Household Expenses

Household expenses refer to living expenses such as rentals, mortgage payments, utility bills, groceries, and others. These expenses can be categorised in various ways.

A good starting point is to consider whether expenses are either “fixed” or “variable” in nature. Fixed expenses are expenses that are generally the same each month, usually contractual in nature, cannot easily be changed, or is not depended on consumption habits. Mortgage, health insurance, life insurance, car insurance, home owners insurance and frequently education are examples of fixed expenses. Variable expenses represent those daily spending where the amount is not constant and does depend on consumption habits. Examples of variable expenses include groceries, fuel costs, utility bills and entertainment. Although many variable expenses are essential and unavoidable, individuals generally have more control over these types of expenses and have more flexibility to reduce them if the need arises.

Budgeting your expenses

A way to effectively manage your household’s income and expenses is to create an itemised budget. Although there are many approaches to creating a budget a good place to start is to keep a record of your income and expenditure over the last couple of months and then to calculate a reasonable monthly average. With this information at hand ask yourself whether your expenses are appropriate based on the income that you earn.

It is important to be realistic when this question is answered and to reassess spending habits if it appears that you are under financial strain.

One way to do this is to prioritise expenditure; focusing on ensuring that enough funds are available for contractual obligations (such as loans, insurance policies and retirement savings) and essential living expenses. Once these expenses have been prioritised it will be easier to reduce discretionary expenditure such as entertainment, mobile bills, and others.