Personal Costs

To analyse expenditure into fixed and variable can be a useful device also when considering personal and individual budgets. A householder's fixed expenditure will often include the following:

mortgage instalments (or rent);

household rates and water rates;

heating (partly variable as it is possible to economise but not

to reduce to nil);



maintenance, licensing and insuring the car;

fares to work;

insurance of property and contents;

life assurance premium.

None of these items can be reduced significantly except by making drastic and long-term changes in lifestyle, such as moving to a cheaper house, changing job, having the telephone disconnected or getting rid of the car. It is, of course, true that many forms of expenditure share the qualities of being fixed and variable: they can be voluntarily rationed and so could be termed 'semi-variable' - one can lower the thermostat of the central heating, switch off more lights, cut down on telephone conversations.

Other expenditure is capable of being tailored to what we can afford to pay. The amount we spend on the following items is variable because even in the short term we can reduce it:

food and drink;

eating out;

clothing replacements;

car running costs;

holidays and entertainment;

maintenance of property;

giving presents.

Part Four - Personal Expenditure

Personal expenditure

Types of expenditure

Every business has to budget its expenditure. It has to estimate as accurately as it can what cash it will need to spend, on which items in what quantities and in what time periods. It also has to ensure, as far as possible, that its inward flow of cash from its customers, together with its cash stock, is going to be sufficient to meet all calls made upon it as they arise.

A private individual is in much the same position. He also has to budget his expenditure in such a way that his flow of income, plus his stock of cash, is going... see: Part Four - Personal Expenditure

Personal And Business Finance 2018

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