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** This lesson is generated with AI assistance and approved by Danny Nelson. This lesson will communicate the essence of the topic for now until Danny can create a full lesson. **
In personal finance, an expense refers to any money spent by an individual or household to acquire goods, services, or to fulfill financial obligations.
Expenses can be categorized into fixed costs, such as rent or mortgage payments that remain consistent each month, and variable costs, like groceries or entertainment that fluctuate based on usage or choices.
Tracking expenses is crucial for creating a realistic budget and identifying areas where spending can be reduced to increase savings or pay down debt.
Common examples include utilities, transportation, healthcare, and education, all of which impact one's net worth over time.
Managing expenses effectively involves prioritizing needs over wants to achieve long-term financial goals like retirement or emergency funds.