![]() ![]() Adding up your monthly payments is pretty straightforward. After listing out your monthly income, you move on to your monthly payments. When you create a budget, you naturally start by recording your income and expenses. Read: Do More, Not Less With a Budget Why Your Budget Keeps Failing By taking the amount that we usually spend on Christmas and dividing it out over the year, we arent financially strained during the most wonderful time of the year.Įven if you face a periodic expense and dont have the full amount saved, youll be so much better off with something saved than if youd set aside nothing at all! We do the same with the money we spend during the holiday season. Its much less daunting to save $67 a month than to come up with the entire sum in one months budget. If we set aside $67 each month, we have $810 in November to pay our life insurance premiums. Our family spends $810 each year on life insurance. Since we never saved up for either of these significant expenses, they had to come from our regular monthly spending categories, which meant that money was always tight in November. Not only is it typically a more expensive month because of the holidays, but its also when our annual life insurance premiums are due. Read Also: How Early Can A Girl Get Her Period No More Dreading Large Expected Annual Expensesīefore we started to budget like this, I used to dread Novembers budget. If you have to pay $100 every three months for your car service, then you need to save $34 every month, so you have enough money available when the periodic fixed expense arrives. Managing your recurring costs involves treating them like the fixed expenses. Instead, you need to be very diligent while budgeting and preparing for your periodic expenses so they dont sneak up on you when youre not financially ready to pay for them. Similarly, you cannot avoid financial obligations like paying your taxes if you own a business. It would not make sense to cut your car service or oil change. Periodic fixed expenses are easy to prepare for because they arrive in predictable intervals and consistent amounts.ĭue to the nature of periodic fixed expenses, most of them are essential, making it difficult to cut them from your budget. ![]() Four Ways To Prepare For Periodic Fixed Expenses You might struggle to afford your fixed expenses, but they wont surprise you. Youll see they take up a large percentage of your budget. When youre setting up your budget, your fixed expenses will be the first entries you make. You often have limited control and a legal obligation to pay your fixed expenses.įixed expenses are consistent and usually paid monthly. Fixed expenses will probably take up the largest percentage of your budget since rent, insurance, and car payments are fixed expenses. Here are some of the common examples of fixed payments:įor household budgeting, fixed expenses are predictable costs with amounts and due dates that dont change. For this reason, you can easily apply specific budgeting techniques like the 50/20/30 budget or zero-based budgeting. This is because the expenses remain more or less the same. Your budgeting process becomes easier and more predictable. This is because theyre paid in similar amounts at recurrent monthly intervals and take up the lions share of your budget.įrom a planning standpoint, the more fixed expenses you have, the better. For example, your landlord might raise your rental fees or you might choose to switch to a new internet service provider.įixed expenses should be the first thing to include in your budget. And the amounts are predictable because you always know how much youre expected to pay.įixed expenses may change occasionally, but the change does not occur regularly. You also have little or no control over your fixed costs. It doesnt fluctuate, meaning you dont have to take a wild guess on your next months fixed expenses. Fixed Expenses DefinitionĪs the name implies, a fixed expense is that which remains constant and predictable over time. Aside from periodic expenses, you also have to understand how fixed expenses and flexible or variable expenses affect your budget. Static and Flexible Budgets | Accounting | Chegg TutorsĪn expense is an amount you part with for products and services that you use each day.
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