Knowing Your Fixed Expenses
What are fixed expenses?
Fixed expenses are defined as any expense that comes regularly and is nearly (or exactly) the same cost every time. Fixed expenses are predictable, and are usually the first set of bills you will add to your budget (because you have them memorized). Think of rent/mortgage, cell phone, or subscription services. The term "fixed" is usually used in contrast to "variable" expenses, to describe bills like eating out or groceries, that change every time.
How to track fixed expenses
The easiest way to track your fixed expenses is to write them in a list or add them to your budgeting app. Many people know what they pay for each fixed expense, but never realize the total amount of them added together. That realization can be jarring and can make you want to revisit what you are paying for. Another misconception is that a fixed expense cannot be lowered. Just because a bill is the same every month does not mean that there is no room for adjustment. Sometimes going the extra mile to lower your fixed expenses can make a bigger dent in your budget than trying to eliminate extra expenditures.
How much should I spend on fixed expenses?
The point where you realize a fixed expense isn't interchangeable with a "need" is when you can successfully determine how much you should be spending on your fixed expenses. Try lumping your bills into categories so you can see where most of your fixed expenses fall. Most budgeting apps will do this for you. Depending on the budgeting method you are using, this will also inform where most of your funds should be going. Fixed bills like rent and utilities, along with other "needs" should make up about 50% of your budget. If 40% of your expenses are subscription services and other bills that can fall into the category of "entertainment or extras", that is your signal to re-evaluate where your hard-earned money is going.
The Bottom Line...
Fixed expenses are an essential part of life, and you will always have them. The skill of being successful financially is knowing what is "essential" and what isn't, and where you can cut down your fixed expenses within your budget.
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