Reflective Essay about Fixed and Variable Costs

The cost of living is unavoidable, we cannot escape this reality of life. Regardless of whether we are financially strapped or not, we face expenses every month. There are expenses that stay the same and are predictable, these are the fixed costs, and there are expenses that change regularly, mostly influenced by daily spending habits, these are known as variable costs. So, these are the main differences between fixed and variable costs. 

Rebecca Lake, writing for the banking column on the Forbes Advisor website, on July 2, 2021, wrote an article titled "Fixed Vs. Variable Expenses: What's The Difference?" fixed expense just means an expense in your budget that you can expect to stay the same or close to it, over time. Variable expenses are the opposite of fixed expenses. A variable expense may recur from month to month. But the amount you pay in any given month could be different from previous payments or ones you'll make in the future" Therefore, we can say that expenses which are influenced by spending habits, like groceries, petrol, public transportation costs, parking, clothing, shoes, work lunches, snacks, restaurant meals, entertainment, etc., are variable expenses because the amount paid for them varies each month, while mortgage, house rent, electricity bills, car loan, car insurance, and bank fees are fixed each month. 

It's early in the morning, I am standing on the porch step in my pajamas, drinking a cup of coffee, and looking outside. That's when I see the mailman drop some letters in my post-box, I immediately pick them up because I recognized them because I receive them every month: the electricity bill from the city government and the rent bill from the real estate agent, I opened the bills and put them together. I remembered that I also receive some monthly bills by email. I logged on to my computer and checked my email inbox, and sure enough, I found bills from the bank for a car loan, the gym for a monthly gym membership, the Internet service provider for an Internet package, and the insurance company for the premium on an accident car. I open my online banking portal, to meet the monthly payment obligations for these bills, I have already designated these companies as my beneficiaries, I do not have to change the amount I pay because they are fixed. These are my fixed costs

Later that afternoon, my wife and I decided to go to the mall to buy groceries and other necessary items. As we walked through a few grocery stores, we noticed a significant 5% price increase on all the food we buy each month. Similar was the price increase on the other items we purchased, yet we bought more groceries because the next day was our daughter's birthday, so we spent 30% more than last month. Although the prices of groceries, hygiene items, and clothing fluctuate due to various factors, our monthly expenses also change from month to month these expenses are variable costs. 

My daughter was accepted for a 4-year degree program in computer science at the University of Kwa-Zulu Natal. I took enough information from the university's digital prospectus about how much I would have to spend per semester or per year on my daughter's tuition. I have approached the university to pay tuition fees of R23,3300 for the first semester, the whole academic year will cost about R85,000. This is a fixed amount that I will pay at the beginning of the semester for the whole academic year 2022. It is a fixed cost as it remains the same over a long period of time which means the tuition fee is a fixed cost. A week later, I drove about 1000 km from our hometown to the university where my daughter will begin her 4-year degree program. I paid for gas and tolls on the way and gave my daughter pocket money, we hugged, said goodbye, and parted ways. The expenses for this trip were fuel, tolls, and spending money these are variable costs. 

Using the practical examples, I found that the distinction between fixed and variable costs depends on how consistently I spend the same amount of money over a period of time on expenses such as university tuition, city utility bills, gym and internet provider subscriptions, car loan payment, and car insurance premium, as opposed to expenses that are constantly changing and unpredictable, such as food, clothing, toiletries, car maintenance, gasoline, entertainment, and other daily necessities.