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What Are Fixed Expenses?

What Are Fixed Expenses?

Jenius Bank Team
6/23/2025
Financial WellnessMoney Management
Woman holding a mobile phone and looking thoughtful.
When creating a budget, it’s important to understand your fixed and variable expenses. Most people have two types of expenses each month: variable expenses (ones that change) and fixed expenses (ones that stay the same). Identifying your fixed expenses is important because it may allow you to build a budget for better money management. Through the process of evaluating those monthly budget items, you may also identify opportunities to cut back on spending.Let’s take a closer look at the definition of fixed expenses, how they fit in with your budget, and how you may be able to optimize them.

Key Takeaways

  • Fixed expenses are costs that don’t change from month to month.
  • Though many fixed expenses are necessities, some variable costs like utilities and food are essential.
  • It’s possible to save on your fixed expenses which could help you increase your savings each month.

Fixed Expenses Defined

As we just mentioned, fixed expenses are those that don’t change from month to month or change negligibly, like only by a few dollars each month. Some common fixed expenses are rent or mortgage payments, car payments, insurance premiums, property taxes, and even streaming service subscriptions.Does that mean all fixed expenses are essential? Not necessarily. Though many of your fixed costs are necessary to maintain your quality of life, some could be cut out entirely if necessary. If you’re struggling to make ends meet, cutting your streaming subscriptions, enrolling in a lower-tier cell phone plan, and other similar efforts could help you save.

Fixed vs Variable Expenses

While fixed expenses shouldn’t change a lot from month to month, variable expenses are another story. Some variable expenses do fluctuate in a more narrow range, but others can vary widely. Common variable expenses include the following:
  • Utilities
  • Food
  • Gas for your car
  • Personal care
  • Clothing
  • Eating out
  • Entertainment costs
Some costs, like utilities and food, are essential to your survival and comfort. Others, like eating out and entertainment, could likely be reduced if needed. Overall, since these expenses often change from month to month, they are sometimes more difficult to budget.

Budgeting for Your Fixed and Variable Costs

To help create a functional budget, it’s important to start by looking at both fixed and variable costs to create a complete picture of your full financial situation and potentially even build savings into your routine in a way that helps you hit your financial goal faster.Not sure where to begin? Here are a few easy tips to help you build a budget while keeping both types of costs in mind.
  • Track your current expenses: Tracking your expenses gives you a clear understanding of where your money is going and if any of your expenses, fixed or variable, could be eliminated or reduced. When you see exactly where your money is going and what you’re spending it on, you’re better equipped to make informed financial decisions and create and achieve savings goals.
  • Use statements from previous months or years: To better budget for variable costs, you may want to look at how much you spent on them in the previous year. Pull up bank or credit card statements to see how much you spent on average and use this information when creating your estimates of future costs.
  • Consider setting up a splurge fund: You may be able to manage the financial impact of splurges and other spontaneous costs by building a dedicated savings account for those expenses. Add to it each month and use the funds in the account to cover things like entertainment, new clothes, and other fun purchases. This could keep you from dipping into your other savings or going into debt to cover those variable costs.

How to Save Money on Your Fixed Expenses

Your fixed expenses are likely the bulk of your budget. Here are a few tips to help you reduce them.

Shop Around for Insurance

Insurance is a competitive business, and providers set their own prices and requirements, and each have their own criteria for evaluating how risky you may be. Get quotes from several insurance companies and compare them. Be sure to shop around and ask about any discounts that could help you save you money, such as packaging home, auto, and your business together.

Pay Down Your Debt

Your debt payments may be fixed or variable depending on the type of debt you have. Payments on variable-rate loans and credit cards change with the market and balance fluctuations, while many student loans, mortgages, personal loans, and car loans have rates and payments that stay fixed. For some of your balances, you may be able to refinance or consolidate the debt owed at a lower rate or a lower payment, helping to reduce the amount you’re required to pay monthly (and potentially overall). Remember, as you compare rates in a refinancing or consolidation scenario, be sure to consider any fees that may included.

Consider Annual Payments

Can you save money by making an annual payment instead of a monthly payment on a service? Many insurance companies and even streaming subscriptions offer discounts if you pay for the full year upfront. The downside is that you have a larger lump sum due at once, and that may be a little painful. Consider opening a savings account to create a sinking fund where you contribute each month toward that lump sum payment. If you choose a high-yield savings account (HYSA) like Jenius Savings, you could also grow that fund a little bit faster.

Research Service Providers

Some service providers may offer you discounts or promotions for switching your plans. It’s always important to read the fine print, but there’s potential that you could save money by shopping around. For example, cell phone providers routinely offer lower-priced plans and offers on phones to customers who agree to switch from their old provider. And, depending on where you live, you may be able to lock in a lower rate on services like cable TV or internet by moving to a different provider. A little research could pay off!

Final Thoughts

Gaining an understanding of your fixed and variable expenses is key when creating a budget that works for your goals. While budgeting for both types is always a good idea, you may be able to save on your fixed expenses to further free up cash each month. Trying to cut your costs takes effort, but once you do, you may have more funds on hand to build your savings or pay down debt. Not sure how to implement a savings strategy? Check out our guide to help you start setting money aside.