Fixed Expense

Fixed expense summary:

• Fixed expenses are expenses in your budget that are typically the same amount from one month to the next. 

• Examples of fixed expenses include rent or mortgage payments, student or car loan payments, cell phone bills, and internet service.

• Fixed expenses are usually easier to budget for since they're consistent and predictable. 

Fixed expense definition and meaning

A fixed expense is an expense that typically stays the same in terms of the amount and how often you pay it. When you make a personal budget

Fixed expenses are usually tied to your basic needs or debt. For example, you have to pay your rent or mortgage each month so you have a place to live. And you'll need to make your car payment if you want to hold on to your vehicle. 

Key concept: A fixed expense is a budget item that usually doesn't change.

More on fixed expense

One of the best ways to take control of your finances is to make a budget. A budget is a plan for how you spend. On one side is your income. On the other are your expenses. 

If you're a new budgeter, you'll add up your income first, then make a list of your fixed expenses. Fixed expenses in a budget are the predictable costs you pay toward basic needs (and debts, if you have any). 

Fixed expense: A comprehensive breakdown

A fixed expense is an expense you pay regularly, usually for the same amount and on the same due date. Fixed expenses can sometimes change if your circumstances change. For example, if you switch car insurance companies, your new bill may be higher or lower. 

Fixed expenses typically have a regular payment schedule so you know when your next bill is due. Many fixed expenses are paid monthly, but some you might pay quarterly, semi-annually, or annually. 

Examples of fixed expenses

Everyone's budget is different, but there's usually some overlap in the fixed expenses people pay. Fixed expense examples include:

• Rent or mortgage payments

• Renters or homeowners insurance

• Property taxes and HOA fees (if you own a home)

• Car insurance

• Cell phone service

• Internet

• Child care

• Gym membership

Debt payments could technically go into this part of your budget if you make them regularly and the amount is roughly the same. 

Fixed expenses vs. variable expenses

A budget usually isn't just fixed expenses—there are some variable expenses mixed in as well. Variable expenses are expenses that fluctuate. The amount typically changes from month to month.  

Variable expenses may allow for more control. For example, you could decide how much to spend on:

• Groceries

• Take-away meals

• Entertainment 

• Subscription services

• Hobbies and recreation

• Personal care

• Clothes or books

• Travel

Real-life example of fixed expenses in a budget

How do you budget for fixed expenses? One popular budget method is the 50/30/20 rule

• 50% needs

• 30% wants

• 20% debt payoff and savings

Fixed expenses often go into the 50% needs category. Let's say you have a net income of $5,000 a month. (Net income is your take-home pay.) Your budget would look like this:

• $2,500 to needs (which includes fixed expenses like rent or utilities)

• $1,500 to wants (any expenses you could technically live without)

• $1,000 to debt payoff and savings

If you owe credit cards or loans, you might save $500 a month and send $500 to your debt snowball.

That's a compromise you might make if all the money in your needs bucket goes to basic living expenses. Once you pay off your debt, you can focus on saving that extra $500 a month instead.