Here are some of the ways you can manage your expenses and improve your financial health. When you reduce your periodic fixed expenses, you end up reducing your overall cost of living. Establishing financial habits that constantly look to reduce overall expenses can create long-term wealth due to sound spending discipline principles. One of the tips savvy financial experts use is to shop around for vehicle insurance every couple of years to ensure you are still getting the best rate. Unlike eliminating and reducing variable costs, which have a minimal effect on your monthly budget, if you can find a way to reduce your periodic fixed expenses, you can make significant long-term changes to your financial future. If you are trying to reduce your periodic financial outflow, you need to evaluate your recurring expenses and how necessary they are in your life. Reducing Your Periodic And Fixed Expenses This will help you save up each month, so when the time comes to pay the periodic bill, you will have the money set aside to pay it in full. Separate Your Periodic Expensesįrom your total monthly income, set money aside each month for each periodic fixed expense in a separate account or cash envelope. Doing this will identify how much you should budget each month for that particular periodic fixed expense. To prepare for these periodic expenses, take each expense total and divide it by 12 (for each month of the year). However, if you pay your vehicle insurance every six months, add up the total you spent on vehicle insurance over the past year.Įach expense should have a separate yearly total assigned to it. For instance, if you pay for life insurance once a year, no calculation is needed.

Add Your Periodic Fixed Expensesįor the previous year, add up how much you spent on each periodic expense. This may be a great time to identify bad spending habits. Identify which expenses you would categorize as periodic fixed expenses from the examples above. The easiest way to identify the best way to budget your period expenses is to look over your expenses from the previous year. If you have to pay $100 every three months for your car service, then you need to save $34 every month, so you have enough money available when the periodic fixed expense arrives. Managing your recurring costs involves treating them like the fixed expenses. Instead, you need to be very diligent while budgeting and preparing for your periodic expenses so they don’t sneak up on you when you’re not financially ready to pay for them. Similarly, you cannot avoid financial obligations like paying your taxes if you own a business. It would not make sense to cut your car service or oil change. Periodic fixed expenses are easy to prepare for because they arrive in predictable intervals and consistent amounts.ĭue to the nature of periodic fixed expenses, most of them are essential, making it difficult to cut them from your budget.

Travel expenses like work trips and visiting relativesįour Ways To Prepare For Periodic Fixed Expenses.

Entertainment expenses (if not a fixed monthly item).

Utility bills that are not fixed each month.

Variable expenses may include groceries or your occasional party attendance. They largely coincide with your monthly spending patterns. Variable expenses, also known as flexible expenses or variable costs, are different amounts each month or every couple of months.

Car insurance if you pay for it annually or semi-annually.

Planned vehicle maintenance and service.

They include auto insurance, life insurance, and other fixed expense you pay for in regular intervals other than monthly. They are required to be paid every three months or even every six months. Periodic fixed expenses are like regular fixed expenses (think mortgage, electricity, etc.), only they do not come every month. These expenses are generally the same each month and are reliably static.

Fixed Expensesįixed expenses are recurring expenses that come in monthly intervals. While each family unit has unique wants and needs, their expenses will still fall into periodic, variable, and monthly fixed categories. A single mother raising three children is going to have different costs than a married couple without children. As you can imagine, no two people have the same expenses.

Fixed expenses definition