A fixed cost item is something, usually in your budget, that you know will cost the same amount every month. This makes budgeting for these items easy because you know what to expect.
Examples of a fixed cost are your:
- rent/mortgage (although it may vary from year to year, month to month they tend to stay the same)
- cable
- internet
- car payment
Can these ever change… well yes. There are a few reasons one or more of these might change.
- If your mortgage is a variable rate mortgage, it might change. How much it can change, and how often are specified within your mortgage. After the housing crisis of 2007/2008, various rules went into place to limit how much of a change could occur – but it’s still good to know.
- Late fees – pay something late, or forget to pay, and you’ll often have a penalty.
- Mortgage and rent my change yearly based upon rising cost (rent) or rising escrow changes (year to year changes in taxes and/or insurance) which are often included in your mortgage. I’ve had my mortgage go up one year, and down the next due to escrow fees, however, they usually don’t vary too much.
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