Most household expenses fall into one of four categories: fixed expenses, periodic fixed expenses, flexible expenses or debts. Although some items within these categories vary between people and households, many are common to most every budget. A first step to creating a realistic workable spending plan is to list common daily, monthly and annual expenditures that apply to your situation.
Fixed expenses are regular monthly bills for which you pay about the same amount each month. Housing, utilities and telephone, transportation, life and disability insurance and childcare are common fixed expenses. Some people also include payroll deductions such as group health insurance and court-ordered payments like child support or alimony in a fixed expense list. Others do not include these because they are already paid and therefore aren't part of a monthly spending plan.
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Fixed Flexible Expenses
This category consists of housing and transportation expenses for which you usually pay or budget for the same amount either quarterly, bi-annually or annually. The housing sub-category includes property taxes, homeowner or renters insurance and homeowner association dues. Common fixed flexible vehicle expenses include repairs and maintenance, license and registration fees, and insurance if you pay a lump sum every six months rather than make monthly payments. The easiest way to fit these expenses into a monthly budget is to divide the total by how often the bill comes due.
Flexible expenses make up the largest portion of a household expense list. These include daily, weekly, monthly and annual expenditures that are necessary but can be adjusted to make your budget work. Categories include food and groceries, out-of-pocket medical expenses, clothing and personal expenses such as hair care, personal hygiene products, allowances and alcohol. This category also includes entertainment expenses, gifts, donations and education expenses such as dance lessons, magazines and tuition. Most people also include a miscellaneous, catchall category for expenses that don't fit in anywhere else.
The debt category includes both fixed and fixed flexible consumer debt. Debt that has a set monthly payment, such as a mortgage or student loan, is a fixed debt. Debt for which you are likely to vary the monthly payment, such as credit card payments and outstanding medical bills, are examples of fixed flexible consumer debt.