What are fixed expenses?

Fixed expenses are characterized by their consistency; these are costs that do not fluctuate from month to month. Common examples include rent or mortgage payments, insurance premiums, and certain subscription services. Because fixed expenses are predictable and stable, they play a critical role in budgeting and planning financial responsibilities.

Understanding fixed expenses is essential in personal finance because they represent a portion of one's budget that typically requires continuous allocation of funds, regardless of changes in income or spending habits. Knowing this allows individuals to plan their finances better, ensuring they can meet these obligations without being caught off guard by variations in their budget.

The other choices highlight traits of different types of expenses that are not classified as fixed. For instance, costs that vary each month are known as variable expenses, and those that change with income reflect a more flexible financial scenario, further distinguishing them from the solid nature of fixed expenses.