Fixed Expenses

By | January 25, 2018

There are a few key ingredients to building wealth.  These include your income, expenses, savings rate, rate of return and time.  I will go into several of these topics in later posts. But for today, I wanted to focus on expenses.  And, specifically, fixed expenses.


Generally, to build wealth, you can either increase your income or lower your expenses or both.  It’s important to keep your expenses low.  Expenses come in two flavors:  fixed expenses and variable expenses.  Fixed expenses are those that recur every single month at a fixed payment.  Bought a new car?  That’s an example of a fixed expense.  Every month, you have to make your monthly car payment.  Student loans, mortgages, are all examples of fixed expenses.

Sometimes you can negotiate to lower your fixed payments.  Perhaps you don’t need all those amenities on your cell or cable bill.  Try to negotiate to lower your fixed expenses where you can or shop around for better alternatives.

Variable expenses are those which vary in payments every month.  Depending on your budget, these may include food, gas, entertainment and one-time costs such as those for a vehicle repair, or purchasing a gift.  Even though these costs vary, you can sometimes have a general idea of how much money you spend per month on variable costs.  However, regardless of whether the expense is fixed or variable, it’s important to keep those costs low.

My Fixed Expenses

I’ve been trying to figure out my savings rate, which has proved a little more difficult than I expected.  So, I’m still working on it.  The issue has to do with determining what my income is.  But, I was able to determine what my fixed costs are.  Part of my problem was that on my spreadsheet, I would list my monthly contributions to my dividend portfolio, and my Roth IRA as a monthly expense.  I still do, as that is my way of paying myself first.  I treat those items as fixed expenses, meaning that it’s mandatory that I do that every month.

However, in an effort to figure out my actual fixed expenses. I temporarily redid my spreadsheet to only focus on the traditional definition of fixed expenses.  It turns out that I am in pretty good financial shape where that’s concerned.

Currently, I calculate my fixed expenses at $1879.49. That includes a mandatory payment to my student loans per month of 97.61.  Now, I try to pay a minimum of $1997.61 to my student loans per month, so when I get rid of them in October, that extra money would likely be devoted to savings and investing (or a down payment on a house).  I also recognize that some fixed expenses I have now will be substituted for other (perhaps larger) fixed expenses in the summer.  I do believe my income will be adjusted accordingly to meet the upcoming change in my job assignment, and I might even come out ahead.  But, as of today, I’m very encouraged.


The lower you can reduce your expenses, the higher your savings rate will be.  I’ll be talking more about these concepts and going more in depth will concrete examples in future posts.  I just couldn’t contain my excitement realizing that, other than my mortgage payment (which I contend is making me money every month), my fixed expenses are quite low.

What do you think? Do you calculate your savings rate every month?  Do you know what your monthly expenses are?  Let me know by commenting below.

11 thoughts on “Fixed Expenses

  1. p2035

    Hi DP, yes keeping all expenses low is a good thing 🙂 Personaly Im spliting my fixed expenses to Mprtgage, utilities, food and transport. It is thouse things that you have to buy. I liked the idea that this must be below 1/2 your income. Then there are other cost like holliday ect that you can live without. Im trying to keep it at 30% of our income and then we have a ling term goal to save 20% of income. Not something impresive like +50% for other DGI but still a target to reach for 🙂

    1. Dividend Portfolio Post author

      I think having a target and paying attention are both great and not too many people do that. Seems like you have good goals to work towards regarding your expenses as low as possible.

  2. Tom @ Dividends Diversify

    Hey DP, I have always tracked my monthly expenses. I also use the history to project forward. I use the excess in the projection to plan my savings and investments on a monthly basis. I think we view it about the same way. One other benefit. If you have a good handle on your expenses you don’t have to rely on retirement rules of thumb like you need 80% of your working income to retire on. Or you can withdraw 4% from your portfolio safely on an annual basis. All you need is enough to cover your expenses. Tom
    Tom @ Dividends Diversify recently posted…O My! Now I’m a Real Estate Guy.My Profile

    1. Dividend Portfolio Post author

      Interesting point Tom regarding not really having to worry about the retirement rules of thumb. That would be nice. The more I reduce my expenses, and realize that I don’t need that much to live on, the more it seems that even if I relied on the retirement rules of thumb, I’d be ok in the long term. But I can’t wait to have enough money coming in passively to cover all my expenses.

  3. Mike at Balanced Dividends

    Hi Glen – nice post and good points captured here.

    On your question, we do know our monthly savings rate and expenses; I review some aggregated data via Personal Capital and then dump a few figures into Microsoft Excel / Google Sheets for a few particular things I like to analyze and calculate further.

    Related to your focus on fixed expenses, I recently took our 2017 year data and averaged out a typical month. This helped to accommodate for non-fixed expenses. I like working with averages for this reason. We’re now going through to eliminate and/or potentially lower a few areas.

    Thanks again for the post. – Mike
    Mike at Balanced Dividends recently posted…6-Month Update: Fundrise Passive Income ReviewMy Profile

    1. Dividend Portfolio Post author

      Hey Mike. Speaking of Personal Capital, I did just start using the app. So, to some extent I am able to account for my net worth, but I admit Personal Capital doesn’t have everything of mine included. I plan on reviewing the app in a later post. But it’s good you are able to track your savings rate. I’m going to take a stab at it and try to keep track of it and maintain a minimum level of savings, which I think I do already, but it’s nice to be able to put a number to it.

  4. Frankie

    Yes, have been tracking my monthly expenses for many years, one of the best decisions I made. When I started, I had many expenses I just assumed were fixed (mortgage, internet, utilities etc), but realised that even these can be trimmed, sometimes significantly! At the end of the day, I guess nearly all of our expenses are variable, we just can’t bear living without some of them 🙂

    1. Dividend Portfolio Post author

      I think it’s very important to track your expenses Frankie, so I completely agree with you. After all, if you don’t know what you’re expenses are, it’s going to be hard to figure out where you need to cut. Paying attention to those expenses is almost half the battle. Thanks for the comment.

  5. BrokeInvestor

    Hi DP,
    That’s something I should learn from you. Actually, I kinda know what my fixed expenses are but I never put them on paper so I may be surprised if I do so. I think I should do that and see if I can improve any of those expenses 🙂
    Thanks for sharing and it would be nice to see a more detailed review at some point 🙂
    BrokeInvestor recently posted…December 2017 Fitness SummaryMy Profile

    1. Dividend Portfolio Post author

      I fully support tracking your expenses on paper BI, or at least a software program, maybe such as MINT. I might have to get back to you on a more detailed review of my fixed expenses. I’ll think about it.

  6. Pingback: Progress Report - January 2018 - Dividend Portfolio

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