Fixed vs Variable Expenses
While you could just lump all expenses into one category, I think it is crucial to separate them. The reason for this separation has to do with how you spend money, and more specifically, how you chip away at your discretionary income.
Fixed expenses are not just those expenses that are the exact same amount every month, but they are the ones that don’t change if you are reckless, lose control, or rationalize. Essentially, you pay them every month and the amount due isn’t determined by your emotions or psychology. Some examples of fixed expenses are rent or mortgage, car payments, utility bills, and tuition.
Variable expenses, on the other hand, are expenses that can vary widely from month to month, depending on your money attitudes and willpower. When you’re having a hard time breaking even each month, much less creating discretionary income to pay off debt, variable expenses are usually the culprit. Variable expenses can include things like clothes, dining out, groceries, gifts, and leisure activities.