My spending plan and your spending plan contain fixed and variable expenses. What are fixed and variable expenses? And what do they mean for your spending plan.
What are fixed expenses?
Generally, fixed expenses are expense in your spending plan that are the same each month. Fixed Fixed expenses do not change with out considerable effort.
What makes this important is that fixed expenses are much easier to plan for in your spending plan than variable expenses.
Examples of normal fixed expenses include car payments and house or rent payments. Although your house payment can change by signing a new lease or a car payment may change by refinancing your car loan, these are not easy to do without considerable effort and won’t change until then.
Other examples of fixed expenses include your car insurance, your cell phone plan, and loan payments. And again you would need to take considerable time and effort to change these payment amounts. Additionally, the biggest part of your spending plan is normally your fixed expenses.
If you are just starting to plan to spend your money, and you need to cut expenses, focus on the variable expenses.
What are variable expenses?
Variable or flexible expenses are the ones that are different for week to week, and month to month. Your expenses that change and always different like electricity, and weekly or monthly food, and gas are your variable expenses.
If you are new to creating and using a spending plan, once you start tracking your expenses, you will be able to find variable expenses to cut. Tracking your spending will help you to think about your purchases and you will see the purchases do not line up with your values. Additionally, this will help you keep unnecessary spending under control.
Final thoughts
As you are working your spending plan expenses, start with listing fixed expenses first and then listing variable expenses. Remember, your first variable listing should be savings. Therefore, every month you are saving something and that amount changes, it’s variable, based on the other spending plan expenses.
Along with income, fixed and variable expenses categories makeup the parts of the spending plan. And basically, fixed expenses are the same every week or month. Variable expenses are different all the time. Tracking spending will help you to see where you can possibly cut some of your variable expenses. Take care and contact me if I can help you.