Start by listing the fixed expenses that you know you will incur every month. Fixed expenses are expenses that are the same amount every month with little variation.
Think of housing expenses – gas, electric, water & sewer, Internet, cable costs, normal maintenance, lawn care or snowplowing. If your property taxes and homeowner’s insurance are escrowed as part of your mortgage payment, pull this information out and note that portion of your payment as a fixed expense. You should have access to an escrow analysis or you will be able to see that in your online mortgage account information.
Think of vehicle expenses – gasoline, insurance and normal maintenance. Go through your credit card statements and your checkbook looking for other fixed expenses. Do you pay for maintenance agreements, for a cleaning person, have educational expenses, prescription costs, childcare expenses, life insurance, phone costs or any other expenses that are the same amount each month? Are you paying for dance lessons, a gym membership, sporting team expenses, Scouts, gymnastics, acting lessons – what expenses are you incurring for yourself, your partner and your children each month for the activities that you are doing?
To this list of monthly fixed expenses, you need to add fixed expenses that are paid throughout the year just not paid monthly. For example, if your property taxes are paid by you and not escrowed, they should be included here. If you pay quarterly health insurance premiums out of your checkbook, they should be noted here. Do you have life insurance or long-term care insurance premiums that are paid less than monthly? How do you fund your IRA – if it is a once a year payment, it should be added here. What expenses do you know that you need to pay at least once a year that are fixed dollar amount? Annualize these expenses also by multiplying by the number of times per year you pay the expense. Total all fixed expenses to complete this section.
Your fixed monthly expenses all now need to be annualized. Take your monthly amount for each expense and multiply by 12 to get the annual amount for each expense.