There’s No Such Thing As Fixed Expenses

There’s a lot of standard finance assumptions I disagree with.

One of them goes something like this…

Things like rent, a mortgage, transport, insurances and so on – are all basically locked in and almost impossible to change.  These are referred to as ‘Fixed Costs’ – it’s literally built into the name.

So rather than focus here, optimise your variable spending instead.  Takeaway food, holidays, subscriptions, shopping, entertainment, etc.

This sounds reasonable on the surface.  But I disagree with the framing entirely.  I think the term Fixed Costs is misleading.  Because it leads to people believing that large blocks of their spending are basically unimprovable.

You need a house.  You need a car.  You need to eat.  So a large part of your living costs are set in stone, and there’s only a bit of wiggle room around the edges.

If you follow that logic, you end up assuming that financial independence just isn’t feasible.  This type of thinking traps people more than almost anything else.  My counter-belief is that there’s no such thing as a fixed expense.

In this article, I want to pull this apart and explain why it’s such a self-defeating and restrictive way to think, while sharing how I look at it.

Let’s get started.

Fixed expenses are a myth

Before you start angrily typing comments, here’s how I see things…

The term ‘fixed costs’ is a lie.  Sticky or recurring costs would be a better phrase.  But if they’re able to be modified, at all, then by definition they are not fixed.

You have fixed needs.  But you do not have fixed expenses.

You need food.  You need shelter.  You need some way to get around.  You need connection with other people.  You need interests or hobbies.  And you likely need a bit of exploration – some travel or novelty in your life.

These are real human needs, and I’m not going to pretend otherwise.  But the fact that we can meet those needs in a wide variety of ways, means we get to choose our level of expenses.

Let me explain.

You need a home.  But you don’t need the exact house you currently occupy, in that exact suburb, at that exact price point.

You need a way to get around.  But you don’t need the exact car you currently drive.

You need to eat.  But you don’t need to eat the exact food you currently eat.

If we’re going to call them ‘fixed expenses’ then we’re essentially going to close our mind off to the possibility that they can be changed.  So when someone says “fixed expenses,” what this really means is, “expenses that I no longer question.”

As a result, you’ll only ever tinker around at the edges of your finances.  But the greatest life-changing impact can be made by questioning it all from the ground up.

The spending spectrum

I’ll show you what I mean with a few real examples from my own life.  As I do, keep in mind the specific details matter less than the mindset behind them.

First, housing.  Ours was never wildly expensive.  We started out in a townhouse, even though we could afford much more.  When we decided we wanted more space and a house with a yard, we didn’t assume it had to be in the same location.

Our requirements were not based on the postcode, but on what an area provided – close to shops, lots of green space, short drive to the beach, not too pricey.

If we treated our original location as fixed and unchangeable, the same house we’re in now would cost twice as much.  Back then, that would’ve meant an extra half a million bucks needed for FI – or closer to a million in today’s Perth market.  No thanks!

As for transport, I’ve always just seen this as getting from A to B.  At one point we went from one shitbox car plus one decent car, down to just the shitbox and a scooter.

That freed up around $10k to invest, and improved our overall position by roughly $4k per year.  Which doesn’t sound like much, but this amounted to almost 10% of our expenses at the time.  That’s the same as having an extra $100k invested.  (And yes, we upgraded again later once our situation had improved a lot.)

As you can see, I treat spending as variable on the upside too!  None of this is about maximum saving for the sake of it.  It’s about purposeful re-thinking of your finances based on your priorities and overall situation.

Or travel….

Before really knuckling down, we’d done a couple of slightly pricey trips to Singapore/Bali, plus a two-week dream trip to Africa including gorilla trekking in Uganda.

Later, travel became road trips with our dog, at maybe $3k a year instead of $10k. And even now, with overseas travel back on the cards, my brain just goes, “Why not do the closer, cheaper stuff first?”

There are endless amazing places in the world, and I don’t have a strong preference about where I go first.  Essentially, I just want to see cool, interesting places I haven’t been, ideally with nice people, some English, and (at the moment) warm weather.  Given the proximity and short flights, South-East Asia seems like the natural place to start.

Basically, I see basically every expense as malleable and tweakable, depending on your priorities at the time.  I applied this thinking to every single expense we had.  I didn’t assume it had to be a certain level – I just saw what need we were trying to meet and looked at how we could vary the cost.

Everything is adjustable

The reason this matters is because there’s no amount of money you can’t spend.

Your ‘needs’ can be met by spending millions of dollars… or thousands of dollars.

You can assume you need $5m for a paid off home, or just a tiny tiny fraction of that per year to stay in a comfortable dwelling.

You can spend tens of thousands for a single two week luxury trip, or spend an entire year travelling on the same amount.

You can have multiple six-figure vehicles that you maintain and upgrade over time, or you can catch Ubers, public transport and walk/ride everywhere else.

And you can spend hundreds of dollars on a single meal, or just a couple of bucks.

You can do this with almost anything.  Name an expense, and I reckon 95% of them are adjustable in some way.  Even the ones that feel basically locked in.

I won’t bore you with dozens of examples, but if you’re familiar with my previous writing, you’ll recognise this is an ongoing theme.  Personal finance is a big ‘choose your own adventure’ game.  We each select our own difficulty setting, and decide how many ‘level ups’ seem worth it.

Now, you might not like the alternative options on offer, but that isn’t the point.  The point is that the cost itself is changeable.  To say otherwise is untruthful.  It’s just that you’re choosing one of the more expensive options.

Make no mistake, there’s a direct correlation between what you want and how much of your life you need to give up to not only reach that place on the expense/luxury spectrum, but maintain it.

Level 1 thinking is “Think big, be ambitious and persistent and you can have anything you want in this world.”

Level 2 thinking is, “What am I giving up in order to reach those higher levels? Will it make me happier? Will life be more meaningful? Are the tradeoffs worth it?”

The self-questioning nobody wants to do

I’ve got a few questions for you, but before that I want you to remember that none of this is about permanent sacrifice.

The goal is finding ways to meet your needs in a less expensive way while you build wealth and increase your life optionality.  Then, from a position of relative freedom, you can choose whatever you like.  The magic is in the sequencing.

OK, here’s some questions that some of you won’t have considered…

Do you actually need the second car in your household?  Or is that just what a family “has”?  Are you worried about being judged if you don’t have it?

Do you really need the extra one or two bedrooms you’re most likely paying for as a homeowner?  Or are they mainly storing stuff you never use?

Side note: You could pay for a hotel or lovely AirBNB for a big family reunion for 2 weeks a year and come out way ahead versus permanently paying for an extra 1-2 bedrooms you don’t need for the same purpose.

Do you need to live in one specific spot forever?  Is it even remotely possible that another location could meet your needs just as well, for a lot less?

How could you switch up your travel to still have a sense of enjoyment and novelty and exploration without it costing an arm and a leg?

I know these might not be fun to think about.  They’re difficult.  The whole idea of changing them creates mental load and that sense of impending doom when we think about what hassles we might have to deal with.

By the way, I’m not saying you need to change any of these things.  If you’re genuinely particular about your food, or your location, or whatever – that’s completely fine.  It’s healthy to be precious about certain things that really matter to you.

You just can’t be precious about everything. 

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Fixed thinking across the board

I’ve noticed that this rigid thinking doesn’t stop at our expenses.  Many of us apply it to ourselves too.

People think of themselves as fixed.  “I’m an accountant.”  “I earn this much.” “This is just what my industry allows.”  As if that’s some permanent fact about the universe, rather than a set of circumstances you’re completely free to change.

But your circumstances aren’t fixed either.  You can retrain.  You can learn new skills and earn more.  You can switch industries entirely.  You can start your own business.  You can take a break and go pursue something completely different.

This is where identity comes into it.  We get a sense of identity from our jobs, and our lifestyles too.  Put them together, and people feel as though questioning either one is ripping away the clothes they’re wearing.  Who am I without this job and this lifestyle?  They feel naked, lost and a little empty.

For a long time now, I’ve pushed the message of becoming a flexible human being.  Someone who can adapt, adjust, and find a way through whatever life throws at them.  And it all starts with the way you look at the world.

If you see your expenses as fixed, your income as fixed, your location as fixed, your skills as fixed, and your whole situation as fixed… then OF COURSE YOU FEEL STUCK.

You’ve basically locked every door in the house and are wondering why you can’t get out.  A prison of your own making.

Which brings me to the thing that genuinely frustrates me the most.

An impossible set of circumstances

A lot of people have decided that financial independence is impossible.  And in a way, they’re right.  But not for the reason they think.

It’s because all the conditions they’ve decided are non-negotiable in their own minds.

So is FI possible?  Absolutely.  Just not for you.  Because of the conditions you’ve set in your own mind about what’s acceptable and what isn’t.

If you aren’t willing to reconsider anything about modern life, or fight against the human impulse to make short-term choices over long term and spend everything you earn… then FI is not for you.

But then don’t complain about the outcome.  The universe is never going to look at your situation and go, “You know what, Dave really values all these things and isn’t willing to budge on a single one of them, and he also doesn’t want to work extra hours or change jobs… but he wants to be wealthy and free one day – so let’s help him out and bend reality to fit his desires.”

The unfortunate truth is, you have to adapt yourself to the world and the outcome you want.  The world will not adapt to you.

Final thoughts

So what can you take from all of this?

Contrary to how much airtime these things get, the most important parts of FI are not budgeting, picking the best investments, or even optimising your tax.

The magic ingredient is invisible – your mindset.

It’s having the flexibility and the willingness to consider meeting your needs in more than one way.  It’s being comfortable with tradeoffs and getting really good at prioritising.  And it’s learning deeply about yourself, what you value, and having the courage to follow that path even if those around you don’t understand.

The more open you are to different ways of living and looking at the world, the easier it is to build wealth.  And funnily enough, the more content you tend to be along the way.

Because you’re no longer so fussy about everything being exactly one particular way.  You hold your preferences a bit more loosely, and life gets a whole lot easier.  You accept that maybe you just need to delay your desires until a bit later, rather than forgoing them altogether.

If you’re willing to delay gratification while compounding your money, you can eventually have both freedom AND your ideal lifestyle.  But if you insist on having the lifestyle first, it prevents you from building freedom.

Fixed needs are real.  Fixed expenses are an illusion.  They’re a barrier we create in our mind.  Everything is a choice you get to make, over and over, as your life and your priorities change.

So next time you catch yourself thinking, “Oh well, I can’t do anything about it” – stop.  Ask yourself whether it’s genuinely fixed, or whether you’ve simply decided to stop questioning it.

Almost every time, it’s the second one.

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