4 Best Ways To Prepare For Periodic Fixed Expenses [with examples]

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While this post is primarily about periodic fixed expenses, it’s essential we understand the three main types of expenses. By understanding the main expense categories, we can better prepare a spending plan that aligns with our financial goals.

The Three Types Of Expenses

Fixed Expenses

Are recurring expenses that come in monthly intervals.

Examples of fixed expenses are: – Rent or mortgage – Vehicle payment – Internet services bill – Phone bill – Cable bill – Monthly subscription – Other annual registration

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Period Fixed Expenses

Are like regular fixed expenses (think mortgage, electricity, etc.), only they do not come every month. They are required to be paid every three months or even every six months.

Examples of periodic fixed expenses are:

– Tuition and school fee – Life insurance premium – Property taxe – Club dues or association fee – School book

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Variable Expenses

Also known as flexible expenses or variable costs, are different amounts each month or every couple of months. They largely coincide with your monthly spending patterns.

Examples of variable expenses are:

– Utility bills that are not fixed each month – Credit card payment – Unexpected vehicle maintenance cost – Groceries (if not on a fixed budget)

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Four Ways To Prepare For Periodic Fixed Expenses

Periodic fixed expenses are easy to prepare for because they arrive in predictable intervals and consistent amounts. 

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Identify Previous Spending Patterns

The easiest way to identify the best way to budget your period expenses is to look over your expenses from the previous year.

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Add Your Periodic Fixed Expenses

For the previous year, add up how much you spent on each periodic expense. For instance, if you pay for life insurance once a year, no calculation is needed.

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Find The Monthly Average

To prepare for these periodic expenses, take each expense total and divide it by 12 (for each month of the year). Doing this will identify how much you should budget each month for that particular periodic fixed expense.

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Separate Your Periodic Expenses

From your total monthly income, set money aside each month for each periodic fixed expense in a separate account or cash envelope. This will help you save up each month, so when the time comes to pay the periodic bill, you will have the money set aside to pay it in full.

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