However, if your fixed expenses are under 50%, then you have a lot of room to cut back your
discretionary expenses to weather a setback without having to eat up your savings and/or turn to
debt.
Suppose your fixed expenses are at 45% of your take-home income. That includes your
mortgage or rent, car notes, basic food expenses and anything that you cannot simply cut back on
if necessary.
Since nothing else is a fixed expense, all the rest – the other 55% – is discretionary and saving.
And discretionary spending and saving can immediately be cut to zero if necessary. Thus, you
have a full 55% of your take-home pay that you can cut back anytime to we