What is a fixed expense?

A fixed expense is defined as an expense that does not change from month to month. This includes items such as rent or mortgage payments, where the amount due remains consistent over time regardless of other variables, such as purchasing habits or unexpected financial issues. Fixed expenses are crucial for budgeting because they provide a foundation for a person's or business's monthly financial obligations.

Understanding fixed expenses helps individuals plan their finances more effectively, as they can reliably predict how much will be owed each month, allowing them to allocate funds for variable expenses and savings. Other expenses, such as those that vary based on spending habits, unexpected costs that arise suddenly, or commission-based calculations, do not fit this definition, as they fluctuate or occur unpredictably.