Variable expense
The one that changes with what you do. Where everyone tries to save first, and where least is achieved if the fixed ones are out of control.
In the chapter
CKnow
Where your money comes from and where it goes
From the same chapter
- Net incomeWhat actually reaches your account, after everything is taken out. The only figure you can plan with: gross cannot be spent.
- Fixed expenseThe one that repeats identically each month regardless of daily choices. The hardest to cut and the one that frees the most room when cut.
- Cash flowThe difference between what comes in and what goes out over a period. Positive means you can build something; negative means the rest of the plan is moot.
- Net worthEverything you own minus everything you owe. The real scoreboard: your salary says how much comes in, this says how much you kept.
- AssetSomething you own that has value. The useful question is not what it is worth, but whether it produces anything or merely depreciates.
- LiabilityWhat you owe someone else. Not a failure in itself: it is a future claim on your cash flow, and it is planned as such.
- BudgetDeciding where money goes BEFORE it goes. Not a diet: it is swapping the order of deciding and spending.
- Savings rateWhat share of what comes in you do not spend. It matters more than returns for the first years, and by a wide margin.