Expense types

comparisons

The types of expenses that exist in day-to-day economics respond to the different needs of families and companies for consuming goods and services of different natures in exchange for a consideration.

The fact that there is a great variety of needs to be satisfied supposes, consequently, that individuals and organizations find themselves with different types of expenses or expenses.

A key fact is to differentiate between expenses addressed by ordinary people and those undertaken by companies. While it is true that some of them may be in common, each social group has its own spending behaviors.

Any classification of the existing modalities of expenses understands this variety, thus establishing different ways of classifying the types of expenses. In other words, depending on the utility of the expense, it will be framed in one type or another.

The preparation of strategies for types of expenses is recommended when designing budgets and defining efficient business strategies.

Types of expenses according to periodicity

Depending on the periodicity with which they are carried out and how often certain goods and services are used, there are five types of expenses:

  • Fixed rate expenses: These are usually those referred to unavoidable and essential periodic routines. Within this group would be the monthly fee for a gym, a transport pass, commitments to pay memberships to groups and organizations or electricity bills. They usually have a fixed periodic amount of money.
  • Variable rate or extraordinary expenses: These expenses do not have periodicity and are usually more random. Exceptional expenses such as going to dinner at a certain restaurant or buying a new mobile phone could serve as examples.
  • Expenses that respond to emergencies: Sometimes a family or a company must face a certain expense that they did not have and that in most cases is unavoidable. A simple example would be the need to repair a vehicle or a water leak at home.
  • Flexible expenses: Sometimes there is an unavoidable expense forecast but the individual has the ability to decide when to do it, since they are not so urgent. Examples of these can be the periodic wheel and oil changes of a car.
  • Ant-type expenses: It is common for there to be small, insignificant a priori expenses, but with the passage of time they affect the volume of total expense in a notable way. A remarkable and striking ant expense would be that made by collectors of all kinds.

Types of expenses according to their motivation

Another way of taking into account the different types of expenditure is by taking into account the motivation of the natural or legal person when addressing it:

  • Leisure-related expenses: It includes those related to entertainment or recreational and cultural interest. Also included is the visit to restaurants motivated by gastronomic interest.
  • Family and daily expenses: Family units, whatever their training, address all kinds of expenses within their daily operations.
  • Expenses derived from economic activity: These are provided within a budget and are exercised by individuals, companies or other private and public institutions.

Types of expenses according to the ownership of the organization

The spectrum of business and economic spending is itself a broad set of different spending modalities.

Organizational operation inexorably supposes the existence of administrative expenses, financial expenses, purchase expenses or personnel expenses, among others.

It is also important to note the difference between public spending and private spending:

  • Expenditures in the private sphere: Every individual and every society (mainly private companies) belonging to the sphere of the private sector would be included in this modality.
  • Expenditures in the public sphere: This is the accumulation of expenses made by an Administration, as well as all public institutions, for the exercise of its activity. Additionally, every public company has regular and intrinsic expenses to the economic activity it carries out.

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