![]() If you’re consistently finding yourself in the hole despite having a budget to follow, consider reevaluating your plan to make sure you are managing (and minimizing) your flexible expenses. It’s fairly simple to get a handle on fixed expenses, but without careful planning, flexible expenses can easily wreck a budget and jeopardize your financial goals. Flexible expenses (often called variable expenses in accounting) are those that fluctuate month over month, like groceries, dining out, or entertainment.īoth types of expenses need to be accounted for. What Are Flexible Expenses?Įxpenses fall into two buckets, fixed and flexible.įixed expenses are those that typically stay the same month over month – your rent or mortgage, car payments, streaming services, and so on. It can be an easy trap to fall into, especially if you’re budgeting incorrectly for your flexible expenses. ![]() There’s a greater risk of overspending when people fail to budget, but even if you have one there’s no guarantee that you won’t spend too much. Ten years ago, only about 40% of Americans had a monthly budget, but according to a recent survey by, that number has increased to almost 86%. Most seem to be listening to that advice. Next: How To Build Your Savings From Scratch Related: 9 Bills You Should Never Put on Autopay However, if the company hires freelance developers based on the number of projects it has, the cost of those developers would be a variable expense, because it changes based on the level of output.Just about every financial expert agrees that it’s important to have a budget and spending plan to track your monthly expenses and help you keep your financial goals within reach. These costs will need to be paid regardless of how many software projects the company undertakes or completes during the month. This results in a monthly depreciation expense of $500 ($24,000 / (4*12 months)).Īdding these costs together, the company has fixed expenses of $15,300 each month. Depreciation: The company has invested $24,000 in computer equipment which is expected to have a lifespan of 4 years.Other utilities like electricity and water average around $300 per month. Internet and Utilities: As a software company, they have a hefty internet bill that comes up to $500 per month.Insurance: The company pays $1,000 per month for various types of insurance, such as property, liability, and workers’ compensation insurance.Each earns a salary of $4,000 per month, so the total monthly cost is $8,000. Salaries: The company has two administrative employees who are not directly involved in the software development process.Rent: The company rents office space for its employees.Let’s consider a small software development company to illustrate some fixed expenses: Understanding both fixed and variable expenses is crucial for effective budgeting, forecasting, and business decision-making. Interest Expense: If a business has debt, it often incurs a regular, fixed interest expense.įixed expenses contrast with variable expenses, which fluctuate based on the level of output or sales, such as the cost of raw materials or commission-based pay.Property Taxes: If a business owns property, it generally pays property taxes, which are typically a fixed expense and paid annually. ![]() While these costs don’t represent a cash outflow, they are still considered fixed expenses.
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