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Flexible expenses can be adjusted as needed, unlike fixed expenses. They can be managed through careful planning, such as grocery shopping, and include items like clothing, home appliances, and furniture. Fixed expenses, like rent or mortgage payments, cannot be changed. Some debts, like credit card payments, involve both fixed and flexible expenses.
Flexible expenses are costs that are not considered fixed or set, but can be reduced or increased as needed. Many corporate expenses, as well as individual expenses, are actually flexible in nature, as there are ways to manipulate the amount of spending and still stay within a balanced budget. Understanding what does and does not constitute a fixed cost or expense can have a significant impact on how well an individual or business manages income and stays within the monthly budget.
It is important to note that flexible spending may or may not be related to need. For example, food is considered an essential expense in the household budget. However, it is possible to adjust the amount of resources dedicated to food consumption for the weekly or monthly budget. Careful planning when it comes to grocery shopping, along with eliminating the number of times during the period that meals are eaten at a restaurant or ordered as items are all that is required to manage or control food cost. to go. This same approach can be applied to flexible spending of any kind, including home appliance selection, car selection, or furniture selection.
Several items of clothing are examples of flexible spending. The consumer has the option of purchasing garments that are available at a discount, or purchasing similar items that are sold at full price. Assuming that both garments are of similar quality, the consumer must make a decision regarding the purchase of one garment or the other, or even forego the purchase altogether. At each point in the process, control is in the hands of the consumer, who can decide how and when to proceed with the transaction, controlling the amount of money spent to purchase a desirable or necessary item.
This is in contrast to fixed expenses, where there is no control over the amount of the expense. An example of a fixed household expense is a monthly mortgage or rent payment. It is important to pay the same amount each month to be considered current on the debt. There is no option to reduce or change the amount for that month as and when desired, as the terms of the agreement governing the transaction do not allow for that type of activity.
Some debts involve a combination of fixed and flexible expenses. This is true with many credit card accounts. The debtor is expected to pay a minimum amount each month, with that amount determined by the lender, not the debtor. The debtor may choose to reserve funds to pay more than the required minimum payment. Should some unforeseen circumstance occur, the debtor can still keep the credit card account current by making the minimum payment due, while diverting the additional amount set aside to help manage the emergency.
Smart Asset.
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