What Is a Fixed Expense and What Are Some Examples?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on April 24, 2023

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A fixed expense is an expense that does not change from month to month. Fixed expenses are important to track because they can have a big impact on your budget.

Examples of Fixed Expenses

Some common fixed expenses include:

  • Car payments
  • Student loans
  • Insurance premiums

Fixed Expense vs. Variable Expense

Unlike fixed expenses which do not change, a variable expense is an expense that changes from month to month. The amount you pay for a variable expense can vary depending on things like the season or your spending habits.

How Do Fixed Expenses Affect Your Budget?

Fixed expenses are important to track because they can have a big impact on your budget. They are the expenses that stay the same each month, while variable expenses change from month to month.

It makes up a large part of most people's budgets, so it is important to be aware of how much you spend on these expenses each month.

Fixed expenses must be paid regardless of your budget, and they can make up anywhere from 40% to 75% of most people's budgets.

They are a key factor in determining how much money is available for discretionary spending in a household budget.

Paying Fixed Expenses

Fixed expenses cannot be avoided and must be paid regardless of how much money is left over after your variable expenses have been paid.

They must be paid first, before you can spend any more of your budget on discretionary spendings, such as entertainment.

Fixed expenses are generally more difficult to reduce than variable expenses because they cannot be changed without significant effort or major sacrifices.

Importance of Fixed Expenses

Fixed expenses are important because they allow you to budget for a specific amount of money each month. They provide stability and predictability in your monthly budget, which is helpful when trying to save for a financial goal or prepare for retirement.

Ways to Reduce Fixed Expenses

There are a few ways to reduce your fixed expenses:

  • Rent or mortgage - Consider downsizing to a smaller home or apartment to reduce your monthly payment.
  • Car payments - Consider refinancing your car loan to get a lower interest rate and reduce your monthly payment.
  • Student loans - Consider refinancing your student loans through a private lender to get a lower interest rate and reduce the amount you pay each month.
  • Insurance premiums - Compare auto, home, health, and life insurance quotes from several companies to find a better deal on your insurance.
  • Phone bills - Look for a cheaper cell phone plan that is better suited to your needs.
  • Cable and internet bills - Consider cheaper alternatives like Hulu or Netflix, which provide access to the TV shows you watch for less money each month.

Get creative about how you can save on your fixed expenses by cutting back in areas like food, clothes, and entertainment.

Knowing Your Financial Habits

In order to reduce your fixed expenses, it is important to be aware of your spending habits. Track where you are spending your money each month and see where you can cut back.

If you are not sure where to start, consider using a budgeting app or tracking your expenses in a spreadsheet.

Saving for Retirement

It is also important to save for retirement, even if your fixed expenses seem like a lot of money each month. Retirement savings should be a top priority for everyone, regardless of their income level.

There are many ways to save for retirement, and most employers offer matching contributions to their employees' 401(k) plans.

The Bottom Line

Fixed expenses are an important part of your budget, and they should not be overlooked. They provide stability and predictability in your monthly budget, which can help you save for a financial goal or prepare for retirement.

There are a few ways to reduce your fixed expenses, so be sure to explore your options. Fixed expenses can be very difficult to reduce, but not impossible.

By being creative and using a few tricks you may be able to save a significant amount of money each month without making too many sacrifices.

Fixed Expense FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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