However, some variable costs happen every month. Think of that plane ticket you just booked to see your family in California. Many variable expenses happen sporadically only a few times a year. Examples of Fixed Expenses:Ĭlassic examples of variable expenses are clothing, vacations, entertainment, eating out, gifts, facials, and home goods. Fixed costs should take up no more than 50% of your income to make sure that you have enough breathing room in your cashflow. Therefore, it is essential to make sure that your fixed expenses are as low as possible, allowing you ample funds for variable costs that are often harder to control and savings. These fixed expenses occur repeatedly and typically can’t be dropped with a moment’s notice, should your financial situation change. We typically do not pay much attention to these costs, but most of our budget goes towards funding them. Other bills that fall under this category include health insurance, life insurance, and essential utilities.
What Are Fixed Expenses?įixed expenses are all reoccurring expenses – from rent or mortgage bills to car payments as well as tuition or childcare expenses for your children. So let’s break them down and look at what fixed, and variable expenses are – and aren’t. They affect your financial future to a much greater extent than you may think. Perusing the annual report of a company that I am invested in, I got to thinking about how these two words are so much more than just accounting jargon.
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