Money Management

What two categories can expenses be catagorized in?

Answer

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December 18, 2014 8:46PM

There are lots of dichotomous categories (not catagories!) that can be used and the choice depends on the purpose. One possible categorisation is fixed or marginal. Fixed expenses are those that will be incurred irrespective of usage. For example, you pay your rent (or mortgage) whether you are there every day of the month or spend most of it away on holiday. Marginal expenses depend on the usage. An example might be your spending on food.

Another possible categorisation might be necessity or luxury. In the UK this defines, to a large extent, whether or not the expenditure is subject to value added tax (VAT).