Preparing for Bills: Income and One Time Purchases

September 15, 2019

Money
management lies in understanding the different types of payments you’ll make:
fixed and variable expenses. There’s the misconception that if you spend less
on your variable expenses, you’ll have more money to afford higher fixed
expenses. This isn’t always the case.

Expenses

Fixed Expenses

A
fixed expense is going to entail things like your rent or mortgage payments,
car and health insurance premiums, etc. These are more often than not
non-negotiable – with few and infrequent caveats to the types of fixed
payments, like refinancing your mortgage or making a deal with your
landlord. 

Variable Expenses

The
opposite of a consistent and stable expense is the one that fluctuates, though
more specifically that it fluctuates based on spending habits. These expenses
encompass groceries, entertainment, and gas for your car. They change based on
need or necessity. These are the items that most backseat budgeters will tell
you to cut back on, but not everyone has fat to trim from these items. If so,
it will only range a couple dollars each paycheck.

Income and Budget

When
it comes to managing your own budget, the fixed expenses come first, then
general estimates for your variable expenses. The remaining excess of your paycheck
goes into savings or your variable expenses.

Depending
on your expenses and income, you’ll vary in the amount you’ll be able to save
from every paycheck. For those unable to make significant deposits to their
savings because of this trouble, it’s unlikely that saving an extra three
dollars will actually benefit you that drastically in the long-run. As such, enjoy
that coffee or pastry you got when you ran late to work.

Fat You Leave On

Not
everyone has fat to trim. In trying
to cut off those delicate slices of fat, you may risk hurting yourself in the
process. Either by downsizing your groceries or trying to ration your gas, you
can end up doing some damage that will require a bigger fix later on.

For
example, if you’re not getting enough food on a daily basis because you cut
back to only eating rice and beans, you may not have the energy to work or put
in the time after work to job hunt. Taking care of yourself is more efficient
in the long-run.

Trim the Fat

For
everyone else that can trim a few things from their budget, you likely should.
For the mysterious millennial that is buying a six-dollar coffee every day, try
cutting it in half by making your own coffee at home every other day. Other
areas you can excess is in entertainment expenses, like going to the movies or
buying video games.

But Don’t Over
Promise Fixed Expenses

All of that being said, finding and excising the excess from your variable expenses doesn’t fix your budget if it’s an issue of fixed expenses. This is why abstaining from buying fancy coffee isn’t a fix for people that can’t find the last $100 in their budget to pay their rent.