Fixed and variable costs: Planning smart spending!

Posted by seomypassion12 on June 13th, 2021

If you usually follow my publications on the Blog of Valor channel on YouTube and our articles here on the blog, you should already know that the practice of investing starts in personal finances.

It is useless, for example, to follow all the news and movements in the financial market if you are not able to receive money and spend less than you receive. Without the care to plan expenses and control your money, therefore, it is simply impossible to accumulate equity.

There are, however, some practical tips for everyday life that tend to be very useful for those who want to accumulate money more easily and keep their budget always under control - such as the issue of fixed and variable costs. Read on and understand how to plan spending efficiently and intelligently and increase your ability to save over time.

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Fixed costs vs. variable costs

When we talk about expense planning and efficient financial planning, one of the most important issues to consider is the issue of fixed costs and variable monthly costs.

Fixed costs are those expenses that need to be paid every month, such as rent, condominium expenses, electricity bills, water bills, among others. Variable costs, on the other hand, are those that fluctuate over the months - such as spending on leisure, for example, which can be increased or reduced in certain periods.

There are also those costs that are semi-fixed and semi-variable, as is the case with shopping at the supermarket. You can reduce expenses or increase them in certain months, but this cost will always exist - therefore, it is a semi-fixed cost.

Although important, these concepts often end up in the background when planning and organizing finances - which should not happen.

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Inefficient spending planning

It is quite common for people, when organizing their finances, to identify the amount of income received monthly and define a percentage of this income for commitment to costs - without measuring what is fixed cost and what is variable cost.

A person earning R $ 5,000 per month could define, for example, a commitment of up to R $ 4,000 (80% of income) from the budget to pay fixed and variable expenses - directing the remaining amount to other purposes, such as investments .

This practice of compromising earnings, however, ends up creating problems for a lot of people - mainly because they “plaster” the monthly budget and do not allow maneuvers in case of needs. For this reason, I do not consider this an efficient method for planning finances intelligently.

Efficient and intelligent spending planning

A very interesting way of maintaining an efficient spending plan is to keep fixed costs at the lowest possible level and work with variable, semi-fixed and semi-variable costs throughout each month.

Maintaining a lower rent and reducing consumption bills, for example, can cause your variable costs to fall - increasing the maneuvering power to cut variable costs - such as cable TV, the gym, among others - in case of need and in periods of restrictions or cost cut.

In this way, you are able to keep your income as low as possible - offering you greater flexibility and freedom to increase or reduce various variable costs over time and accumulate more equity over the years.

The question of financing

In this scenario, it is also worth rethinking some decisions that can immobilize your financial condition and keep your fixed costs very high for a long time, as is the case with a 30-year mortgage, for example.

The fixed costs remain high - which would not allow you to make some choices in relation to money in case of need without this causing you problems - such as having to dispose of the property so as not to get into debt in case of difficulties in paying the financing installments.

The importance of financial organization

To boost financial accumulation and maintain good financial planning over time, always try to keep your finances organized and plan them so as not to compromise your income so much with fixed expenses - always seeking, preferably, to manage the fluctuations of variable costs within your budget.

This type of financial planning and organization can help you avoid financial difficulties and tend to facilitate the accumulation of money for financial freedom and independence - in addition to the other financial goals you have.

So, if you still have many - and high - fixed costs in your daily life, this may be a good time to review your habits and make changes that will allow you to reduce these fixed costs and increase the room for maneuver for variable costs.

With commitment, discipline, organization and good planning, it will be much easier to save, save and invest more and better your money.

How to make your money work for you?

Learning how to invest your money better and making good investment decisions, according to your personal planning, is the only way to make your money work for you and achieve all of your financial goals.

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