Which type of expenses are categorized as non-essential?

Non-essential expenses are often referred to as discretionary expenses. These are costs that are not mandatory and can be adjusted or eliminated from a budget without impacting essential living standards. Discretionary expenses include things like dining out, entertainment, vacations, and hobbies. Unlike fixed expenses, which are consistent and necessary (such as rent or mortgage payments), or variable expenses, which can fluctuate but are often needed for day-to-day living (like groceries or utilities), discretionary expenses are driven by personal choices and preferences.

Emergency expenses are associated with unexpected costs that arise, such as medical emergencies or car repairs, and are also considered essential since they address immediate needs.

Understanding the distinction between these categories is crucial for effective budgeting and financial planning, allowing individuals to prioritize essential needs while managing discretionary spending based on their financial goals.