There are two sources of income: earned and unearned. Earned income is derived from employment, and unearned income is derived from investments and other passive sources. Centrelink payments would be counted as unearned income.  Earned and unearned income provides the source to cover expenses.

Expenses can be categorised in the following way:

Compulsory expenses

Those expenses that must be paid, such as mortgage repayments or rent, food and groceries, transport, services (e.g. gas, electricity, water, phone), insurances etc.

Discretionary expenses

Money spent on things clients believe they can go without, for example, cable television, restaurants, cigarettes, alcohol and entertainment.

Tax-deductible expenses include:

Understanding a client’s cash flow is critical in being able to assess if they can afford this investment for today, next week and well into the future.  You must be able to ensure in your interview process that future liquidity and provisioning for future cash flow requirements are being documented and addressed so no cash flow shortages are forecast, to ensure the asset can be held for the duration the client is anticipating.





Complete the income and expenses sections in the Fact Finder.

  • What percentage of your expenses fall into the categories of compulsory, discretionary and deductible?