Ah, fixed expenses. They’re like old friends. They’re reliable, predictable—you can always count on them to be there. Expensive friends, a lot of the time. Friends you’re not necessarily happy to see. Friends you wouldn’t miss if they suddenly disappeared.
Friends that you don’t even really like, if we’re being honest, so maybe friends is the wrong word here? Regardless, fixed expenses are one of the easiest aspects of managing a budget. Sometimes just knowing what to expect is a big win.
Eliminate some of the uncertainty that comes with living a busy life by creating a monthly budget that includes fixed expenses so that you can get an honest, big-picture perspective of your finances.
What is a Fixed Expense?
A fixed expense stays the same from month to month—the amount due and the frequency of your payment don’t typically change. Examples of fixed costs include your rent or mortgage payments, car payment, loan payments, subscriptions, cell phone bill, gym membership, regular childcare expenses, and some utility bills like a landline phone, cable, or internet.
When most people start budgeting, they sit down and make a list of their fixed expenses, add all of that up, subtract that number from their monthly income, and assume that’s the amount they have left over.
And then the villains of every budget—variable and non-monthly expenses—insist on reminding you of their existence. That surprise car repair bill, insurance premiums, property taxes, an emergency vet appointment, the water bill, personal care like hair appointments—these are all examples of variable expenses and they add up in a way that’s often hard to estimate.
All of those variable costs really make you appreciate the reliability of fixed expenses. Kind of.
How to Budget for Fixed Expenses
At YNAB, we have an easy-to-follow four-rule method for budgeting that simplifies spending decisions and makes it easier to save money to meet your financial goals while covering your fixed expenses and variable costs.
Rule One: Give Every Dollar a Job
The first step is to figure out how much money you have right now and assign every single dollar a job to do. Money that’s not attached to an outcome is too easy to fritter away—it’s a lot harder to justify yet another night of takeout if you’re forced to accept that the money is really coming out of your “Visit the Galapagos” category.
Create a list of fixed costs, variable expenses, upcoming needs, and specific savings goals and start allocating the money you have on hand to each category according to due date or priority. Stop once you’re out of dollars. (Don’t worry, you can do more once more money comes in).
This is called zero-sum budgeting and it will help you align your spending with what actually matters to you in life.
Rule Two: Embrace Your True Expenses
Whether you like them or not, those variable and non-monthly expenses are here to stay. The holidays? They happen every year. Your water heater? It’s going to break some day. Stop letting this tsunami of predictable-yet-somehow-unexpected expenses sink you. Instead, plan ahead for a lazy river financial life by estimating the potential cost and starting to set aside small, manageable sums on a regular basis so that you can pay in full (without panicking) when the time comes.
Setting up your finances to predict upcoming expenses can keep you out of credit card debt and help protect your growing emergency fund.
Future You is going to love you for this some day.
Rule Three: Roll with the Punches
Repeat after me: there’s no such thing as a normal month. Sure, some are more normal than others but if you wait for a “normal” month to get a handle on budgeting, you’ll be waiting for a long time.
Your budget should be made out of Play-Doh, not chiseled in marble—if something in your life changes, just reshape it a little. Move money from one category to another without guilt or shame. The bottom line is that it’s your money and you can spend it however you want.
Rule Four: Age Your Money
Once you start making more intentional spending decisions, saving will start to happen automatically—soon you’ll be paying next month’s bills with the money you made last month (instead of last week.) This creates a built-in buffer that adds some breathing room in the earn-spend cycle and allows your money to hang out in your savings account with a cool job-to-be-done like “Build an in-ground pool” or “Buy one of those nugget ice machines.”
Most budgeting apps make it easier to manage your finances, but the four rules that YNAB is built around change the way you think about spending and saving in a way that changes lives.
If you want to get organized about the different types of expenses you should include in your budget, our free printable Change Your Money Mindset workbook is a great place to get started. The downloadable budget planner and a short email series will help you explore your history with personal finance while encouraging you to set some attainable life goals that will keep you motivated as you go.
Once you get a realistic picture of your fixed expenses and the other costs associated with being you, it’s easier to take a hard look at where your money goes to make sure it lines up with what you really want.
Maybe you’ll even cancel that streaming service you never watch or finally shop around for cheaper car insurance—who knows what the future holds? But budgeting can help you plan a life you’ll love to live.
Ready to experience less money stress? Sign up for a month of free YNAB—no credit card or commitment required!