What are "fixed expenses"?

Fixed expenses refer to regular financial obligations that remain consistent in amount over a specified period, typically on a monthly basis. Examples include rent or mortgage payments, as these costs do not change from month to month and are predictable in nature. This characteristic of fixed expenses makes them essential for budgeting because individuals can plan their finances more easily, knowing that these costs will not vary significantly over time.

The distinction between fixed and variable expenses is important in personal finance management. Fixed expenses provide stability in financial planning, allowing individuals to allocate their resources effectively without the uncertainty that comes with fluctuating costs associated with variable expenses, which can change based on factors like usage or consumption.

Understanding fixed expenses is crucial for anyone looking to create a comprehensive budget, manage debt, or plan for future expenses, as it helps ensure that essential costs are accounted for in financial calculations and decision-making.