What Is the Definition of Recurring Expenses?

A recurring expense is a financial obligation that occurs on a regular, predictable basis. These are ongoing costs paid at consistent intervals, such as weekly, monthly, or annually. Because these costs are anticipated and can be planned for, they are a foundational component of financial planning and help distinguish them from other types of financial outlays.

Identifying Common Recurring Expenses

Personal Recurring Expenses

For an individual or household, many recurring expenses are tied to daily living and maintaining a certain quality of life. These include:

• Housing, which takes the form of monthly rent or mortgage payments.
• Transportation, encompassing monthly car loan payments and auto insurance premiums.
• Utility bills for services like water, gas, and electricity.
• Subscription services, from streaming platforms to gym memberships.

Business Recurring Expenses

In a business context, recurring expenses are the predictable costs necessary to maintain daily operations. These costs can include:

• Rent or lease payments for office, retail, or warehouse space.
• Employee compensation, including salaries, wages, and associated payroll taxes.
• Fees for services and software, such as CRM systems, accounting software, and website hosting.
• Insurance premiums for general liability, workers’ compensation, or commercial property.

Fixed vs Variable Recurring Expenses

Recurring expenses can be separated into two categories based on whether the payment amount changes. The first type is a fixed recurring expense, where the amount paid remains constant with each payment cycle. This predictability makes them straightforward to incorporate into a budget. Common examples include a mortgage payment, a car loan, or rent, where the amount due is stipulated in a contract and does not fluctuate.

The second category is a variable recurring expense, which also occurs on a regular schedule, but the amount due changes with each payment period. While the expense itself is predictable, the exact cost is not. A household electricity bill is a classic example; it arrives monthly, but the total depends on consumption. Groceries or raw material purchases also fall into this category, as the need is constant but the final cost varies based on usage and market prices.

Differentiating from Non-Recurring Expenses

Non-recurring expenses are costs that are infrequent, one-time, or unexpected and do not happen on a regular schedule. For an individual, a non-recurring expense could be a significant medical bill from an unexpected illness, the cost of a major home repair, or a large purchase such as a family vacation.

For a business, a non-recurring expense might include purchasing major equipment, expenses related to a lawsuit, or costs from a one-time restructuring event. These expenses fall outside the normal budget and are treated differently in financial analysis, as they do not represent a company’s ongoing operational efficiency.

The Role of Recurring Expenses in Budgeting

Identifying and totaling recurring expenses is a key step in creating a budget. By calculating the total of all recurring expenses, an individual or organization can determine the minimum income required to cover ongoing commitments. This figure serves as the starting point for all other financial planning.

This calculation clarifies how much income remains after all regular obligations are met. The leftover amount can then be allocated toward other financial goals, such as saving, investing, or paying down debt. For businesses, tracking these expenses is a component of forecasting future cash flow needs and ensuring sufficient funds are available to maintain operations.