Module 1 · Lesson 3

Fixed Expenses

7 min read

Fixed Expenses

Fixed expenses are the predictable, recurring bills that stay the same (or nearly the same) each month. These are the foundation of your budget because you can count on them being there every month.

What Counts as a Fixed Expense?

Fixed expenses typically include:

  • Housing: Rent or mortgage payment
  • Insurance: Health, auto, renters/homeowners, life insurance premiums
  • Subscriptions: Streaming services, software subscriptions, gym memberships
  • Loan Payments: Car loans, student loans, personal loans (minimum payments)
  • Utilities (Fixed Portion): Internet, phone plans, some utility base charges
  • Savings Goals: Regular transfers to savings accounts (if automated)
  • Childcare: Daycare, after-school programs (if consistent)
  • Memberships: Professional associations, clubs, organizations

Why Fixed Expenses Matter

Fixed expenses are critical because:

  1. They're non-negotiable - You can't skip rent or insurance
  2. They're predictable - You know exactly how much you'll pay
  3. They're the foundation - Everything else in your budget is built around these

If your fixed expenses exceed your take-home pay, you have a fundamental problem that needs addressing (either increase income or reduce fixed expenses).

How to Identify Your Fixed Expenses

Step 1: Review Your Bank Statements

Go through your last 2-3 months of bank statements and credit card statements. Look for:

  • Recurring charges that appear every month
  • Automatic payments or subscriptions
  • Bills that arrive on a regular schedule

Step 2: List Each Expense

For each fixed expense, note:

  • Name: What is it? (e.g., "Rent", "Netflix", "Car Insurance")
  • Amount: How much do you pay? (Use the exact amount from your statements)
  • Due Date: When is it due? (This helps with cash-flow planning)
  • Payment Method: How do you pay? (Auto-pay, check, online)

Step 3: Don't Forget Annual Expenses

Some expenses are fixed but only occur once or twice a year:

  • Annual subscriptions (Amazon Prime, software licenses)
  • Insurance premiums (if paid annually)
  • Property taxes (if not escrowed)
  • Annual fees (credit card annual fees, membership renewals)

Pro Tip: Divide annual expenses by 12 and set aside that amount monthly. This prevents budget surprises.

Common Fixed Expenses Checklist

Use this checklist to make sure you haven't missed anything:

  • Rent or mortgage payment
  • Homeowners/renters insurance
  • Auto insurance
  • Health insurance premiums
  • Life insurance premiums
  • Car loan payment
  • Student loan payment
  • Other loan payments
  • Internet service
  • Phone plan (cell phone)
  • Streaming services (Netflix, Hulu, etc.)
  • Software subscriptions (Adobe, Microsoft 365, etc.)
  • Gym membership
  • Professional memberships
  • Childcare (if fixed monthly amount)
  • Savings transfers (if automated)
  • Any other recurring monthly bills

Practical Exercise

Before moving on, take a moment to:

  1. Pull up your last 2-3 months of bank and credit card statements
  2. List every fixed expense you can find
  3. Note the exact amount for each
  4. Calculate your total monthly fixed expenses

Write this number down - we'll use it when building your budget!

Red Flags to Watch For

  • Fixed expenses > 50% of take-home pay: This leaves little room for variable expenses and savings
  • Too many subscriptions: Small monthly fees add up quickly
  • Annual expenses not budgeted: These can cause cash-flow problems

Key Takeaway: Fixed expenses are your budget's foundation. List every single one, including annual expenses divided by 12. This gives you a clear picture of your financial commitments.