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Budget Line Graph
Fixed Expenses
In the previous lesson, we established that fixed expenses are expenses that occur every month like the power bill, cable bill, cell phone bill, insurance, rent etc. they are fairly consistent in their cost, or at least predictable.
When planning our budget, we listed all of these under the section labeled fixed expenses. We also subtracted those fixed expenses from our net income to find our spendable income. There are many things that can come from the spendable income category. These things can vary greatly from one person to the next. They can also vary greatly from one month to the next for the same person.
Spendable Income
My family spends a great deal of time camping in the summer yet we rarely camp in the winter. Therefore, camping expenses would not fall under fixed expenses for us. Our camping expenses would actually be considered variable expenses and fall in the category of spendable income.
Variable Expenses
A variable expense is one that can change over time according to a number of factors. For instance, during the month of December many parents notice a significant change in the amount of money they spend on groceries because their kids are home for half of the month eating meals at home that they normally would not eat there.
One thing that we should all understand about a balanced budget is that if we spend more in one area, we are going to have to spend less in another one.
Example #1
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