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Discretionary income and profits #finance

We all have overheads, those essential things we have to buy before we can even begin to think about buying the luxuries. That money left for buying the luxuries and paying for Christmas treats and holidays is referred to as discretionary income. If your boss gives you a Christmas bonus, your discretionary income can soar. Small businesses have overheads. They have to pay rent, business rates and other bills and a small increase in turnover can mean a big increase in their discretionary income. Their discretionary income is the profit they take home to spend on their families.

discretionary income

Public companies

Public companies use their discretionary income to pay their shareholders dividends and to reinvest and drive growth. They can get that little extra by launching successful advertising campaigns especially as Christmas approaches. I’ve seen a local butcher doing a like-share-comment promotion on Facebook and he will increase his trade and I’m sure the extra profit will enable him to strengthen and grow his business in the new year. By contrast, many public companies are sticking with traditional advertising and some of the TV advertising is ill-thought out. As a shareholder in Debenhams, I think advertising is essential but their Christmas offering leaves a lot to be desired. Will they strengthen and grow in the new year? We live in hope.

Discretionary income

If you’ve been wasting your discretionary income on paying interest on loans and credit cards or frittering it away on tat to keep up with the Joneses, then you might be in for an austere Christmas. We need to be aware that a small drop in income can wipe out our discretionary income and a small increase in discretionary income, say from investments, can give us a big increase in that leftover cash that we use for enjoying life.


My investments aren’t appreciating as concerns about Brexit still dominate the market. The star of the show has been Immupharma which has continued to appreciate and hit a pound a share. Many pundits on the forums think that is just the beginning. Verona Pharma has dropped this week from 130 to 125 but still has potential too. Immupharma is farther along with the development of its new drug but Verona Pharma has an innovative drug as well. Solo Oil, also on the AIM, dropped again as an RNS was released explaining that gas production has been cut. They are looking at ways to remedy that. The gas reservoir seems to be smaller than indicated in tests. They are in a pocket rather than the main reservoir.  If they manage to access the main reservoir that could mean increased pressure and increased gas flows. It could go either way. The share price could easily soar and triple yet again on positive news.

Main market

Away from the AIM, my small cap, Premier Foods, which I seem to have been struck with forever, dropped as well. They need a chilly winter so products like Oxo and Bisto will sell. They could make better use of social media too. Tesco, the AA, Carillion and Lloyd’s bank continued to drift. The big pharmaceuticals and FTSE 100 that earn foreign currency continue to be in demand.

That’s it for this week. I’m looking more long-term than usual and with the UK economy looking very fragile, this is a time to batten down the hatches and expect things to deteriorate.

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