#HOUSEHOLD BUDGET DEFINITION FREE#
Not only will you be able to free up money to pay down debt or save for your future, you may not have to give up as much of your lifestyle. Lowering your fixed costs creates automatic, non-optional saving. Plus, it might not feel like a sacrifice, while cutting back on your fun spending probably would. That’s because it’s harder to change your decision when it becomes part of your lifestyle. Although it may be easier in theory to cut back on variable costs, it may actually be easier in practice to cut back on fixed costs. Sometimes creating and sticking to your budget is a matter of a few clever tricks. Staying on top of monthly fees will help you make sure you’re not paying for anything you don’t use. Cancel any monthly services you didn’t realize you were still paying for, too. If your insurance premium is going to go up in the next year, you can plan in advance for that. In addition, monitor your fixed expenses. It could also turn variable expenses into expenses you can anticipate and budget for each month, just like your fixed expenses. This could help you clearly see how much you have left to spend on each category every month. If you want, you could even open separate savings accounts for each variable expense category. You can then set aside that amount each month for each variable expense. Next, see how much you spent on these categories during the previous year and divide that number by 12. For example, you could have a groceries category, a utilities category and a travel expenses category. You can also use the past year’s data to estimate how much you typically spend on categories of variable expenses. But could you stretch a haircut to last six weeks? That would save you roughly three haircuts, which at, say, $30 a pop, is $90. For example, maybe you get a haircut every four weeks. If you go through the previous year’s credit and debit card statements, you may begin to see a pattern. Many of your variable expenses may end up being fairly predictable. Cutting back on variable expenses requires more day-to-day willpower than cutting back on fixed expenses.
Or maybe you need to decide between buying new clothes or seeing that new movie. You may have to choose between making dinner and getting take-out. Variable expenses may be harder to cut back on than fixed expenses because they can affect your lifestyle. For example, you might spend more on electricity in July than you do in December because of air conditioning. Your utility bills may also be variable expenses because they may change from month to month. Grocery shopping is also a variable expense. Buying gas for your car each month is a variable expense, as are car repairs and maintenance.
Variable expenses are defined as such because the amount you spend may vary each month.Īlthough variable costs are quite often discretionary expenses, some may be necessities.
Do you buy conventional or organic produce? Do you get Starbucks or make coffee at home? Not all variable expenses are discretionary expenses, however. One way of describing variable expenses is that they represent your daily spending decisions. The best part? You only have to make that money-saving decision once to see the reward. However, that $85 per month will turn into $1,020 in one year. The little bit you save on your fixed expenses can add up fast.įor example, if you spend $1,100 instead of $1,185 per month on rent, the quality of your apartment and neighborhood may not change much. This is a great alternative to being frugal with your other spending decisions, such as buying new clothes or ordering takeout. So when you lower your fixed expenses, you lower the percentage of your budget that’s devoted to them. That’s because fixed expenses tend to take up the biggest percentage of your budget.
When you lower your fixed expenses, you automatically save more money each month or pay period. For example, consider a cheaper gym membership or a different streaming service. Additionally, shop around for alternative car insurance, health insurance, life insurance and homeowners or renters insurance plans to save more money. If you’re signed up for a monthly service that you rarely use, there may be an alternative plan with a lower price. Some fixed expenses may be discretionary, like a gym membership or streaming service subscription.Īlthough these bills are consistent each month, you may still be able to lower their costs.
#HOUSEHOLD BUDGET DEFINITION PLUS#
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. Typical fixed expenses include car payments, mortgage or rent payments, insurance premiums and real estate taxes.
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