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Fixed expenses are expenses which remain static, not fluctuating over time. This is in contrast with variable expenses, which change. The term “fixed expenses” can be used in reference to either personal or business finances. Calculating fixed and variable expenses is an important aspect of effectively managing a budget to ensure that funds will be available when they are needed, including in an emergency when an unexpected expense arises.
To qualify as a fixed expense, something needs to remain constant. A classic example of a fixed expense is a loan payment, such as a payment on a mortgage or car loan. This expense is fixed for the life of the loan, although people may opt to pay more to pay off the loan earlier. Another example of a fixed expense is rent, for people who are not paying down a mortgage, or a fixed bill. For example, people may be charged a flat fee for garbage service, lawn maintenance, or similar types of services.
Insurance and taxes can also be fixed expenses, remaining fairly stable when income remains stable. Other examples of fixed expenses might be tuition payments, subscription fees, and so forth. Essentially, anything which people pay a set amount for every month or at regular intervals would be considered a fixed expense. In business, payroll is another example of a fixed expense.
By contrast, variable expenses can change. Food, for example, can be a variable personal expense, with people spending more or less each month. Another example of a variable expense is a metered service, with fees which vary depending on how much of the service is used. Other types of variable expenses can include things like plane tickets, car rental fees, and hotel rooms for people who travel, or purchases of goods like clothing, schoolbooks, and so forth. These expenses are less predictable in nature, and they may occur at variable intervals.
When calculating a budget, people can used fixed expenses come up with an immediate estimate of funds which will be spent every month. People can add estimates of variable expenses to this to get an idea of how much money they need every month or in a longer period. Ideally, people will make enough money that they can put funds in savings so that they will have money to use for big projects, emergency expenses, and other unexpected events which may occur during one's life.
Keeping track of everything you spend can be a challenge. If you are interested in not only tracking your fixed expenses but variable ones as well, your bank may already be doing this for you.
If you online bank and use your debit card a lot many online banks are now offering free software that will show you what you spend and what percentage of you money it takes up.
For example, if you buy groceries at two or three particular stores, the software can be told to use those stores and numbers to figure out what you spend on food. It will provide you with handy graphs and make your budgeting much easier.
If you are interested in figuring out your first home budget calculating your fixed expenses is a great way to get a realistic outlook on how much you have left to spend and save at the end of the month.
For your fixed budget, the main things to include are utilities, rent or mortgage, car payments, loans and fixed bills like cable and Internet.
Once you have these figures laid out you may be surprised to see how much you are spending. Luckily, you can figure out what things can be lowered to fit your new budget. Doing something like switching to a cheaper Internet package, or shopping for lower interest on your loans can help quite a bit.
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