What is a fixed expense?

A fixed expense refers to a cost that remains consistent and is paid at regular intervals, regardless of changes in usage or activity levels. Common examples include rent, mortgage payments, and insurance premiums, as these amounts do not change month to month. Understanding fixed expenses is crucial for effective budgeting, as they represent a predictable financial obligation that helps individuals plan their finances accurately.

In contrast, other options describe expenses that can vary. Irregular costs fluctuate and can change based on circumstances. Costs that are paid only when necessary are contingent upon specific needs, making them variable. Lastly, expenses associated with unexpected events can arise suddenly and are typically unforeseen, further highlighting the consistent nature of fixed expenses. Therefore, recognizing fixed expenses helps individuals manage their finances better by accounting for those steady costs in their financial planning.