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Fixed Expenses

Fixed expenses are those costs in your life that are occurring today and are designed to pay for something that is needed today, but will be fixed over a longer time period and can be hard or impossible to cancel in the event of a financial shock. The amount of the payment tends not to be affected by seasonality or the time of the year. These expenses tend to persist in their current form for at least several years, and even though everything can be changed eventually, these expenses tend to take longer to modify due to commitments being made to them. A mortgage is a good example of this: The terms will be renewed every few years and payments may change slightly, but it will be done over time. It is difficult to make radical changes to your mortgage within hours. Other examples are car leases, utility contracts like Bell or Rogers, or payment plans for renovations.

When you zoom in on the details of the budget or zoom out to make decisions on the big picture cash flow, what you have control over and what decisions you have made will allow you to ask different questions about what can be changed in your budget. Fixed expenses get the most attention because of the lack of control over short time periods. So carefully consider your mortgage, rent, lease payments for your car, utilities, property taxes, voluntary insurance payments for a house or car, interest payments on other forms of debt that are long term like lines of credit or student loans, instalment payments for big ticket items and sometimes daycare if it is relatively fixed in cost.

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