To live within your means, you must know your net financial expenses. These are the monthly total of your fixed, variable and discretionary expenses. To calculate your net financial expenses, you need your total fixed monthly expenses and your average monthly variable expenses.
Total Fixed Expenses
Fixed expenses never change, or they change on a predictable pattern, such as once a year. Common fixed expenses include mortgages, vehicle payments and internet service. Some fixed expenses occur quarterly, biannually or annually, such as real estate taxes and insurance premiums. Divide these periodic expenses by the number of months between payments to create a monthly total, as when you divide your estimated real estate taxes by 12. If you set aside a specific amount for discretionary expenses, list that amount as a fixed expense. After you compile a list of fixed monthly expenses, add them up.
Average Variable Expenses
Variable expenses change from billing period to billing period and typically are based on how much you use some service or commodity. Utility bills, for example, change based on how much you need to heat or cool your home. Common variable expenses include groceries, gas and pocket money. Include discretionary expenses in this category if you don’t set a fixed amount in your budget. Add up six months' to a year’s worth of variable expenses. Divide that by the number of months to create a monthly average. To calculate your net financial expenses, add your average monthly variable expenses to your monthly fixed expenses.