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What’s considered a living expense, and why is this important in setting my budget? There’s one major difference between living expenses and debt, and it’s important to differentiate them.

So what are living expenses? Living expenses is another way to say the cost of living, and Investopedia.com defines the cost of living as “the amount of money needed to sustain a certain standard of living by affording basic expenses such as housing, food, taxes, and healthcare.”

In other words, living expenses are items that everyone must pay to live. You can’t really avoid it. Certain cities have a higher cost of living than others which is why it’s important to make sure your salary in those cities compensate for the higher standard of living.

In the video below, I provide an example of a living expense versus debt payment and show you how you can keep track of them.