Your living expenses mean how much you spend to maintain your chosen standard of living. Given the influence of society and social media, many people have adopted a standard of living that cost more than they can afford, and this is not good for their personal finance.

Dave Ramsey, a renowned American businessman, author, and personal finance expert, made the following statement;

Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.”


Calculating your cost of living will help you understand your living expenses in the past and present, and how it will affect your future.


Your financial status will help you understand how good or bad your financial health is. It helps to have a concrete understanding of what’s been going on in your financial life and how far it has brought you.

To do this, you’ll need to consider the following:

  • Monthly income
  • Debt-to-income ratio
  • Housing situation
  • Credit report and score
  • Savings
  • Retirement planning
  • Net worth
  • Investments

Doing this every so often, say every month, will help you stay in track with your living expenses and your financial goals.


Understanding your financial situation will help you to make adjustments where necessary in order to achieve your financial goals even faster. Reviewing your monthly expenses requires that you make a list of your monthly expenses. You can categorize them the following ways to make them easier to deal with.

  • Fixed expenses:

Fixed expenses are specific expenses that must be met every month. They remain the same each month and are necessary for your basic standard of living.

The following examples are considered fixed expenses.

  • Rent
  • Car payment
  • Insurance premium
  • Student loan payment

Fixed expenses can be classified as needs as opposed to wants.

  • Flexible expenses:


Flexible expenses are recurrent that can also be classified as needs, but unlike the fixed expenses, flexible expenses are variable.

Examples of flexible expenses include

  • Groceries
  • Utilities
  • Transportation
  • Personal effects

Flexible expenses may vary each month, but they are a necessity in your daily living.

  • Discretionary expenses:

In the case of discretionary expenses, you have the absolute power to control how much you spend on an item, that is if you decide to spend on it at all.

Examples of discretionary expenses include

  • Sports and leisure
  • Entertainment
  • Restaurant visits
  • Coffee shop visits

Discretionary expenses are classified as wants as opposed to needs.

Making a budget is overwhelming, and so is calculating your cost of living. But you do not have to worry about that because you can use a free cost of living calculator to make it easier for you to calculate your living expenses.


By the time you evaluate your financial situation and monthly expenses, then you can comfortably answer the question, “what are my living expenses?”. At this point, you can make adjustments if you think your living expenses are not in line with your financial goals. Here are a few tips on how to do that.

  • Cut down how much you spend on your wants as much as possible. Take a look at your discretionary expenses and strike out as many items as possible, or find a way to reduce their costs. For instance, if you go to the movies every weekend, you can reduce it to once a month or even less. You can also cook your own foods instead of eating in different restaurants every day.
  • You may not be able to strike out items under your flexible expenses list, but you can reduce how much you spend on them. After all, they’re flexible expenses. Taking the bus every now and then is a good way to cut down on flexible expenses. Turning down your heater and using coupons for your purchases can help too.
  • As for your fixed expenses, you can refinance your student loan, use a less flashy car, move to a cheaper apartment or share your apartment with a good roommate.

Like and follow us on Facebook, LinkedIn, Twitter, and Instagram.