How to budget for other types of fixed expenses or variable expenses
While fixed and variable expenses cover every kind of expense, there are other ones worth highlighting.
Capital expenses relate to purchasing fixed assets such as land, equipment, or real estate. When you have a capital expense, it’s usually financed in whole or in part, meaning you will have a payment to make each month (or another arrangement).
Making capital expenditures should only be done if it fits into your business plan and is directly tied to revenue. In most cases, there are ways to mitigate capital expenditures through leasing or renting – and these options are typically much cheaper. The thing to be aware of with renting or leasing is that you will have to deal with a landlord or owner, which may not be desirable for every business.
Overhead expenses are expenses not tied to revenue generation. These can be fixed or variable, depending on how they work, and include:
- Legal expenses
- Government fees
- Overtime wages
Or anything else not directly tied to creating a product or service for sale.