Fixed expenses are costs that remain the same in price and frequency, regardless of the level of goods or services produced by a business. They are recurring expenses that can be planned for and are typically factored into a regular budget. Here are some common examples of fixed expenses:
- Rent or mortgage payments
- Car payments
- Insurance premiums
- Real estate taxes
Fixed expenses are different from variable expenses, which can change in cost and occurrence. Variable expenses are more difficult to plan for, as they can vary depending on several factors, such as unforeseen events and discretionary spending. Some common examples of variable expenses include:
- Dining out
- Medical expenses
- Groceries
To plan and follow a budget, its helpful to identify which expenses are fixed and which ones vary month to month. Fixed expenses generally cost the same amount each month, while variable expenses change from month to month. By identifying fixed expenses, individuals and businesses can better plan for their financial future and make informed decisions about spending and saving.
