What Is a Fixed Expense?

If you’ve been making a budget for any length of time, you probably have a fairly good idea of your typical monthly expenses. 

Not all of your bills stay the same from month to month, but some of them likely do. These are called your “fixed expenses.” But what is a fixed expense, and how do fixed expenses impact budgeting? Learn everything you need to know.

What is a fixed expense?

A fixed expense is a recurring cost that stays the same each billing period. Most fixed expenses are monthly, and they’re often due on the same day each month.

Fixed expenses are predictable, so they’re easier to budget for. When most people create their budgets, their fixed expenses are the first ones they account for.

Common examples of fixed expenses

Larger expenses can be stressful to budget for. So can variable expenses that change every month. 

Fortunately, many larger expenses are fixed. These are some common examples.

Housing payments

Whether you pay rent or a mortgage, housing is probably your largest monthly expense. 

Since rent payments typically stay the same for at least a year, they are considered a fixed expense.

Mortgage payments are fixed as well, although they may fluctuate yearly if you use an escrow account to pay for taxes and insurance. Variable-rate mortgages are not very common, but if you have one, your mortgage payment could change significantly based on current interest rates.

Transportation costs

Many transportation expenses are also fixed. If you’re financing your vehicle, you probably make the same loan payment each month. Likewise, car insurance payments usually stay the same over the course of the insurance term.

Fuel costs are an exception. The amount you spend on gas each month can vary based on the number of miles you travel and the fluctuating cost of fuel.

Certain utilities

Water and electricity bills are usually dependent on your monthly usage. However, some utilities are typically the same from month to month:

• Internet
• Phone service
• Cable
• Trash and recycling services
• Sewer service

If you want to make your variable utility expenses more predictable, ask your utility provider about levelized billing. With levelized billing, the provider looks at your past use to predict your average consumption and charges you a set monthly amount.

Subscriptions 

Streaming services, gym memberships, and other subscriptions usually bill the same amount each month.

Loan payments

Most installment loans, including personal loans and consolidation loans, are split into equal monthly payments.

Childcare and tuition

Childcare providers typically bill on a monthly or weekly basis, so if your needs don’t change from month to month, this expense is easy to predict. Private school or college tuition is usually billed on a semester or quarterly basis.

What is a fixed expense vs. a variable expense?

Fixed expenses are simple to budget for because you know how much you’ll owe every month. 

Unfortunately, not all expenses are fixed. You’ll also have to account for variable expenses that are less predictable. These are some common examples of variable expenses:

• Electricity and water bills
• Groceries
• Gas and fuel costs
• Vehicle maintenance

While variable expenses are harder to predict, they are often easier to control than fixed expenses. For instance, you probably can’t convince the city to charge you less for sewer service, but you might be able to save on car maintenance by finding a more affordable mechanic.

How fixed expenses factor into your budgeting goals

Many fixed expenses (like housing and utilities) are for essentials. As a result, they’re often the expenses that people build their budgets around. A popular budget setup is the “50/30/20” rule:

• 50% of your income goes to needs
• 30% goes to wants
• 20% goes to savings and extra debt payments

If your fixed expenses are more than 50% of your income, it will be harder to save money and get ahead financially. You should look for ways to lower these expenses or to increase the amount of money you have coming in. 

Unfortunately, that’s easier said than done. Finding a higher-paying job will take time and, probably, a little luck. Likewise, fixed expenses tend to be difficult to change. Sometimes, however, the extra effort is worth it.

Here’s an example: Imagine that your income is $4,000 a month. Your apartment costs $2,000 per month. Because your rent alone is 50% of your pay, the “needs” portion of your budget is far too high. 

If you can significantly reduce your housing costs, you’ll be able to free up more money to work toward your other financial goals. You look for a smaller apartment and find one that costs $1,200 per month. The cost of moving is $500, but this one-time expense will save you thousands in the long run.

Need help tracking your fixed expenses?

You already know the importance of tracking your expenses. But life can be hectic, so choosing a budgeting method and sticking to it can be harder than it seems.

At Grant Cash Advance, we help people like you access cash advances from $25 to $500 to fill in unexpected gaps in their budgets. We also connect our users with expense tracking tools and offer insights on building healthy financial habits.

It’s free to get started, and it only takes a few minutes. Set up your account with us today!