Real Life: Do you know where your money is going every month? Have you ever tracked what you spend? These are all called Expenses. Expenses are anything you spend money on, and they add up quickly! Here are just a few expenses the average American pays each month, listed in priorities of living:
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Needs (Necessity Expenses):
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Wants
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Activity – How much do I spend? Now that you have a good list, go through your bank and credit card statements and write down how much you spend on theses items each month. If you don’t have this, ask your parents what they spend. Would you like to increase, or decrease, your expenses in each category?
How could you lower these expenses? Where are you overspending? Are you willing to spend less?
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FIXED VS. VARIABLE EXPENSES: (Also W1:D3)
Now that you have a list of expenses (the money you spend), you may want to understand the difference between those that are Fixed or Variable Expenses?
Fixed Cost (Expense): Is a cost that does not change month to month. It does not increase or decrease because of something you do or buy. This can be for goods or services you purchase. There is less that you can do to reduce these types of payments each month. These include: mortgages, cell phone, internet, and insurance.
Variable Cost (Expense): Is a cost that goes up or down, depending on choices you make and desires you have. These may increase and decrease month to month, depending on how much you spend. For most of these, you get to decide how much you will spend.
Though some bills are a fixed amount every week/month/year, and others vary day to day, this does not mean that one is more important than the other. Instead, you need to make a list of your priorities. Those that are less of a priority, you should think about eliminating. As you will find, when looking through your expenses, you have more Variable Costs than Fixed, because most of these expenses increase as we want them more, and are willing to spend more on them. The United States is a consumer nation, meaning we spend what we want to spend on most items. There is nothing wrong with this, but also know that while some people are spending more on these items, some wiser individuals are finding ways of spending less. They are realizing that they don’t need as much as everyone else. The old saying is, “Keeping up with the Jones',” which means that you have to spend more to look like your neighbor, because they look so happy or rich. The truth is, most people who spend more to look good are majorly in debt.
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Fixed Cost (Expense):
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Variable Cost (Expense):
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