#Examples of fixed monthly expenses how to#

If you’re consistently finding yourself in the hole despite having a budget to follow, consider reevaluating your plan to make sure you are managing (and minimizing) your flexible expenses. It’s fairly simple to get a handle on fixed expenses, but without careful planning, flexible expenses can easily wreck a budget and jeopardize your financial goals. Flexible expenses (often called variable expenses in accounting) are those that fluctuate month over month, like groceries, dining out, or entertainment.īoth types of expenses need to be accounted for. What Are Flexible Expenses?Įxpenses fall into two buckets, fixed and flexible.įixed expenses are those that typically stay the same month over month – your rent or mortgage, car payments, streaming services, and so on. It can be an easy trap to fall into, especially if you’re budgeting incorrectly for your flexible expenses. There’s a greater risk of overspending when people fail to budget, but even if you have one there’s no guarantee that you won’t spend too much. Ten years ago, only about 40% of Americans had a monthly budget, but according to a recent survey by, that number has increased to almost 86%. Most seem to be listening to that advice.

#Examples of fixed monthly expenses how to#

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The following table shows how fixed costs are fixed, regardless of levels of production, over a relevant range.Just about every financial expert agrees that it’s important to have a budget and spending plan to track your monthly expenses and help you keep your financial goals within reach. However, at some point (the 1,001st table, in our example) fixed costs increase to accommodate the need for more capacity. At 999 tables, the fixed costs are $20,000. At ten tables, the fixed costs are $20,000. If the company produces 0 tables, it still pays the fixed costs of $20,000. Assume our table company pays monthly rent, insurance, full-time staff, and utilities in the amount of $20,000, and that the company pays assembly workers by the piece, so that if a worker is not needed during the month, he or she does not earn a base salary (just to simplify the example). However, within a relevant range, say between 0 and 1,000 tables produced, fixed costs do not change. Sometimes these costs are referred to as “step” costs because they jump up incrementally as production increases.

However, doubling production would mean renting another assembly facility and hiring another supervisor, doubling fixed costs. The costs remain the same regardless of the number of units sold until capacity has been reached, at which time the company cannot produce or sell any more without spending money for expansion.įor our table manufacturer, assume producing 1,000 tables per month could be done in one facility with one supervisor. These are general expenditures that cannot be traced to any one item sold and may include electricity, insurance, depreciation, salary, and rent expenses.įixed costs are considered within a relevant range. Fixed Costsįixed costs remain the same in terms of their total dollar amount, regardless of the number of units sold. You can view the transcript for “Variable Costs” here (opens in new window). Here is a short video recap of variable costs: Using our example of $780 per unit in material and labor costs, this chart shows how variable costs increase in direct relation to the number of units manufactured. Paint and shipping materials might also be considered variable costs, but since they are very hard to allocate to each table, they will more likely be lumped in with manufacturing overhead and treated as a fixed cost. In addition, it takes two hours for a worker to put the table together, paint it, and wrap it for shipping, and the worker makes $40 per hour including benefits. The top costs $500 and each leg costs $50. Each table consists of a top and four legs. For example, a furniture manufacturer buys parts with which to build tables. The most common variable cost would be raw materials. Variable cost examples include sales commissions, hourly workers, and units-of-production method depreciation, as these amounts will change based on total volume, but the amount charged per unit does not change. Variable CostsĪ variable cost remains the same per unit but changes in total. Differentiate between fixed and variable costsĬosts can also be classified as variable, fixed, or mixed.