In some places disposable income is considered to be your total income minus current taxes. This idea is tied to your net pay, the part of your pay check that you get to take home after paying income tax, social security tax, medicaid, insurance, etc.

We like to think of disposable income as the income you have left after your required payments. Think of your net income, then take out rent/mortgage, car payment, etc. After your those fixed costs are removed, the rest is your disposable income that you can choose to spend how you want.

This is what lets you pick between eating out vs. eating in. Buying that new console game, or that accessory for your car.