1.3.7 Calculating your expenses

To figure out what you actually spend, you need to keep track of two types of expenses:

• Fixed expenses are those that come up every month and are roughly the same each month, like rent or mortgage payments, utilities, loan repayments and child care.
• Variable expenses are those that may vary from month to month, like food, entertainment, travel, and home maintenance and repair.

What's "fixed" and what's "variable" may change. For example, child care may be a regular monthly expense or it may be an occasional expense. Most people have more control over their variable expenses than their fixed expenses.

You also need to include irregular expenses: expenses that don't come up regularly or often, like car repairs or new appliances. To estimate irregular expenses, review your bills or expense records for the previous year, total the cost of irregular expenses in various categories, and divide by 12 to arrive at an average monthly cost.

Now that you've got a good picture of your monthly expenses, do the following:

• Go back to the Cutting back my discretionary spending worksheet and see what items you noted. Can you adjust your expenses worksheet to reduce spending on those items?
• Did you notice that Savings was included as a fixed expense? That's because financial experts recommend putting aside 10 percent or more of your net income each month to save for your goals and have funds in reserve in case you lose your job or face a major unplanned expense. Build up an emergency fund of three to six months' income. Then continue to save for your other goals.

For an online Expenses worksheet, see the Budget Planner from the Financial Consumer Agency of Canada. You can use the calculator to create a household budget by the end of this module.