Fixed necessary expenses are generally the largest expenses you will experience. They make up the biggest of the four squares in your grid because this category includes what are the principal expenses for most people: mortgage or rent, fixed loan payments for cars or tuition, some utilities, and similar costs.
Ideal Distribution
As with all of my advice and tips, remember that individual circumstances will determine the correct levels for you; I cannot give perfect advice for every situation, but try to give good general estimates. The value of your total expenses that fit into this category will obviously vary, but it is a good rule of thumb to try to keep this between 35% and 45% of your monthly expenses. My personal amount usually varies from 38-42% of my monthly output depending on my variable expenses. One oddity you may find in the short run is that if you start taking some of the tips and tricks found throughout this blog, this percentage may increase! Don’t worry – this is perfectly normal. A reduction in percentage spent on your V/N or V/D expenses will cause this.
Use of the Category Information
The F/N category is the most difficult to improve. Most of the items which fit into this category are long-term costs which are not easily shed – how easily can you change your monthly mortgage payment? Please note! This is not to say that it can’t be done, merely that it is the most difficult to do.
Take a look at your fixed necessary costs. Just how fixed are they? Read the following options, and consider everything you have placed into this primary category. You will see why this category is the least flexible – it takes time, thought, and effort to change any of these, and some of the decisions can be agonizing.
Mortgage: Can you refinance your home? There are several companies that offer no- or low-cost refinancing of mortgages. Right now long-term fixed rate mortgages are at a historical low, so the sooner the better! What about selling your current place and buying a less expensive property, or changing to renting?
Rent: Can you negotiate your rent based on duration of lease, or on some other terms? Are there less expensive locations that still have what you need and are nearby? Look into moving into a new complex when your lease is up, or research local rates and use these to renegotiate your monthly amount.
Fixed Utilities: Generally items such as internet, television, and telephone services fall into this category. Though it could be argued that these are not truly ‘necessary,’ for practical intents and purposes they are in today’s society. Are there lower-cost providers for these services available to you? Many places offer discounts if you ‘bundle’ them all together. Consider investigating all of the options available to you!
While there are other possible tertiary categories that fit into this block, these are the most common. If you think of others, please don’t hesitate to let me know! Next up, have a look at Fixed Discretionary (F/D) expenses.
Fixed Necessary, Fixed Discretionary, Variable Necessary, Variable Discretionary
Tags: Budgeting, expense log, finances, necessary, The Expense Grid, tools, tracking
