"Fixed" Expenses are the Worst ... Let's Get Rid of Them! - Life Before Budget (2024)

FAQs

Is it easier to budget for a fixed expense? ›

Fixed expenses are business costs that remain the same. Typically, these costs remain consistent over a defined period, regardless of how much your company produces or sells. It's easy to budget for fixed expenses because of their predictable nature.

What Are Fixed Expenses? Typical fixed expenses include car payments, mortgage or rent payments, insurance premiums and real estate taxes. Typically, these expenses can't be easily changed. On the plus side, they're easy to budget for because they generally stay the same and are paid on a regular basis.

Fixed expense examples

Rent or mortgage payments. Car payments. Insurance premiums (auto, home, renters, health, dental, life, etc.) Subscriptions and memberships (streaming services, meal kits, fitness memberships, etc.)

Fixed Budgets work well for businesses that don't expect much change in their operations or need a budgeting plan for just a short time. But in situations where things change a lot and businesses need to be able to react quickly, a flexible budget that can adjust as things change might be a better choice.

Fixed expenses are difficult to reduce because they stay the same each month, usually by contract. Rent or a mortgage payment will not change, no matter how little income you have or, in a business, how many sales are made.

A static budget is best suited for businesses with predictable sales and costs or those that can predict their sales and costs in the short term. For instance, a digital marketing company might use a static budget for a month depending on client sales and known fixed expenses.

Example of Fixed Budget

If the company prepares a fixed budget and it is projecting sales of $1 million, the budget for sales commissions will be fixed at $50,000. If the actual sales end up being only $900,000 the budget for sales commissions will remain unchanged at the fixed amount of $50,000.

Fixed expenses generally cost the same amount each month (such as rent, mortgage payments, or car payments), while variable expenses change from month to month (dining out, medical expenses, groceries, or anything you buy from a store).

Is a cell phone bill a fixed expense? ›

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.

Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan repayments. Some kinds of taxes, like business licenses, are also fixed costs.

Fixed expenses 50%

These unchanging costs should stay within 50% of your monthly income. Choose housing, transportation, and monthly subscriptions you can afford to sustain without draining your wallet.

Fixed expenses are the predictable, recurring costs that typically stay the same in your budget from month to month. Common fixed expenses include: Mortgage or rent payments. Loan payments (car loans, student loans, personal loans)

Fixed monthly expenses.

Examples include rent or mortgage payments, insurance premiums and subscription services. These expenses are predictable, making it easier to budget for them since you know the exact amount you'll need to set aside each month.

Theoretically, fixed costs are not easy to change—that is why they are called “fixed.” But not easy and not possible are not the same. A business (and a household) can always make changes to their fixed costs. And when they lower them, they are left with more margin in the budget and more money in the bank.

Since they mostly stay the same throughout the financial year, fixed costs are easier to budget. They are also less controllable than variable expenses because they're not related to operations or volume. Variable costs are a little more complicated to track using accounting.

The upside of having variable expenses in your budget is that you have more control over them than you do with fixed expenses. So it's typically easier to find opportunities to save money.