Fixed expenses are costs that remain constant within a budget, regardless of the level of goods or services produced by a business. They tend to be recurring, such as rent or mortgage payments, insurance premiums, and property taxes. Fixed expenses are paid at regular intervals and may vary slightly, change significantly, or stay the same, depending on the type of expense. Monthly expenses are common, but fixed expenses may also occur weekly, quarterly, twice a year, or yearly. Examples of fixed expenses include rent or mortgage payments, car payments, other loan payments, insurance premiums, phone and utility bills, child care costs, tuition fees, and gym memberships.

In contrast, variable expenses are costs that vary or are unpredictable, such as dining out or car repairs. They are more difficult to plan for, as they can vary depending on several factors, such as unforeseen events and discretionary spending. Some common variable expenses include groceries, entertainment, travel, and clothing.

Understanding the difference between fixed and variable expenses is key to planning a budget and spending money more wisely. Fixed expenses tend to be easier to plan for, since they are typically due at set times, while variable expenses are less consistent, making them harder to plan for in advance. By dividing expenses into fixed and variable categories, it is possible to prioritize and budget for fixed costs first, and then assess typical spending in variable categories for a few months before making a budget.