519-646-2222Budget Cutting – Expense Categories
When there isn’t enough money to go around – budget cutting will help immensely. Expenses generally come in three categories: 1. Fixed expenses. 2. Semi-fixed expenses, and 3. Discretionary expenses. Let’s look at what they are and why they fall into those categories.
Fixed Expenses:
Fixed expenses are expenses that you really have no control over, there may be ways, through the courts or through government incentives to reduce or eliminate some of this category but these are the most pressing expenses, that have consequences if they remain unpaid.
Examples include fines from a court, child, or spousal support, required medical expenses, and employment related expenses. If you don’t pay these expenses, you could be jailed, garnisheed, or have serious health complications or be unable to work.
Semi-Fixed Expenses:
Semi-fixed expenses may be similar in some ways to fixed expenses but there are less consequences if they remain unpaid. Interestingly rent or mortgage payments fall into this category – you don’t need to live in a big fancy house, you could move down to more affordable accommodation. This is still the most challenging expense in this category because it means “leaving home”.
Other semi fixed expenses include dietary supplements, and medications that are optional – they make you feel better but are not necessary to survival (that may be an over-simplification). Food is a semi-fixed expense, you must eat, but it doesn’t need to be top of the line choices every day. Semi-fixed are regular expenses that are important, but they have some flexibility, some degree of personal choice and control.
Discretionary Expenses:
The discretionary expense category is all about you and they can be controlled or eliminated altogether as a matter of personal choice or preference. Let’s think about items such as entertainment, recreational drugs, alcohol, cigarettes, eating out, lottery tickets, gym memberships and so forth.
Where to Start:
When you need to start cutting back on your budget – which is a reality for most of us these days with runaway inflation – start with discretionary expenses. Then work your way up through the list. There is no magic bullet for insufficient income or for the impact of inflation – but if we can minimize our lifestyles, we can save some money.
Still need help – call 519-646-2222 one of the services we provide is budget management, call us to learn more.