The most important consideration when planning your budget is <u>allocating the budget for fixed expenses before flexible expenses.
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<h2>Further Explanation
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Fixed expenses are the cost that <u>do not change for a period of time</u>. These include rent or mortgage payment, car payment, dues and subscription.
Flexible expenses are the cost that<u> typically fluctuate</u>. It can be changed, reduced, or eliminated. These include groceries and entertainment costs.
Since flexible expenses can be changed or reduced, allocating the fixed expenses can lead to the safe side of not living beyond your means.
However, before you allocate your flexible expenses, you have to identify these costs. According to a certified financial planner (CFP) a person may need to review 6 months past their financial statements to know the average of their food-related cost if they fluctuate significantly. It is possible that some people are budgeting fixed amount for food but actually spending more after taking into account the restaurant bills or the food delivery bill for lunch and dinner. Keeping a diary of the expenses you pay with cash, such as restaurant bills and grocery purchases, can help you accurately track what you spend over a given period. Once you know your average, you can budget accordingly.
Needs vs. Wants
Flexible expenses like food and gasoline are needs. Eliminating the less important costs from your budget such as maid services can improve your cash flow.
Learn more
- Cash flow brainly.com/question/10714011
- Income brainly.com/question/9932763
Keywords: budget, expenses, flexible expenses, fixed expenses
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