Question

In your own words, explain the difference between a fixed expense and a variable expense.

Answer 1

A fixed expense is a cost that remains constant and does not change regardless of one’s activity level or usage. Examples include rent, mortgage payments, and insurance premiums — these bills are typically the same from month to month.

On the other hand, a variable expense fluctuates based on usage or consumption. These expenses can change each month depending on factors like spending habits or needs. Examples include groceries, utility bills, and entertainment costs, which can vary significantly based on personal choices or circumstances.