Wise Certification Practice Test

Electricity and food expenditures are categorized as variable expenses because these costs can fluctuate based on consumption and lifestyle choices. For example, electricity bills can vary depending on usage, seasonal changes, and energy-efficient practices. Similarly, food expenses can change based on dietary choices, shopping habits, and market prices.

Variable expenses are those that can vary widely from month to month, unlike fixed expenses, which are more consistent and predictable, such as rent or mortgage payments that remain the same regardless of personal consumption. Discretionary expenses refer to non-essential spending, like entertainment or vacations, which are not applicable to necessary costs such as food and utilities. Emergency expenses arise unexpectedly and typically do not fall under regular monthly costs like utilities or groceries. Thus, categorizing electricity and food as variable expenses accurately captures their nature of fluctuating costs associated with daily living.