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Fixed Expenses
Definition
Fixed expenses are recurring costs that remain the same each month, such as rent, mortgage payments, insurance premiums, and loan payments.
Explanation
Fixed expenses are predictable, making them easy to budget for. Common fixed expenses include housing payments, car loans, insurance, subscriptions, and minimum debt payments. Fixed expenses typically consume 50-60% of income for most households.
Reducing fixed expenses (like refinancing a mortgage or negotiating insurance rates) creates permanent savings that compound over time.
Example
If your fixed expenses total $2,000 per month on a $5,000 monthly income, fixed expenses consume 40% of your income.