3 Main Categories of Expenses in a Household

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Published at : 23 Dec 2020
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Do you feel overwhelmed every time the end of the month approaches? Are your costs out of control? Phone bills, car rent, debts, kid’s birthday parties and many more.

All costs you pay, whether for buying a product or for taking a loan, are called expenses.

Every household has many expenses but by learning how to classify your expenses you can start managing your money wisely. There are three categories of expenses: fixed, savings and variable expenses.

Fixed expenses do not change over time and thus, are independent of your income change. They might change slightly but you know they are due on a regular basis. The following are flexible expenses in a household:

1- Housing: money you pay for rent of a house, electricity, heating and telephone bills.
2- Transport: money you spend on car rents, public transport, taxis and parking.
3- Essential Living Expenses: money spent on ‘needs’ rather than ‘wants’. Groceries and Education are examples of essential expenses.
4- Debt Payments: money that you owe and should be paid back on time to avoid debt accumulating. Cards, loans and mortgages are types of debts.
Variable expenses do change over time. When your income increases you tend to increase your variable expenses. The following are variable expenses in a household:
5- Non-Essential/Discretionary Expenses: money spent on ‘wants’ rather than ‘needs’. They are extra expenses that make us happy by allowing us to live in luxury. Vacation, clothing and entertainment are examples of discretionary expenses.
Saving Expense is the money you need to save for future expenditures.
6- Saving expenses in a household: money saved for future goal-oriented expenses such as retirement, education, emergencies or a bigger home. Savings can also be money kept aside for irregular expenses such as gifts and health charges.

As explained, there are many expenses in a household but all expenses fall under the 3 main categories: flexible, variable and saving expenses. Know what your expenses are and try to classify them accordingly!

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