Definition
Fixed expenses are recurring costs that remain the same amount every month, regardless of how much you use a service or product. Because they don't change, they are the easiest expenses to plan for in a budget. Mortgage or rent, car payment, insurance premiums, and loan payments are common examples.
Example
Your fixed expenses might include: rent $1,400, car payment $350, auto insurance $120, renter's insurance $20, gym membership $45, and streaming services $35. Total fixed: $1,970/month. On a $3,700 net income, your fixed expenses consume 53% of your budget before you spend a dollar on food, utilities, or anything else.
How It's Calculated
List every recurring bill with a fixed monthly amount. Sum them to get your total fixed expenses. Fixed Expense Ratio = Total Fixed Expenses ÷ Net Income × 100. Financial planners generally recommend keeping fixed expenses below 50% of net income.
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