Topic: The difference between...
Just the other day, someone who occasionally posts questions here asked me the difference between fixed expenses, variable expenses, and discretionary expenses - when calculating the level of actual income needed pay the bills. Here's a quick explanation of the three:
1. Fixed expenses are those that recur every month without fail and are always the same amount. Examples include things like a rent or mortgage payments, or a car or utility payment.
2. Variable expenses are those that may or may not occur every month and, by definition are not the same amount every time. Groceries, heating or air conditioning bills, or the gas you use in your car to do all the things life requires.
3. Discretionary expenses are those that don't have to be incurred at all. They include things like the theater or movie tickets and other forms of entertainment, magazine subscriptions, gifts, dues and memberships - expenses that one could eliminate or reduce and still get along.
Among the three, discretionary expenses are the easiest to reduce during tough economic times. It may be no fun to spend less for things like entertainment, but between taking a cruise and paying the mortgage, the mortgage payment is probably more important. Hope this helps.