What Is A Fixed Expense? 5 Tips To Save On Fixed Expenses
by Shahnawaz Alam Finance 15 September 2023
Budgeting is difficult.
It is even more difficult to understand ‘what is a fixed expense’ and a variable expense.
Once you have a clear idea of what both types of expenses are, you will clearly understand what your budget should look like.
So, what is a fixed expense?
A general meaning of fixed expense is the expenses that do not change month after month. Variable expenses, on the other hand, can change (even on a weekly or daily basis).
Once you understand which expense goes where during budgeting, you will have a clear outline of your spending habits. It can also help you identify if you are overspending or not.
Go through this article thoroughly to find out what fixed and variable expenses are.
What Is A Fixed Expense?
Fixed expenses help make your monthly budgeting easy. This is irrespective of whether you are running a business or managing your personal finances. For starters, you do not have to calculate your fixed expenses every month when you are budgeting. You can carry over the fixed expenses from the previous month and add them to the next month’s expenses.
For example, you may have the same amount of payable rent (thanks to the rental agreement) or the mortgage amount. You can easily carry it over to the following month and make your budgeting plan more perceptible.
Having a fixed expense figured out would help you follow different budgeting methods, such as a zero-based budget. It is also applicable for 50 30 20, the rule of money.
Also, fixed expenses are paid at a specific time of the month. So, if you clearly understand your monthly recurring expenses, budgeting will become easier. This allows you to budget by your paycheck and sometimes schedule automatic bill payments. This will also result in avoiding late payments or paying unnecessary fines.
Examples Of Fixed Expenses
Here are some common examples of fixed expenses –
- Mortgage or rent payments
- Real estate taxes
- Internet services
- Cellphone services
- Childcare expense
- Property taxes
- Insurance premiums
- Car payments
- Student loan/car loan payments.
How To Save On Fixed Expense?
It is not easy to save money on fixed expenses because they are fixed. However, if you are able to save a few bucks from your fixed expenses, it will surely feel like saving a lot.
Some common solutions would be opting for cheaper health insurance. You can also take a cheaper telephone service or rent an affordable living space. But if you do not want it to feel like curbing your lifestyle down, then follow the different tips provided below –
1. Refinance Your Mortgage
If you have been paying the mortgage for your dream house, then, assumably, you are paying a huge sum from your paycheck to mortgage payments. Did you know that there is a way to lower those mortgage payments? You can do it by refinancing your mortgage and lowering your payable interest rate.
Yes, you have to pay some cost for the refinancing. But there is an option for you to roll your different fees and the closing costs into the refinance loan. Besides, you will save some amount every month, and it will offset some of these costs. You can use it as a smart tactic to bounce off overspending on fixed expenses.
2. Lower Property Expenses
Property taxes for your property are another fixed expense you cannot escape. But you can surely lower it by challenging the assessment of your property by the town you live in. Each of the towns has its own process for the assessment. But in the end, you have to agree to get your property reappraised so that its value is less than the town’s home assessment.
3. Lower Your Auto Insurance Premiums
You have been paying auto insurance premiums, right? Have you cared to evaluate whether you are overspending there or not? This is a fixed expense that wastes a huge portion of your paycheck.
If you have been paying these insurance premiums for a few years, you should speak to the insurance company representatives and ask them to lower the premiums. You can shed light upon your regular premium payment and your loyalty.
There is another option. You can try increasing your deductible to get a lower monthly quote. But, if none of these options are working, and if the insurance company is not willing to comply, then it is better to look for options.
4. Debt Consolidation
You will go nowhere if you have a huge amount of debt. Debt can be among the expenses fixated upon your back, and you cannot shake it off. Debt expenses usually take away a huge amount from your monthly paycheck. Also, if the debt interest is massive, you will have more money draining through your pocket.
If you follow those with different credit cards with an outstanding balance, there is a way out. The way out is a balance transfer. You have to first open a new credit card with low-interest rates. Then, transfer all of your debts to that credit card.
This will take away the difficulty of paying different debts on different credit cards. You will pay debts on only one credit card going forward. Also, thanks to the low-interest credit card, you can compromise on paying a high amount for credit cards.
5. Unnecessary Subscriptions Need To Go
Many individuals often opt for monthly renewal of different paid subscriptions. This could include gym, OTT, or any app subscription. These are some of the monthly subscriptions that you may not need. However, you end up paying for them like a fixed habit.
Unused Gym Subscription
If you skip gym three days a week, then there is no reason to pay for it in the first place. If it is really not that necessary, you can cancel your gym subscription. Do it if you are really into health and fitness. But, if you want to keep the subscription, you can choose more affordable ones.
Unused Cable Subscription
Why do you have your cable subscription on when you do not watch TV at all? If you are watching Hulu and Netflix and getting all your daily news updates through YouTube and news apps, then there is no need to keep using TV subscriptions. It is a fixed expense that you can shake off.
Fixed expenses are usually difficult to trim down. The reason behind this is the essentiality of some of these expenses. But now that you know what fixed expenses are and have some of the tips understood, it should not be difficult to tweak here and there. You might also be able to generate the amount of savings you want from them. So, did you find the answer to “what is a fixed expense?”
Please let us know about your feedback in the comment section. Thank you for reading.