Page 35 - Workbook1E

The Spending Plan Worksheet Made Easy
“Economy does not lie in sparing money but in spending it wisely.”
~ T. H. Huxley
“I get it! Shoes are a discretionary expense not a fixed expense!”
#4
You’re off to a great start. You know what you earn, what you spend, and where you spend it. Now you can fix what’s out of balance. Even if your income and expenses were in balance, you may wish to consider spending less and paying yourself more. But first you need to determine what type of expenses you have, and then you’ll know which ones you can adjust.
STEP 4—What Type of Expense is it?
Dave and Marie realize they’ll need to cut some expenses to balance their plan. The most effective method is using your Worksheet to lead you though this process. First you must determine which expenses are “Fixed,” “Variable,” or “Discretionary.”
Fixed Expenses are monthly expenses that cannot be adjusted or changed, i.e. loan payments for your mortgage, rent, car, etc.
Variable Expenses are payments you must make monthly, but the amounts may vary. You have some control over the amounts. Examples are groceries, utilities, gas, etc.
Discretionary Expenses are completely in your control. You make choices about what you spend on these expenses and how much you spend, i.e. entertainment, dining out, gifts, recreation, allowances, etc.
The Expense Category Description on Page 32 also gives you some guidelines about the typical Type of Expense for each category. Note: Some categories could include all three types of expenses like the “Auto” category. Car payments are “fixed” expenses; car repairs are “variable;” and a car wash is “discretionary.”
Breaking Down Your Expenses
Refer to Dave and Marie’s sample Worksheet, and the Expense Category Descriptions to guide you in determining the Type of your expenses: fixed, variable or discretionary.
Record each expense in the
corresponding column. Some may need to be broken down into multiple columns. For example the $245 Dave and Marie spent on “Children” is split into $70
for school expenses (variable) and $175 for activities, allowance,
and lessons (discretionary.) This process takes some time but is a very important step.
Access Education © 2013 31