Fixed vs Variable Cost Structure

Executive summary

Household cost structure determines recovery speed. High-fixed-cost households take longer to cut burn after shock.

• Target fixed costs ≤ 50% of gross income
• Avoid lease commitments > 2 years
• Refinance to extend amortization on shock

Key takeaways

• Target fixed costs ≤ 50% of gross income
• Avoid lease commitments > 2 years
• Refinance to extend amortization on shock
• Negotiate fixed services annually

Key strategies

1. Strategy 1

   Target fixed costs ≤ 50% of gross income

2. Strategy 2

   Avoid lease commitments > 2 years

3. Strategy 3

   Refinance to extend amortization on shock

4. Strategy 4

   Negotiate fixed services annually

Pro-tips checklist

• Audit fixed costs quarterly
• Convert fixed to variable where possible

FAQ