Fixed expenses

What It Means

Fixed expenses are costs that stay about the same from one month to the next, such as rent or a mortgageMortgageA loan used to buy or refinance a home, secured by the home itself and repaid in monthly installments over a set term. See more, a car payment, insurance premiumsInsurance premiumThe amount you pay to keep an insurance plan, such as health insurance, in force, usually monthly, quarterly or yearly, whether or not you use any care. See more and a phone plan. The Consumer Financial Protection Bureau (CFPB) sets them against variable expensesVariable expensesRegular costs whose amount changes from month to month, such as groceries, gas, utilities and eating out. See more, whose amount changes month to month, like groceries or medical billsMedical debtMoney owed for health care, such as hospital, doctor, lab or ambulance bills; unpaid bills can go to collections and, in some cases, onto credit reports. See more. Many fixed costs come from a contract, such as a lease or a loan, and fall due on the same date each month.

How It Sounds at Home

• "Rent, the car and insurance are gone before I buy a single thing."
• "Our fixed bills come to about two grand a month."
• "That one's on autopay, it never changes."

The Breakdown

Worked example. A household takes home $4,200 a month (made-up numbers):

That's 49.4% of take-home payTake-home payThe money that actually reaches you from a paycheck after taxes and other deductions are taken out, also called net pay or net income. See more spoken for before the month starts. The other $2,125 has to cover groceries, gas, utilities, costs that come once or twice a year, and savings. Paid every two weeks, the same household needs about $958 from each paycheck for fixed bills ($2,075 × 12 ÷ 26).

What the result means. Fixed expenses are the least flexible part of a budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more, because many of them are set by a contract. A high share leaves little room when a variable cost jumps. The usual moments to lower one are at renewal: a new lease, an insurance policy coming up for renewal, or the end of a phone contract.

Good to Know

The CFPB's bill calendarBill calendarA calendar that shows each bill on the day it's due, often next to your paydays, so you can see which paycheck has to cover which bill. See more is a simple way to see fixed bills against paydays. It suggests marking each payment 7 days before the due date when you pay by mail and 2 days before when you pay online. If most due dates land right before a payday, the CFPB suggests asking the company to move one, and it offers a worksheet for the request. A fixed amount doesn't make a cost a need: the CFPB lists a gym membership among wants, even though it costs the same every month.

Related Terms and Categories

• Variable expenses

  Regular costs whose amount changes from month to month, such as groceries, gas, utilities and eating out.

• Needs vs wants

  The split between costs you must pay to live, work and protect what you have (needs) and extras that would be nice to have (wants).

• Budget

  A plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it.

• Bill calendar

  A calendar that shows each bill on the day it's due, often next to your paydays, so you can see which paycheck has to cover which bill.

Household money and budgeting