desires. They include various discretionary purchases that provide enjoyment, entertainment, or personal satisfaction. While discretionary expenses may differ from person to person based on their preferences and lifestyle, they generally encompass expenses that are not essential for our daily survival.

Examples of Discretionary Expenses

Now that we understand the concept of discretionary expenses, let’s explore some common examples:

• Dining Out: Eating at restaurants or ordering takeout is considered a discretionary expense since we have the option to cook our meals at home.
• Travel and Vacations: Going on a vacation or taking a weekend getaway falls under discretionary spending since it is not necessary for our basic survival.
• Entertainment: Purchasing movie tickets, streaming subscriptions, attending concerts, or engaging in recreational activities are discretionary expenses that provide enjoyment and entertainment.
• Hobbies and Recreational Activities: Visiting a gym, participating in sports, or pursuing hobbies such as painting or playing a musical instrument are examples of discretionary expenses.
• Shopping and Fashion: Buying new clothes, accessories, or luxury items are discretionary expenses that contribute to our personal style and preferences.

Budgeting for Discretionary Expenses

While it’s important to enjoy life and indulge in discretionary expenses, it’s equally crucial to manage them effectively within our budget. Here are some practical tips to help you budget for discretionary expenses:

• Set Priorities: Determine your financial goals and priorities. Allocate a specific portion of your monthly income for discretionary expenses to ensure you are making mindful choices.
• Create a Discretionary Expense Category: Within your budgeting system, create a separate category for discretionary expenses. This will allow you to track your spending and make adjustments when necessary.
• Monitor and Track: Keep a record of your discretionary expenses and regularly review them. This will help you identify areas where you can cut back or make adjustments if needed.
• Practice Self-Control: Before making a discretionary purchase, ask yourself if it aligns with your financial goals and priorities. Consider potential alternatives or more affordable options.
• Consider the Long-Term Impact: Evaluate the long-term consequences of your discretionary spending. Could you invest the money saved into something more meaningful or important?

Remember, managing discretionary expenses is all about finding a balance between enjoying your life and being financially responsible. By budgeting effectively and making mindful choices, you can ensure your discretionary spending aligns with your financial goals.

So, whether it’s taking a well-deserved vacation, exploring a new hobby, or enjoying a night out on the town, embrace and manage your discretionary expenses while keeping an eye on your overall financial well-being!

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Reimbursements

Discretionary Spending for Businesses: Examples and Advice

Business spending comes in many different forms, from business travel expenses to the various expenses that fall within your digital marketing budget .

There are many different ways to categorise the ways businesses spend money. One of the most important distinctions for budgeting purposes is discretionary spending vs. non-discretionary expenses — also known as essential expenses and non-essential expenses.

This distinction is important for calculating the tax a business owes, and ways to effectively adjust its budget in times of need.

In this guide, we’ll explain discretionary spending in detail, including the various different types of discretionary expenses. We’ll also explain how you can manage your discretionary spending to limit the amount of cash leaving your business.

What is discretionary spending?

First let’s define discretionary spending. The term is often used when describing personal finances and the ways in which a household may spend its money. But the same definitions apply to businesses too.

Discretionary spending = expenses that are non-essential for your business to operate

Non-discretionary spending = expenses that are essential for your business’s survival

The boundary between essential and non-essential may seem clear at first glance. But many things that you think would be classified as essential are not.

How do you define non-discretionary expenses for businesses?

Simply put, non-discretionary expenses are things that you have no choice but to pay. Your business depends on these expenses to stay afloat, and failing to pay them can result in fines, legal action, or the collapse of essential business processes.

As a result, your budget should always prioritise non-discretionary spend before anything else. This includes employee salaries, taxes, certain types of insurance, business licences, etc.

But there are other non-discretionary expenses that vary from business to business. For example, certain businesses require specific pieces of software or equipment to produce their goods or provide their service, while others don’t. Then there are other businesses which operate from physical stores only and have to pay to lease their premises, while others sell primarily online.

Different types of discretionary spending

As we’ve pointed out, the expenses that can be classed as discretionary vary depending on the business in question. However, some common examples include:

Marketing and advertising:

Marketing is very important, especially for smaller businesses and start-ups who need to increase brand and product awareness. However marketing expenses are, in the majority of cases, considered discretionary.

Employee perks:

Employee perks are a big focus for companies that want to attract and keep the best talent. However, these perks are discretionary expenses, and are commonly cut if businesses face serious budgetary constraints.

Software subscriptions:

Certain pieces of software, like accounting software, are essential for every business. However, many software platforms are discretionary expenses, and can be cut from inventory for easy cost savings.

If you do need to cut your software costs, but don’t want to get rid of a specific platform altogether, a good option can be downgrading to a more basic pricing option. You’ll get fewer features, but still retain the basic functionality that you need.

Consultancy:

Consultancy fees are another expense that can be classed as discretionary or non-discretionary. For example, legal consultancy fees are often vital for your business, and should be considered non-discretionary. Other consultancy fees, like management or recruitment consultancy, are a luxury and should be considered fully discretionary.

Why discretionary spending is important

Although discretionary spending is non-essential by definition, understanding how to manage and when to alter discretionary spending is an essential part of running a business.

Competent business owners know how to balance the additional value that discretionary spending adds to their business with the monetary value of that spending.

Take the various costs associated with team building activities and staff social events, for example.

These costs are wholly discretionary. They’re not essential for keeping the business running, and not paying them will free up a significant chunk of the budget that can be used elsewhere.

But, just because something isn’t ‘essential’ for the running of a business, doesn’t mean it’s not important for other reasons.

Team events have a huge impact on company spirit and the general willingness of employees to stick with the company. The same applies to expenses like your digital marketing budget . Marketing is essential for building brand awareness and getting more customers to buy your product.

Blindly cutting this sort of discretionary spending can have a huge negative impact on you business, so you need to adopt a much more nuanced approach.

How discretionary spending fits into your overall budget

Discretionary spending is tricky to identify and tricky to calculate for a couple of reasons:

• Discretionary spending takes place across many different departments and cost centres within a business. Each one of these departments or teams will spend differently, and each one will have different reasons for spending what they do.
• Discretionary spending is also much more irregular than non-discretionary spending. It can vary massively from month to month, with different types of expenses popping up at different times. Non-discretionary spending, on the other hand, tends to fit into much clearer categories, with regular monthly invoices from the same suppliers.

This means that it’s significantly harder to forecast discretionary spending. And, consequently, harder to work out how it should fit into your overall budget.

Reimbursements with Moss: More freedom for your team

In personal finance, there’s a commonly stated rule of thumb that you should split your income after tax as follows:

• Spend 50% on needs
• Spend 30% on wants
• Put the remaining 20% in savings

In this case, 50% of your post-tax income would go on non-discretionary essentials, i.e. rent, utilities, food, etc., while the remaining 50% would be free for discretionary expenses and savings.

Unfortunately in the world of business, breaking down a monthly budget isn’t this simple. But there are some strategies and tools that can help.

How to manage discretionary spending

The biggest influencing factor on your approach towards managing discretionary expenses and non-essential spending is the financial health of your business and, by association, the state of the wider economy.

When the market is strong and you’ve got good positive cash flow , it’s important to target discretionary spending towards:

• Strengthening your product or service
• Growing your employee base
• Increasing your finances

Given the economic downturn we’ve seen over the past couple of years, many businesses have had to find ways to cut discretionary expenses instead. Households and governments have faced the same issue.

But cutting non-essential spending is not as straightforward as simply cutting anything that’s not immediately essential for the survival of your business. Managing discretionary spending requires a more strategic approach:

• Tie discretionary spending to strategic objectives

To prioritise your discretionary spending, you need to understand which benefits each type of discretionary spend will bring to your business.

• Quantify discretionary spend wherever possible

Being able to understand the real value that various types of discretionary spending brings to your business is also essential. Businesses commonly calculate marketing ROI, but it can be difficult to do the same for other types of discretionary spend, e.g. employee perks and events.

It’s usually best to combine quantitative evaluations with qualitative evaluations to come up with a realistic evaluation of the impact of your spend.

• Evaluate spending cuts in the medium-to-long term

It’s also essential to think ahead when cutting spending on discretionary expenses. Firstly, certain expenses require significant investment if you want to initiate them again in the future.

A prime example is employees. Cutting your employee headcount may reduce expenditure in the short term, but there are all sorts of additional costs that you need to take into account. There’s redundancy pay, recruitment and rehiring costs, loss of expertise, etc. In this case, cutting employee and management bonuses is a much more sensible option.

Reimburse with Moss: Give freedom to your team

It’s normal for businesses to reimburse their employees for a number of different work-related expenses, the majority of which are discretionary. This includes travel expenses, certain equipment costs, and expenses for social events.

When it comes to managing these employee expenses, your expense policy is your most powerful tool. Outlining exactly what your employees can and cannot charge to the company makes it easier to control the expense costs you’ll have to pay to your employees. It’s also possible to cut costs by targeting non-discretionary spend too, e.g. increasing efficiency in core business processes.

Spend management software

The tips we’ve outlined so far have targeted strategic changes you can make to the way your business spends its money.

However, to build effective strategy, you need accurate insights. That’s where spend management software comes in. It provides the real-time data and spend controls that you need to understand exactly where your money is going, and the power to control how much money each of your departments has access to.

Managing expenses with Moss

Moss’s all-in-one spend management platform allows Moss customers to take full control of their business expenses with a range of different tools.

Moss corporate credit cards  lie at the heart of our vision for more effective spend management. Moss customers can issue corporate credit cards for individual departments, cost centres, and even employees, for unrivalled  spend visibility . Your employees can use their Moss card like any other card, all you have to do is  approve their purchases  in the Moss app.

Meanwhile, Moss Insights  draws data from all of your connected business accounts to build detailed financial reports that you can use to aid your strategic financial planning and analysis .

Discretionary expenses are expenses that are non-essential to the survival of your business. In other words, they’re costs that you can cut without being threatened with severe negative consequences, including fines and legal proceedings, etc.

Non-discretionary spending is the opposite to discretionary spending. It’s the essentials that you have to pay to keep your business afloat. Examples include utilities, debts and employee salaries.

To cut discretionary expenses effectively, you need to assess how important they are to your business. certain discretionary expenses aren’t essential, but they play an important role in the long term success of your business.

First you need to classify which expenses are discretionary and which aren’t. Once you’ve done this, you simply need to add up each expense, and you’ll have the total amount of money that your business is spending on ‘non-essentials’.

Assessing the impact of discretionary spending on your business can be difficult. With some types of discretionary spending it’s possible to calculate a reasonably accurate ROI. However, for most, you have to rely on a mix of qualitative and quantitative assessment to come up with a reasonable appraisal.

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What is Discretionary Spending and How to Manage it

Within a company, not all types of spend are equal. You may have come across the term “discretionary spending,” but not necessarily know exactly what that means — or what kind of expenditure it refers to. If that’s the case, don’t worry — this article is here to help. Below, we’ll analyze the differences between […]

Within a company, not all types of spend are equal. You may have come across the term “discretionary spending,” but not necessarily know exactly what that means — or what kind of expenditure it refers to. If that’s the case, don’t worry — this article is here to help.

Below, we’ll analyze the differences between essential and discretionary spending, look at the types of costs that fall under the discretionary label, explain why these differences can sometimes be more nuanced than you might think, and take a dive into how best to manage your discretionary spend.

But, first things first. Let’s start with a clear definition of discretionary spend.

What is Discretionary Spend?

At the highest level, the differentiator between discretionary expenses and essential expenses is whether the expense is a “nice to have” or a “must have.” 

An everyday discretionary spending definition might be the difference between buying the fully kitted out Tesla of your dreams and buying groceries or paying your electricity bill. The first of these, while undoubtedly nice, is not an essential item. The second, since humans require food and heat to live, most certainly is. You might want the first, but you have to have the second.

Businesses have discretionary and essential expenses as well. A TV advertising campaign during a high profile show could be a great way of bringing in new users to your business, but chances are that it’s not an expense that’s considered absolutely essential for your business to continue. On the other hand, a physical brick-and-mortar store must pay rent for the premises that it operates from, just as it must pay the salaries of the staff employed by the company or certain types of business insurance.

Discretionary expenses are paid for using discretionary income — referring to whatever money is left once essential costs are covered. In good times, there is likely to be more discretionary budget available, while these costs may be curtailed during challenging periods since they can be most easily cut. 

These expenses are typically linked with improving the reputation of a company with its employees and customers alike: whether that’s investing in perks to attract employees or spreading awareness among customers.

Discretionary Spending Does NOT Mean Non-Essential

You might take issue with the idea that certain parts of a business are considered “nice to haves” and not essential. For example, a fancy ad talking up your latest product could be read as a vanity play on your part. But you also do have to find some way of getting word out about your business in order for it to grow. In other words, marketing might technically be discretionary (your business can get through the next week without it), but it is necessary to spend money on if you want your business to thrive in the future.

This kind of nuance has to be considered when it comes to discretionary spending. In many cases, you can argue that certain costs are essential to grow a business and therefore aren’t totally discretionary. Advertising and marketing is one. So too could be spending money on a nice office, since that may be needed to attract talent to your business from a hiring perspective. But these are not fixed costs the way that payroll or taxes are. They are also not essential in the purest sense of the term since, while they can help your business grow, they are likely not essential in the strictest sense of the term.

One of the hallmarks of discretionary spend is also that it is highly flexible. Although areas like marketing are key for growing businesses, you can behave in an agile manner and vary your spend by adopting different strategies or operating approaches on a frequent basis. That could mean that, while you will likely have to pay to advertise your product, this doesn’t have to be done every single month (or, in some other cases, potentially longer), thereby making them fit the discretionary label. In other words, these are costs that can be reduced in the short term, even if they may be essential in the long term. You can cut back on staff training events for a month or so if the going gets tough. But doing so indefinitely would be a bad idea.

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Discretionary spending examples.

The list of discretionary expenses for a company is long. This list is by no means exhaustive. However, it gives a sense of some of the behaviors a business might engage in that are considered non-essential (in the purest sense) and, most importantly, can vary at any given time. Examples include:

• Marketing campaigns and advertising: Covering both on- and offline advertising and marketing to spread the word about your company.
• Attending or hosting events: Anything from hosting your own special live events or sponsoring trade events to attending and exhibiting at existing ones.
• Bringing on freelance staff: Alongside your full time, salaried employees, you may also bring on board agency and freelance staff to support your efforts across multiple roles.
• Public relations: Like marketing campaigns and advertising, PR is crucial for promoting the work you’re doing as a company, whether that’s getting you quoted or profiled in the media or distributing your press releases to the right people.
• Mergers and acquisitions: Potentially pricey mergers and acquisitions can help you acquire other businesses or assets that fit alongside your own core business. M&A can frequently be a way to gain complementary tools or services so that you do not have to pay to develop them yourselves.
• Buying back stock/Other stock-related areas: Stock options are a part of every business. If you’re a startup, distributing shares of the company can help you get the best talent and investors. If you’re a large publicly traded company, areas like stock buybacks may be a good use of excess cash.
• Research and development (R&D): Research and development is all about spending money today that will, hopefully, bear fruit tomorrow — or, at least, several months or years from now.
• Subscriptions: Whether it’s communication tools like Slack , mailing tools like MailChimp , business suites like Office 365, there are multiple recurring costs in the forms of SaaS tools that can help grow the business.
• Travel costs: Sending employees around the world — even around the country — costs money. 
• Employee perks: From entertainment to food and drink, discretionary expenses will be used to cover those extra “perks” that make your business stand out from the pack.  

Again, you can argue that some of these are more essential than others, but they are nonetheless discretionary expenses that you can dial up and down accordingly. They may also not be fixed in terms of what they go toward each month. Even if the marketing team spends roughly the same money each month, they could vary this between a big online advertising push one month and, the next, shooting a commercial for airing on TV. 

How to Manage Discretionary Spend

The first key to managing any kind of spend – discretionary or otherwise – is to track it. Tracking discretionary spend is not necessarily more challenging than tracking essential expenses, but it requires more active engagement since discretionary spend is more likely to fluctuate month-on-month. Organizations must make sure that they are tracking spend that falls into this category to avoid waste, and to be aware of where expenses can potentially be reduced if needed. By its nature, discretionary spend can be changed more quickly (the difference between, for example, spending less ad money on Facebook one month versus having to look for an entirely new, cheaper office to pay rent on) than essential costs.

One of the best ways to track discretionary spend is with a spend management system . This should offer features like easy uploading of receipts, spend approval tracking (to see who approved each expense), payment logs, and flexible budget tools. For example, Mesh offers tools that let finance managers control and view every transaction, across all departments. This includes setting expense limits, looking to see exactly how every company credit or debit card is being used, and setting up real-time alerts so you’re always in control and on budget. It can also give you actionable data for optimizing spend – from coming up with cheaper alternatives to creating accurate forecasts.

It’s the best way to manage discretionary spend. That’s especially true for tax reasons, since discretionary expenses like travel and other expense categories may be deductible come tax time.

Don’t Let Discretionary Spend Get Out of Control

We’ve covered the definition of discretionary spending, given some examples of it in action, and discussed some of the nuances in this area. But, alongside the definition of discretionary spending, one of the most crucial aspects of this topic is to best understand how to manage discretionary spending.

Operational costs such as salaries are fixed. Although you can vary them, they are broadly predictable and will work in the same way most months – likely even down to the day that the money leaves your account. Once implemented, these costs virtually take care of themselves. 

But discretionary spending is on a more “ad hoc” basis. This requires investment in a centralized spend management system that can ensure that you keep on top of this important area of spend to avoid waste and keep finances looking good. Let this kind of discretionary spending get out of control, and it can be virtually impossible to manage. Get it right, however, and you’ll be able to continue growing your business in a smart, flexible way quarter on quarter, and year on year.

Discretionary spending refers to non-essential expenses that can be adjusted based on available budget.

Essential spending is necessary for basic needs, while discretionary spending is optional.

Yes, in some cases, certain discretionary expenses can be essential for business growth or success.

Examples include marketing campaigns, events, freelance staff, research and development, and employee perks.

Businesses can track and control discretionary spend using a spend management system.

Managing discretionary spending helps maintain financial control and make strategic choices.

Some discretionary expenses may qualify for tax deductions, depending on jurisdiction and tax laws. Consult professionals for specific regulations.

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Mesh Content Team

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Discretionary expenses examples for modern businesses

Published on June 27, 2022

The term "discretionary spending" is common in business, but it's not always clear to all what it means.

This article goes into more detail than is probably necessary to make sure that you never have this issue again.

We're going to look at the key differences between discretionary and essential expenses, list a whole range of different discretionary costs, and talk about why managing these costs is both more important and more difficult than it ought to be .

But first, we'd better start with a clear definition.

What is discretionary spending?

Discretionary spending applies to costs and expenses that are non-essential .

A lot of these costs don’t feel “non-essential” (excuse the double negative). We’ll look at some examples shortly, and many of these will feel completely necessary.

But this distinction should be looked at literally . For example, even though most companies know they need to advertise, whether or not they end up paying for advertising is at the discretion of the Chief Marketing Officer or CEO. It may be practically vital if you want your brand to be discovered and to compete in your market, but it’s not strictly speaking essential .

Discretionary spending vs essential expenses

So to be clear, discretionary expenses are optional. In any given month you could not pay a certain cost and there wouldn’t be any legal ramifications. It might be bad for business if you don’t print flyers or update your website, but the business will continue.

On the other hand, costs like rent, salaries, and certain insurances are essential. You are legally obliged to pay these each month . And if you don’t, there’s a very real chance that you’ll be hit with court cases, fines, or have to shut down altogether.

Examples of essential expenses

We’re about to look at a detailed list of discretionary expenses. But first it might help to see some costs that are not optional.

These include:

Employee salaries

Debts repayments (including loans and mortgages)

Utility bills (including Internet costs)

Inventory (especially for retail and other businesses that sell physical goods)

Software that directly powers your business

Necessary hardware (for instance, point-of-sale machines for stores)

The difference here is pretty clear. You can’t choose not to have these things this month. Without them, your business can’t run.

So what do discretionary costs look like, by contrast?

Discretionary expenses examples

There’s no better way to really spell out what’s considered a discretionary expense than with a nice long list. We’ll try to be as comprehensive as possible, but of course there will be some costs missing.

Once again, the most important thing to remember is that discretionary doesn’t mean that every business owner considers these optional . In fact, many of these costs really do need to be paid if you want to have any kind of long-term success.

But since the amounts can fluctuate hugely from month to month, and because you can choose not to invest in these areas for months or even years at a time, they’re definitely discretionary .

Marketing is a classic example of something that is discretionary but not optional . You simply don’t stand a chance of succeeding without some sort of marketing strategy and a little money to back it up.

But what makes most marketing a classic discretionary expense is just how variable it can be. You can choose to attack entirely new strategies from quarter to quarter . You’re not locked into one way of operating, and you can change tactics tomorrow if you like.

Discretionary marketing costs include:

Advertising (online and more traditional)

Events (attending or exhibiting at trade shows, and hosting your own)

Video production

Agencies and freelancers

Public relations (including press release distribution)

External design costs

Collateral (business cards, posters, and flyers)

That's just a  quick list. So how can you know which marketing strategies to devote resources to? According to Tim Brown of Hook Agency , the key is to look at your current clients:

"Start with the things that have paid your company back significantly in the past by looking at where your current best customers come from. Then double down on the approaches that work. If you’re somewhat new to marketing, look at competitors – but mostly look where the attention of ideal customers is . Find the events, websites, and social sites where they spend their time – and push your efforts into that first."

Investments

If your business finds itself in a particularly strong position, it might be time to make a few investments. These are quite clearly not essential expenses - most companies never have these kinds of opportunities.

Potential discretionary investments include:

Mergers and acquisitions

Real estate

Research and development

In some cases, investments are made to propel growth . You purchase other companies in order to acquire their business model and increase your own offerings.

Many businesses also make investments just like you would in your normal life . They use spare company cash to collect stocks and hopefully make gains in the long term.

Others put their money into R&D in the hopes of encouraging innovation in their industry. This could mean funding external startups, non-profit work, or creating research teams in-house to tackle particular issues.

Company subscriptions

Some subscriptions will be essential - web hosting for your online store or the back-end software your product runs on.

But lots of company subscriptions are discretionary. These might include:

Communication tools (like Slack for internal communication, or Mailchimp for external)

Efficiency and planning tools (like Trello, Notion , or Asana)

Sales and marketing CRMs

Business suites (Microsoft Office, Adobe Creative Suite, and more)

Add-ons to your website or digital product (Intercom is a good example)

Some of these definitely don’t feel optional. Sales and marketing CRMs are so commonplace now that you’d think it’s impossible to live without them.

But you could build them yourself, and to some extent sales and marketing themselves are discretionary. So despite feeling like you wouldn’t want to go without HubSpot, Salesforce, and the like, they’re not absolute essentials in most cases.

Learn how to manage SaaS payments effectively

More and more businesses consider travel to be a necessary ingredient for growth . And while this might often be true, travel still falls firmly into the discretionary category.

Many of the common reasons why business teams would travel include:

Client meetings

Trade shows and conferences

Pitch events (especially for startups)

Board meetings (if the board convenes elsewhere)

Cold calling

Visiting warehouses, production spaces, and other offices

None of these has to happen for the business to survive. But businesses need to keep a close eye on travel spending  as it can easily get out of hand.

Good corporate travel management is essential to a well-run business, even if travel itself isn’t an essential expense.

For many business leaders, these are the quintessential discretionary costs. Being able to offer your team coffee, parties, and excursions is a nice luxury.

Typical team perks include:

Entertainment

Food and drink (free breakfast is becoming a staple)

Team off-sites and events

Exercise classes and gym memberships

Company cars and paid transport

And just like some of the other expenses we’ve looked at, these might not feel “discretionary” at all . In order to attract and retain the best talent, many workplaces offer generous conditions to staff.

This is becoming increasingly important. According to some commentators , “the search for better workplace benefits is among the three top reasons why younger employees change jobs.”

So while these costs definitely don’t fall under the “essentials,” they’re a core part of workplace culture for many companies.

Office improvements

Hand-in-hand with team perks is the need to offer a comfortable work environment. Modern offices can include everything from cosy couches and painted slogans to darkened nap rooms.

Being able to spruce up the office is almost the definition of “discretionary.” If the company can squirrel away a few extra dollars, you’re able to make the upgrades you desire. But that’s only if you can keep some cash aside.

These sorts of office costs might include:

Painting (including company logos and motivational messages)

Posters and other printed material

Office plants (and the costs that come with maintaining these)

New furniture

Kitchen equipment (coffee machines, a fancy fridge, or a better dishwasher)

Upgraded office chairs

Specialty lighting

There is so much more that we could add to this list, but you get the gist.

Now that we’ve gone over all these different kinds of discretionary spending, we still have a key question to answer.

Why does discretionary spend matter?

The main reason that business leaders care about all of this is that, when it’s time to balance the budget, cost-cutting usually has to come from discretionary funds . By definition, you can’t cut essential costs without really shaking things up.

By contrast, if you need to save $30,000 this month to keep your balance sheet even. There may be a handful of discretionary areas to do this.

These could include postponing an expense marketing event you had planned, cutting back on freelancers and outsourced agency work, or saving the big office blowout party for next month.

But in order to be able to do all of this, you must have a clear view of discretionary spending in real time . And this is an enormous challenge for most businesses.

Because it fluctuates, discretionary spending is actually much harder to manage than essential spending.

Most CEOs might have the big picture of where their teams’ money goes. You give $50,000 per month to marketing, $25,000 to sales, $5,000 for office food and Friday drinks, and so on. Team leaders are able to spend this money the way they see fit - it’s discretionary, after all.

But when it’s time to make changes - even to increase team budgets - you can’t be sure which of this money has been used for what. Which makes it hard to cut the ineffective schemes, and also difficult to double down on the good.

How to manage discretionary spending

Because discretionary costs are different from quarter to quarter, it’s vital to have a clear system to manage them . When you’re just starting out, every payment runs through the founder or CEO, and they more or less know where the money is going.

But as you grow and scale , this is no longer workable.

The most important thing to think about is how people make discretionary payments :

Your strategic spend - salaries, raw materials, and other fixed costs - are predictable. They’re made on the same day each month, to the same people, in the same way. Once they’re set up, they pretty much run themselves.

Discretionary spend is far more ad hoc. Even if your teams spend the same overall amount each month , they likely do this in different ways .

One month you marketing team hires a digital agency to build a micro-site. This takes up most of the budget, paid by invoice in three installments.

The next month they promote this micro-site with social media and search ads. This is paid by credit card at the end of the month.

The third month they attend a conference in another city. Much of the budget is used for flights, accommodation, and meals. Some of these are paid by credit card, and for others they rely on expense reports (filed when they return).

This third month presents a mix of discretionary spending and expenses (per the graphic above). And this multitude of payment methods is what makes spending a drag to manage.

For this reason, you need to find a smart, centralized spend management system to manage all spending - but especially discretionary.

Must-haves for your spend management system

In order to track spending properly, your system needs to give you:

Flexible ways to spend (virtual cards for online, physical cards, invoice processing tools , and more)

Variable limits and budgets because each team should have its own set amount

Approval tracking so that you always know who approved each expense

Payment logs so that you can check every individual payment - just in case

Easy receipt upload because there’s nothing worse than fumbling through a box full of receipts

We’ve already written a comprehensive guide to spend management . It’s well worth your time.

For now, just know that discretionary spending won’t manage itself. And no matter how diligent (and even frugal) you are, it’s only going to grow and become harder to control.

The big takeaways

Aside from our big lists of costs, here are the main things you need to remember:

“Discretionary” doesn’t always mean “optional” to everyone. Some expenses still feel completely necessary, even if they’re not “essential.”

Discretionary expenses include a wide range of payments across all of your business teams.

Because costs are so varied, it’s hard to manage them all (especially for your finance teams)

Most importantly, you need to take these expenses seriously. Keep a close eye on what's spent, and why, and ensure that company finances are respected as they should be.

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How To Think About Discretionary Spend Now

By The Center Team on May 4, 2020

Across-the-board discretionary spend cuts sound like a good idea, but often deliver little in the way of results. Here’s why, and what to do instead.

In response to the economic uncertainty caused by the Covid-19 pandemic, 77% of finance executives surveyed last month by CFO Research said they were halting all discretionary spending to help manage cash flow.

Cutting discretionary spend is a typical tactic for CFOs and executives who need to take immediate action in the near term. It’s no wonder that organizations from Halliburton to Harvard have announced such cuts as part of a larger package of reforms that also include salary reductions, hiring freezes, and project reviews.

The challenge is that reducing discretionary spend is usually easier said than done. The issues start with identifying how much your company is spending today, and where.

What is discretionary spending?

Discretionary spending is a general term for a broad collection of individual line items and transactions that happen across multiple departments and cost centers—typically anything outside of fixed costs like payroll, rent, and cost-of-goods. (In the long run, of course, everything is either valuable or discretionary, but in the short term, some costs cannot be changed and are therefore fixed.) Examples of discretionary spend include things like travel, meals and entertainment, marketing and events, training, and research and development.

It’s discretionary because it involves some kind of choice, and it typically happens both at the employee level and the company level. While the individual purchase amounts within these categories may be small, they can add up—to 25% of your budget or more.

Why is tracking discretionary spending a challenge?

Discretionary spend is hard to see and monitor—and our research has found that the bigger the company, the harder it is to track . One challenge is the fact that sourcing and procurement has become more decentralized. Employees tend to drive many, if not most, of the purchase decisions—and this was even before the mass move to working remotely. Purchases are made online, paid for by card, and often are only visible to accounting when employees submit expense reports.

The challenge is exacerbated by traditional, batch-based expense reports, which lump together many different types of transactions for reimbursement. Traditional expense software cannot analyze the underlying data in enough detail to identify wasteful spend or duplicate software licenses, for example, leaving controllers and CFOs in the dark about easy places to trim spend and forcing them instead to deliver blunt directives about cutting “all unnecessary spending,” or reducing spending across the board by X%.

New Issues to Consider

Traditionally, the biggest expense in discretionary spending is travel. Since travel for the rest of 2020 will likely be limited to control the spread of Covid-19, it’s an easy category to target for cuts. Before you cut it back entirely, take a moment to consider the underlying purpose of travel.

As our corporate controller Brian said recently,

“Most of our travel investment is used to generate stronger customer relationships, and of course we still need to do that, so we are making investments to connect with our customers in other ways.”

You may want to reallocate some travel budget to upgrading your teleconferencing software, for example.

Software subscriptions are another large category to scrutinize, especially as many purchase decisions are made without explicit approval from the IT department. Analyzing your software spend can reveal duplicative subscriptions that could be consolidated for better pricing or unused seats that could be canceled. Newer software, such as Center Expense, can eliminate licensing fees altogether.

Blunt Tool vs. Surgical Cut

Across-the-board discretionary spend cuts sound like a good idea, but often deliver little in the way of results. Why? For starters, they lose sight of the big picture, which is to emerge from crisis mode ready to restart your business. If you hack all spending down to zero, you will miss opportunities to focus on important customer retention programs or invest in projects that bring a competitive advantage. You really need to understand the benefits received from each expenditure so you can make the right reduction choices.

Across-the-board discretionary spend cuts sound like a good idea, but often deliver little in the way of results.

The other issue with across-the-board directives is that they tend to come across as broad edicts rather than actionable tactics. Few companies know how much they normally spend on discretionary items and which of those items are truly essential, and few employees truly understand what action they need to take. More often than not, employees delay taking action at all, hoping their programs will be spared, and when the quarter ends, management is disappointed with the results.

Few companies know how much they normally spend on discretionary items and which of those items are truly essential, and few employees truly understand what action they need to take.

Ideally, your company can take a more surgical approach to discretionary cuts starting by identifying all spend that falls in the discretionary category, finding strategic line items to cut or maintain, and monitoring progress to goal. Granted, in emergency situations, it may be easiest to tell your team to freeze all spend temporarily, but as you work through the numbers, you can zoom out and re-evaluate which programs need to move forward.

A Balanced Approach to Scaling Back Discretionary Spend

• Start with the goal in mind. Your actions will be very different if you’re managing for near-term cash flow or if you’re trying to stretch your cash on hand to ride out the downturn.
• Communicate. Your co-workers look to the finance team for guidance about how to proceed during times of economic stress. You may not know all the answers, nor do you need to share all the worst-case scenarios, but you can help them understand the reasoning behind the actions you expect them to take, especially when cutting discretionary spend might alleviate the need for more drastic measures.
• Look for easy wins and identify essential needs. Duplicative software subscriptions, employee snacks, the leadership off-site retreat, travel budgets are all areas that can likely be removed from the budget. That said, if travel was primarily used for closing sales, consider reallocating some of that budget toward better telecommunications technology.
• Root out cases of spend inertia. Sometimes spending patterns continue even though the return on that investment is no longer there—spend just keeps happening because that’s what’s been done in the past. Ask whether your team is still getting value from long-term consulting projects and ongoing marketing programs. Look for instances where renegotiating terms with vendors might be beneficial.
• Enlist help from all employees . Ask them to identify non-essential programs, more cost-effective solutions, and other creative ideas for cutting spend. One CEO recently challenged his entire executive team to research solutions that could be implemented now to increase efficiency or reduce costs once business reopens.
• Update your policies. What can be purchased and expensed? Who needs to approve those purchases, and what types of things need advance approval. You may need to revisit your expense policies .
• Monitor employee spend daily or weekly, rather than monthly. Real-time expense software not only helps you see spend as it happens, but also flags out-of-policy purchases for immediate review. Companies that use traditional expense report software can’t see employee-driven purchases until employees submit expense reports, so ask for them to be submitted more frequently.
• Enforce spending limits as needed. As a last resort, you can reduce credit limits on or lock individual employee corporate cards and p-cards.
• Create a positive feedback loop. As you track expenses over time, regularly share progress with the rest of the company. Strengthen your fiscal culture by thanking employees for making tough decisions or sacrifices, enlisting their help if additional spend reductions are needed, and celebrating when targets are achieved.

Weathering the economic downturn will take discipline, agility, persistence and teamwork. Finance teams are on the front-line during this time period, pulling together the data, metrics, and models that will guide the company through uncertain times. When the rest of your colleagues understand what they need to do, they will throw their weight behind the effort to control costs and conserve cash for the long run.

HOW CENTER CAN HELP

Center’s real-time expense management software helps monitor discretionary spend, control costs, and track expenses. Center is easy to customize to your policies and adjust as needed—the AI-powered audit flags any expense requiring review. Managers, finance, and executives can see at a glance what’s been spent to date, without waiting for month-end close. With Center’s integrated corporate card, you’ll have the data and controls you need to make informed decisions about discretionary spend. To find out more, schedule a demo with our team .

“What is non-optional or non-discretionary travel?”

by Administrator | Apr 30, 2020 | Kitchener Immigration Lawyer , Family , Work

Some examples of  discretionary or optional travel are:

• to visit family for a vacation
• for the birth of a grandchild, nephew, niece, cousin, etc. (For the parent of a child, this may be considered non-discretionary travel; however, it will still require assessment.)
• to spend time at a secondary residence (vacation home, hunting or fishing lodge, etc.). This includes entry for upkeep or maintenance purposes.
• to attend the funeral of a family member (This purpose of travel would be improbable due to quarantine measures and limits to the number of attendees at funerals under provincial restrictions.)

Travel for the following purposes would be considered  non-optional or non-discretionary:

• economic services and supply chains
• critical infrastructure support
• health (immediate medical care), safety and security
• supporting Indigenous communities
• transiting through Canada for non-optional or non-discretionary purposes
• studying in Canada if already approved for a study permit on or before March 18
• tending to family matters for non-optional or non-discretionary purposes (such as bringing supplies to elderly parents or tending to sick family members) when there is no one else available in Canada to assist
• any other activities that are deemed non-optional or non-discretionary by the Government of Canada or based on an officer’s assessment

Family reunification

Officers should be aware that family ties will not automatically qualify the foreign national for non-optional or non-discretionary travel. Family members will be required to show that they are not travelling for a discretionary or optional purpose such as a routine family visit.

Some examples of non-discretionary or non-optional travel for the purposes of family reunification are (not an exhaustive list)

• to take up full-time residence in Canada (this applies to prospective permanent residents as well as temporary residents who are seeking entry to Canada to live with immediate family members)
• to care for an ill family member or a family member who is unable to care for themselves when no other arrangements can be made (the 14-day quarantine for travellers will be factored into whether the travel is discretionary)
• for foreign national immediate family member(s) (as per the definition in the Order in Council), to spend the pandemic period with their Canadian citizen family member so they can help to ensure each other’s health, safety and well-being (This section is specifically to allow for the reunification of family members where it would be beneficial to all parties, as the reunification of family members is a key point of the Order in Council. This allows for families to be together during this difficult time.)
• shared custody agreement across borders, as this would be complying with a court order

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Optional or Discretionary Travel

by Fridman Immigration Law | May 25, 2020 | Blogs

Update : Non-optional and non-discretionary travel: COVID-19 program

The Immigration, Refugees and Citizenship Canada (IRCC) has outlined the difference between optional/discretionary and non-optional/discretionary travel. These measures have come into effect due to the impact of COVID-19. Additionally, the onus is on the foreign national to demonstrate the purpose of travel. In simple terms, the traveler must prove the reason they are travelling to Canada is sufficiently important to warrant exemption.

Moreover, restrictions vary depending on where the person is travelling from. Those entering Canada are still required to quarantine for 14 days. However, symptomatic travelers will not be permitted entry into Canada.

Further, travelers departing from any other country besides the United States can be prohibited entry. Specifically if, 1) they are not covered by any exemptions outlined below; or, 2) they are travelling for an optional and discretionary purpose. Similarly, those entering Canada from the United States will be denied entry if they are travelling for an optional or discretionary purpose.

New Term: Immediate Family

The definition of immediate family members was revised for this order. For the purpose of the new order it includes: parents or step parents, a parent’s or step-parent’s spouse or common-law partner, and a guardian or tutor. Guardians or tutors are people who are responsible for living with a foreign national minor who is living apart from their family. The guardian or tutor must demonstrate that they reside at the same address as the minor. Broadening the definition of immediate family members will assist minors and dependents. The guidelines for the officer dictate that they should be flexible with documentation provided as evidence.

Nonetheless, family ties will not automatically qualify a foreign national for travel. The traveler will be required to show they are not travelling for an optional or discretionary purpose.

Optional or Discretionary

As per the dictionary, Optional is defined as “available to be chosen but not obligatory”. And, discretionary is defined as “available for use”. Both of these terms connotes a meaning of availability to the user but not something that is required. Thus, the order uses these terms to determine what reasons for entering Canada can be excluded. Travel for optional or discretionary purposes is broadly defined. But, the order includes travel for tourism, recreation and entertainment.

Some examples of travel for optional or discretionary purposes :

• Family visits or vacation.
• Parents of a child may be considered non-discretionary. This will require further review
• Spending time at a secondary residence. Including entry for upkeep or maintenance.
• Attending a funeral.

Some examples of non-optional or non-discretionary :

• Economic service and supply chains.
• Critical infrastructure support.
• Health, safety and security reasons.
• Supporting Indigenous communities.
• Transiting through Canada for non-optional or non-discretionary purposes.
• Entering Canada to work, study or land as a permanent resident, with appropriate documentation.
• Such as: bringing supplies to elderly parents or tending to sick family members.
• Anything else deemed by an officer to fall under the category of non-optional or non-discretionary purposes. It will be considered on a case-by-case basis

A list of Travel restriction exemptions. For more information click here .

Immediate family members of canadian citizens and permanent residents . key takeaway..

• Must have required travel documents. Such as: supporting documents, passports, marriage certificates, birth certificate, etc.
• They should be coming for non-discretionary reasons. Not tourism, recreation or entertainment purposes.
• Child’s age and dependency play an important role in the officer’s assessment.

Family Reunification .

To be eligible for this exemption two or more foreign nationals who are immediate family members must authorize one or more of the family members to enter Canada. While they must be a resident in Canada, the family member does not have to be a citizen or permanent resident. This means an immediate family member who is a worker, visitor, student or protected person.

International Students.

Students must show they have a valid study permit and a letter of introduction dated on or before March 18. This exemption is made for students who were already enrolled at a school or were accepted prior to the travel restrictions being set.

Temporary Workers .

The worker should have been established in Canada or made arrangements to come work before the travel restrictions were set. Further, the exemption includes new workers in critical industries, such as: agriculture, food processing, health, transportation and emergency services. It is recommended to have a valid work permit or a letter of introduction from IRCC. Workers who only have a letter of introduction should also have an active offer of employment.

Additionally, the order has created a subsection of permit-exempt work . Which includes: emergency services, students in health fields, and workers seeking to enter and remain in Canada solely to become a member of a crew of transportation, this includes international transportation. Workers can self identify at the border, but they will be asked for proof from the officer.

Permanent resident visa holders.

Exemption is given to those who were approved and eligible to travel to Canada to become landed permanent residents on or before March 18, 2020.  Individuals are given exemption because many have already made arrangements to settle in Canada.

To find out more click here .

If you have any questions or concerns regarding any immigration matters, please do not hesitate to contact our office at P: 204-944-8889 or E [email protected]

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What are discretionary expenses and how to manage them?

Every business is trying to stay competitive in controlling its costs in order to maintain the financial health of the company.

 And at the same time, every company is also trying to build the best environment for their employees and customers to ultimately grow the organization. More often than not this comes at a monetary cost. 

So to reach a balance between both these agendas, companies must classify expenses as essential or discretionary expenses.

What are discretionary expenses?

Discretionary expenses are those expenses made by a business that are non-essential.

These expenses will differ from company to company and can be a bit subjective in certain cases depending on the type of business you run and the type of industry your organization functions within. 

An expense may also be discretionary depending on the stage at which your business is in. If you’re still building your product or service, there’s no point in hiring many sales personnel to sell an undeveloped product.

Money that you have should be utilized for research and development at that stage of the business.

Advertising, for example, seems to be an essential expenditure for a company. But this might not always be true. Some companies can manage to grow themselves through other forms of marketing without spending a penny on paid media. 

Another way of looking at it and having a clear distinction in your head between discretionary and essential expenses is through the legal lens - If not making an expense leads to legal consequences, then it is an essential expense.

 If not spending on a particular thing leads to no legal obligation, then it is a discretionary expense.

Many would also consider that essential expenses are those that are required for the survival of the business while discretionary expenses are those that are beyond the survival phase and add to the quality of the business.

Marking essential expenses for the business

• Taxes - Paying taxes on behalf of your business is definitely an essential expense and needs to be fulfilled before any other discretionary expense else there will be legal ramifications that can lead to problems in the future and even more expenses.

• Employee salaries - Paying employees on time is also an essential expense so that the operations of the business are done properly and the company does not have any hiccups on the way. 

• Debt repayments - Any form of repayment that must be made by the business including loans and mortgages are essential. If these are not paid on time the company will end up spending even more in the form of interest and any legal action that might be taken if the business fails to pay after several notices.

• Office rent - Paying the office rent is an essential form of spending as the workspace is often a crucial part for the employees to have a conducive and productive work environment. (Of course, in the case of businesses that operate remotely, there is no office rent at all.)

• Utility bills of the company - Utilities for a business’s physical office such as electricity, internet connection, etc. are essential expenses as they are the backbone for the entire team to collaborate and function efficiently. 

• Inventory - For businesses with physical products, having space to store inventory becomes an essential expense.

• Software - Just like utilities are important for a physical office, software system expenses are essential expenses for employees in a remote business to collaborate.

• Necessary hardware & equipment costs - Factories, machinery, laptops, etc. are all part of hardware and equipment that a business needs to function properly making them an essential expense.

Some discretionary expense examples

1. is marketing a discretionary expense.

Costly marketing events, ads, PR, video production, outsourced agency & freelancers costs, etc are all part of marketing expenditure. Most would say that these are all essential expenses to get the word out about your business and get people to become prospects.

While marketing is an essential part of business, it is necessary to understand that not all forms of it are needed for every business.

Some forms of advertising and marketing channels will yield a better return on investment than others depending on the type of business you have and the industry you operate in. Looking at marketing from this perspective makes it a discretionary expense.

So picking and choosing methods of advertising and marketing is a better way to control expenses and get the most out of your marketing budget.

2. Investments

Merger & acquisition activities can be seen as strategic decisions to enhance and grow your business in the long run but it is definitely a form of discretionary expense as your business would survive in the short term even without doing so.

Funding external startups is again a strategic choice and a form of monetary allocation when your business sees potential in another company and hence decides to support them. But again, it is not anywhere close to an essential expense for your business. 

R&D can be looked at as a discretionary or essential expense depending on how much access you have to current and updated information about the business you are in or want to start.

Training investments for business employees are often unnecessary and can be avoided with correct hiring decisions.

 On the other hand, it can be an important expense if your organization follows non-traditional operational methods for which each employee must be trained properly before they can start executing their daily job requirements.

3. Multiple subscriptions

CRMs, Communication apps, Planning & Data management apps, business suites, and add-on products are all systems that help the management and employees to structure their work and collaborate to get work done more efficiently. 

But more often than not, teams go overboard in implementing too many systems and make processes more complicated than they need to be. All of this ends up costing a lot in the form of subscription fees that are recurring in nature and add up to unnecessary expenses in the long run.

4. Business travel

With modern communication technology, most business travel meetings that were deemed necessary years ago have become unnecessary expenditures in the form of time, energy, and money to travel.

 Today, a business meeting that had to happen in a conference room can happen easily over a virtual meeting on digital platforms like Zoom without any travel costs.

5. Maintenance & office improvements costs

Many businesses after a point look to expand their office spaces. This is necessary if there is not enough space for existing employees to work in the office and you plan to expand the team even further.

 But often businesses spend way too much on expanding an office space more than it is necessary to do so. This extra expenditure is non-essential and can be better utilized elsewhere where it is necessary.

6. Employee gifts & team perks

While it is fruitful to have a positive and jolly work environment so as to improve the culture and in turn improve performance, there are many expenses that a company incurs for employees that can be considered discretionary. For example, dine-outs, reward program costs, etc. are all non-essential spending. 

Building an open and flexible culture where all employees can thrive is not just about having as many material perks as possible.

Nowadays, more often than not people see these perks as superficial ways of making a job seem more than what it is.

 So it can be a good idea to cut back expenses on unnecessary perks and focus instead on inculcating a good culture through empathetic leadership and letting employees explore their potential by giving them the freedom to expand their work capabilities.

Key consideration

Discretionary costs fluctuate a lot more than essential spending and vary from business to business.

You need to remember that discretionary expenses are not something that should be avoided altogether but rather something to be controlled so that your company’s financial health is not in jeopardy.

Making sure your business survives is always the first step to making it thrive. When the financial foundation of your business is strong, then you should look to improve the quality of work life for your business and its employees.

And the smart way to do this is to make sure you budget discretionary spending. Set aside an amount of money and limit the expenses you plan to make for your business that isn’t necessary only to that extent.

This way you will be able to create a balance between not spending too much on non-essential items but still ensuring that your business is doing enough tertiary activities that have an impact on the longevity of your business. 

A company might also find itself in a situation where discretionary costs are important to stand apart from the competition in some form that helps them grow its business.

 Something that seems non-essential on a surface level may well turn out to be an important differentiating factor for a potential employee or customer to make the decision of choosing your company over others.

How to manage discretionary spending using Volopay?

1. examining discretionary spending is critical.

The first step to managing non-essential spending is to analyze and answer the question “What are discretionary expenses for my business?”

Once you identify all the discretionary spending within your organization, you must then discuss with relevant stakeholders with regard to whether a particular expense can be removed altogether, replaced with a cheaper alternative, or not be changed at all.

Examining all your expenses and classifying them as necessary or not necessary will help you with the process of reducing costs.

 An important thing to remember while doing this task is that the decisions you make at one point in time are not obsolete and can be revisited in the future for changes to be made.

2. Clear & effective expense policy

An expense policy is nothing but a system that has protocols set in place to mark out essential & non-essential spending for the company within a defined budget.

Creating such a policy is important for all employees and management to be on the same page about the utilization of company funds.

The expenses that can be made, the expenses that cannot be made, the limit to which an employee can spend a particular budget, and many other such rules are mentioned within an expense policy.

Creating an expansive document with all such rules is very time-consuming and mistakes might still occur because employees did not read the documents properly. This is the case in many organizations.

To solve this, people adopt expense management systems like Volopay that help you automatically enforce expense policies so that there is no overspending on behalf of the employees.

3. Customized budgeting for each department

Setting clear boundaries for each employee for the amount they can spend and the authority they have over a company budget based on their management level is a crucial aspect of cost control.

But it is not feasible for an individual to be appointed who keeps checking how much each employee has spent. 

So to streamline such a task companies use digital expense management systems to onboard their employees based on their team or department and allot them a certain budget. This can be done through the use of financial tools like corporate cards.

 Using the expense management system, you can easily customize and set limits to how much each card that is given to an employee can spend from a team budget.

Implementing such a system empowers your employees to make spending decisions on their own and build their trust and at the same time allows you to control the company budgets.

4. Set up an efficient spend management system to manage all business spends

A spend management system is essentially a software tool that allows a company to track all payments in real-time and get complete visibility over all the spending that is occurring through the company budget. 

Be it card payments, domestic & international wire transfers, or settling reimbursements; a spend management system is usually capable of doing all of this and acts as an expense management ecosystem.

5. Approving & purchasing requests management

When managing expenses of a company there must be a balance between giving employees the freedom to make payments easily without any barriers and at the same time also ensuring that there is no overspending happening.

One way that companies have solved this problem is by using software systems like Volopay that allow you to set up custom approval policies for reimbursement claims or transferring money to someone. 

So making payments through a corporate card is controlled by setting spending limits and making wire transfers on behalf of the company is controlled using approval policies.

Within Volopay you can set 5 levels of approval stages for an expense so that money never leaves your budget without proper authorization from respective team leads or managers.

Helpful information - 8 best practices for efficient corporate card management

6. User-friendly receipt upload system with invoice processing & integrated accounting tools

Volopay has an easy-to-use mobile app for employees to easily attach images of receipts for reimbursement claims. This way they no longer have to worry about keeping the receipt safely till the end of the month and then creating an expense report.

You can also easily process invoices from vendors and send them payments by scheduling them or by creating recurring payments.

Furthermore, to make things easy for your finance and accounting team, Volopay has the capability of being integrated with accounting tools for easy ledger management.

Related read - Benefits of receipt scanning app for your business

7. Flexible methods of payment for employees (virtual cards, physical cards)

Another way that an expense management system like Volopay makes managing discretionary expenses easier is through the use use of virtual cards.

While every employee gets a physical card that can be used both online and offline, you also get to create unlimited virtual cards and use them to manage all your online spending such as marketing subscriptions, one-time employee gift payments, etc.

8. Real-time expense records

Every expense that is made using the financial tools provided by Volopay is instantly recorded in real-time. This not only gives the finance team complete and up-to-date visibility at all times but also allows them to perform analyses on spending.

How do you budget discretionary spending?

• Figure out overhead costs - An overhead cost is that that cannot be attributed directly to a revenue unit or the production of a good or service. These costs might be slowly chipping away at your company funds without having a significant impact. So identify these costs so that you can decide what is to be done with them based on your situation.

• Strategize to pay off any business debt - Out of all business expenses, you should always strategize to pay off any form of loan first. Not doing so will increase expense burdens through the interest rates. Paying off loans early also improves your business credit score.

Adopting a spend management system will account for all business expenses giving a real-time perspective of discretionary expenditure

Volopay is an all-in-one expense management tool that helps you track, control, and manage company expenses seamlessly. Over 500+ companies have saved thousands of dollars annually and 20+ hours each month using our financial product ecosystem.

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Non-optional and non-discretionary travel: COVID-19 program delivery

This section contains policy, procedures and guidance used by IRCC staff. It is posted on the department’s website as a courtesy to stakeholders.

Air travel and border measures were implemented to protect the health and safety of Canadians by restricting optional and discretionary international travel.

These instructions describe IRCC’s role in supporting the administration of these measures and provide guidance on how to assess non-optional and non-discretionary travel when applicable.

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Fully vaccinated foreign nationals, family members, temporary workers.

The travel restrictions continue to prohibit discretionary travel from foreign nationals who do not meet a travel restrictions exemption as outlined in the Orders in Council (OIC). The onus is on the foreign national to demonstrate the purpose of their travel, and if required, provide proof that they are travelling for a non-discretionary purpose or that they meet one of the travel restriction exemptions.

All foreign nationals, regardless of country of residence are not required to be travelling for a non-discretionary or non-optional purpose if they have proof that they are fully vaccinated with a Health Canada approved vaccine. This includes U.S. citizens and permanent residents who reside in the U.S.

Immediate family members (as defined in the Orders in Council) of a Canadian citizen, a person registered as an Indian under the Indian Act or a permanent resident of Canada do not need to be travelling for a non-discretionary purpose if they intend to stay in Canada for a period of 15 days or more, and are travelling with or to be with their Canadian citizen, person registered as an Indian under the Indian Act or permanent resident family member. If the foreign national is travelling for less than 15 days, they must demonstrate that their travel is non-discretionary or non-optional purpose. Officers should be flexible when processing immediate family members of Canadian citizens, persons registered as Indians and permanent residents of Canada travelling for less than 15 days, if they are travelling for a non-discretionary or non-optional purpose.

Note : A fully vaccinated immediate family member of a Canadian citizen, a person registered as an Indian under the Indian Act or a permanent resident of Canada who is travelling for a discretionary purpose would not need to demonstrate that they intend to stay in Canada for a period of 15 days or more.

Extended family members of a Canadian citizen, a person registered as an Indian under the Indian Act or a permanent resident of Canada do not need to be travelling for a non-discretionary purpose if the travel is for 15 days or more and they are travelling with or to be with their Canadian citizen, person registered as an Indian or permanent resident family member. If the travel is for less than 15 days, extended family members will need to demonstrate that their travel is non-discretionary or non-optional.

Regardless of their length of stay, all foreign nationals seeking an exemption under this extended family member provision are required to provide a statutory declaration and obtain written authorization from IRCC to be eligible to travel to Canada.

Note: A fully vaccinated extended family member of a Canadian citizen, a person registered as an Indian under the Indian Act or a permanent resident of Canada does not need to seek written authorization from IRCC with a statutory declaration, or need to demonstrate that they intend to travel for 15 days or more.

Immediate family members of temporary residents in Canada are required to provide evidence that their travel is non-optional or non-discretionary regardless of their length of stay. For these immediate family members seeking to travel to Canada from the United States, no authorization letter is required. For these immediate family members seeking to travel from any country other than the United States, an authorization letter issued by IRCC is required. This letter, issued for the purposes of reuniting immediate family members, should be sufficient evidence that travel is non-discretionary, as letters are only issued by IRCC when travel is for a non-discretionary purpose. In cases where new or conflicting information is provided at boarding or at the port of entry (POE), border services officers may utilize their discretion as always. IRCC officers will insert comprehensive notes in the Global Case Management System which will outline their rationale for issuing the authorization letter. If information comes to light for a Canada Border Services Agency (CBSA) liaison officer or border services officer that contradicts the original purpose of travel, the traveller may be denied travel to or entry to Canada.

Note : Immediate family members of temporary residents in Canada departing from any country other than the United States by air, may be permitted to travel to Canada and would not require written authorization if they meet the fully vaccinated traveller exemption , and would not need to provide proof of travelling for a non-discretionary purpose.

Examples of non-optional or non-discretionary travel:

• supporting Indigenous communities
• transiting through Canada for non-optional or non-discretionary purposes
• any other activities that are deemed non-optional or non-discretionary by the Government of Canada or based on an officer’s assessment
• foreign national coming to assist with the birth of their own child to another foreign national with temporary resident status

Note : As of September 7, 2021, for new clients who apply via the Temporary Resident electronic application (TR eApp) and self-identify as meeting a family reunification/member option will be asked if they are requesting written authorization alongside their application for a TRV.

The following are examples of non-optional or non-discretionary travel for temporary workers who hold a valid work permit or received a letter of introduction from IRCC on their work permit application and are seeking entry at a Canadian POE:

• A foreign national has a valid work permit and ordinarily resides in Canada. Whether the foreign national’s employment still exists or they are currently laid off is not determinative in this case. What is determinative is that the foreign national’s primary residence is in Canada (suggesting their travel is not optional).
• A foreign national has a letter of introduction for an open work permit, holds a valid job offer and will be able to work once they enter Canada.
• A foreign national has a letter of introduction for an employer-specific work permit, holds a valid job offer and will be able to work once they enter Canada.

Note : As for September 7, 2021, temporary workers who meet the fully vaccinated exemption will not need to be travelling for a non-discretionary purpose.

For more information, consult Work permit: COVID-19 program delivery .

For more information, consult Travel restriction measures: COVID-19 program delivery .

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Chilling video shows fire erupting out of a Russian tank after an exploding Ukrainian drone flew into its open hatch

• Ukraine flew an exploding drone into a Russian tank's open hatch, a new video shows.
• It's not the first time operators have flown UAVs with such precision.
• Drones continue to terrorize both sides of the front lines, even killing high-value targets. 

A new chilling video shows a Ukrainian drone flying directly into the open command hatch of one Russia's main battle tanks before exploding and, apparently, setting off the ammo inside.

It's the latest example of how operators on both sides are flying unmanned aerial vehicles with astonishing precision and lethality , destroying everything from individual soldiers to expensive, high-value targets like top tanks.

The video was originally posted on Telegram on April 11 by the Special Operations Forces of the Armed Forces of Ukraine and, later, shared on X. In it, Ukrainian first-person view drones conduct several successful strikes on Russian systems and vehicles, including what experts identified as a Russian T-90M tank, a weapon Putin has called "the world's best tank."

Video of Ukrainian SSO FPV strikes on a Russian T-90M tank and Desertcross ATVs. I cropped the video to avoid strikes on individual soldiers. 15/ https://t.co/UaZmDK7nXP pic.twitter.com/x1TNpIbHb7 — Rob Lee (@RALee85) April 15, 2024

In one particular portion of the footage, the drone flies towards the tank, navigates carefully through what appears to be a cage built on top of it and down into the tank's open hatch.

The footage then cuts to a surveillance drone 's perspective of an explosion inside the tank from a likely ammunition cook off.

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"FPV drone operators of the 8th Separate Regiment of the SSO inflicted significant losses on the enemy in the Donetsk direction," the Ukraine's Special Operations Forces said on Telegram.

The SSO claimed to have successfully eliminated a T-90, a T-72, and two other vehicles, as well as carried out individual attacks on Russian soldiers in trenches.

These kinds of high-precision kills are not new for Ukraine. Back in November 2023, a Ukrainian service member from the UAV unit known as the Magyar Birds with the 59th Motorized Brigade shared footage of a number of exploding FPV drones flying into the open hatches of Russian vehicles.

In that video, the voiceover says that "if a direct hit isn't working, then the mastery and experience of the pilot becomes most important," per a translation.

Drone operators have become invaluable assets for both sides of the war, as well as prime targets. In some cases, operators have been documented using their drones to target each other , hoping to take out their enemy's capabilities for flying the UAVs that have dramatically complicated battlefield maneuver and combat operations.

The recent attack on the apparent T-90M is another notable loss for the Russian army.

Back in January, Ukraine called the claim that it is "the world's best tank" into question after one of its US-made Bradley infantry fighting vehicles was able to overwhelm one with chain gun fire during combat in Stepove, a village outside Avdiivka in northeastern Ukraine.

In the video footage from the battle, the Bradley can be seen engaging in an intense fight with the T-90M, wrecking it with fire from its M242 25mm Bushmaster chain gun. After the modern main battle tank spins out of control and catches on fire, its crew abandons it, and Ukraine sends in an FPV drone to finish the job.

Watch: DIY exploding drones are changing the game in Ukraine war

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