What Are the 4 Types of Expenses?

When a mortgage broker or lending specialist begins assisting a client with budgeting and calculating their potential borrowing power, understanding the four types of expenses is extremely important. The four types of expenses are as follows:

1. Recurring expenses
2. Fixed expenses
3. Whammy expenses
4. Non-recurring expenses

Recurring expenses are any expenses that occur on a semi-regular schedule, generally fluctuate in prices similar to various other types of expenses, and are occasionally referred to as day-to-day expenses. Expenses that fall underneath the recurring expenses category are filling your car’s gas tank up regularly, grocery shopping, purchasing pet food and supplies, as well as regularly spending money on restaurants and take-out. 

Fixed expenses are the customary expenses that occur on a regular monthly schedule. The prices will generally stay the same with minor fluctuations throughout the year. Expenses that fall underneath the fixed expenses category are monthly mortgage repayments, car repayments, household utilities, insurance payments, cell phone bills, and any subscriptions paid monthly. 

Whammy expenses are generally considered to be unpredictable and can be extremely stressful if your client is not financially prepared with an emergency savings account. Expenses that fall underneath the whammy expenses category are paying for unexpected car repairs, home repairs, medical expenses, and other emergency expenses.

Non-recurring expenses only occur randomly throughout the year, generally cost more than recurring and fixed expenses, and without proper preparation can negatively impact an individual’s financial status. Expenses that fall underneath non-recurring expenses are yearly memberships, annual car registration and maintenance, home improvements and upgrades, as well as wardrobe upgrades.