Fixed expenses not so fixed

How much do I have to spend each month? That's the question I've been asking myself for the past week or so. How much have I committed myself, through contract or subscription, to spending each month? What are my "fixed expenses"? Who cares, right? The answer is, "Nobody, until they find themselves out of a job and committed to paying $2,000 each month."

I was introduced to the following concept by my business fraternity's faculty advisor. Here's how it works:1) List all of your monthly expenditures by category in rows. A spreadsheet is ideal for this exercise.

2) Record amounts for each of these categories into each of these three columns: "Needs", "Wants", and "Luxuries". If it is an absolute necessity, it is a Need. If you could get along without it, and you still buy it, but you don't really get the "Deluxe Package", it is a Want. If you get the "Deluxe Package", or it has to be a premium brand, then it is a Luxury.

3) Total the amounts in each of the columns. The total under "Needs" is the bare minimum fixed expenses you can get away with. The total under "Wants" is how much it costs you to live comfortably. The total under "Luxuries" is how much it costs you to live high on the hog.

Note the vast difference between Wants and Luxuries, and the greater difference between Needs and Luxuries. The lesson? When you don't have money coming in, and you don't have a huge savings account to get you through the hard times, it's essential to cut back to the bare bones and plug the leaks.

For the rest of us whose employment is relatively stable, the lesson is that fixed expenses are not quite as fixed as you think. You can save money more easily than you can make more money, and fixed expenses are a less obvious place to find a potential goldmine of savings.