Fixed expenses are expenses that do not change from month to month. These include rent, mortgage payments, insurance premiums, and other regular payments that are the same amount each month. Fixed expenses are essential for budgeting because they stay relatively constant month-to-month. If you know your fixed expenses in advance, you can easily plan your budget around them and make sure they’re covered every month. This is especially helpful if you want to put money toward savings goals by budgeting a certain amount each month that you can put into savings after paying all of your fixed expenses.
Fixed expenses are the expenses that occur regardless of what you do or don’t do. They happen, no matter what. For example, if you have a place to live, you will have rent or mortgage payments, which is a fixed expense. If you have a car and you have to drive it, you have it in gas and possibly insurance. Whether you use them or not, any other monthly bills are also settled expenses.
Fixed expenses are predictable:
Most people have a good idea of what their monthly recurring bills are. You know how much your rent or mortgage is. You know how much you have to pay toward your monthly car payment. You know what your cell phone bill will be and what the monthly rate is on your cable TV package. It’s predictable spending like this that makes up the majority of most people’s budgets, and it can be hard to cut back if you’re already watching every penny.
They can be classified.
Fixed expenses are those costs that stay the same every month, such as rent or mortgage, car payments, cable, and internet bills. Because they’re fixed, it’s easier to plan your budget around them than for variable expenses (like food or entertainment) that change month to month. Fixed costs may also include debt payments (credit card or loan payments) and insurance premiums.
Housing Expenses: When you pay rent or a mortgage, you’re paying for the roof over your head and everything that goes with it: walls, plumbing, electricity, etc. You might also have utility bills if they’re not included in your rent. These expenses are both fixed and variable; housing costs remain the same from one month to the next, but utilities can fluctuate from season to season. If you’re paying a mortgage, most of your payment will go toward interest at the beginning of the loan term, but it will become more principal (the amount borrowed) as time goes by. If you live in an apartment or other rental property, all of your payment is typically considered an expense because there is no ownership stake.
Transportation Expenses: Transportation is another essential monthly expense unless you live close enough to walk.
Rent or mortgage payments: Fixed expenses, such as rent or mortgage payments, are the most critical and immediate expenses that you need to be prepared to pay. Your fixed expenses are the things you have to pay every month. They won’t change. Rent or mortgage payments in fixed expenses.
Property taxes: Property taxes are usually considered fixed expenses. They don’t go up or down very much unless there are a significant change in the property’s value or the tax rate changes. Your property taxes may increase by no more than 3% per year in most areas. I will notify you in advance if your property taxes go up. There will be a public hearing, and you’ll have an opportunity to protest the new tax rate before it goes into effect. If you win your protest, the rate will remain for another year.
Employee salaries: If your business has employees, you will have to pay employee salaries. Salaries are a fixed cost because they do not fluctuate with sales volume and are usually contracted for a set period.
Loan payments: To figure out how much money you need to live on, start with your fixed expenses.
Insurance: You probably won’t have insurance payments if you’re renting, but they’re a must if you own a home.
