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Determine what is “Fixed” and what is “Variable”

Sam noticed a couple of things when he looked at the chart he had made. He had made $40 during the week, but only had $1 left! He knew at this rate it would take forever to reach his goal of getting a new bike, and even longer if he bought ice cream and goes to the movies this weekend.

Sam looked hard at his chart and realized that some of the things he listed in his “Income” column happened every week, others only happened once a year…like getting money for his birthday. Sam added a couple of columns to his chart:

Fixed IncomeVariable IncomeFixed ExpensesVariable Expenses

“Fixed Income” means any money that Sam gets every week. “Variable Income,” means any money that Sam earned that changes from week to week. In the same way, “Fixed Expenses” mean any money that Sam has to pay every week, and “Variable Expenses” mean any money that Sam chose to spend this week. He completes the new chart based on what he knows is “Fixed” and what is “Variable”

Fixed IncomeVariable IncomeFixed ExpensesVariable Expenses
Allowance $20     Candy $1
  Birthday Money $15 Bus Ride $3  
  Helping Out $5   Video Game $35

Sam’s “fixed income,” was his weekly allowance, because he regularly gets that every week. His variable income included all the things that change from one week to the next. Sam takes the bus to the zoo every week, he helps out there as part of a school science project, so it’s one of his fixed expenses. Sam noted that his variable expenses were all the things he chose to spend money on that week, and unless he buys the same thing again, he won’t have to continue paying into the next week.

Sam looked at his income and expense totals; Sam knew from his earlier chart that he only had $1 left over at the end of the week.

Sam guessed that if he lowered his expenses, he would have more money to save toward his bike at the end of the week. We separate out what is “fixed” and what is “variable” so that we know what we have to pay each week (fixed things) and what we chose to pay (variable things).

What was Sam’s biggest expense?

Can you separate out your income and expenses into what is fixed and what is variable?

Why do we separate out what is “fixed” and what is “variable?” Can you make a guess?

Continue on to Step 4: Create a savings plan to reach your goals