How to Budget for Variable Expenses

Variable expenses are costs that change over time. Creating a budget can help you manage their volatility.
Lauren Schwahn
By Lauren Schwahn 
Edited by Kirsten VerHaar
How to Budget for Variable Expenses

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It’s hard to feel in control of your finances when many costs are out of your hands. Fixed expenses such as car payments generally stay the same, but variable expenses change over time.

Variable expenses usually aren’t as predictable, but they often allow more flexibility in your budget. Let’s take a closer look at how you can plan for them.

What are variable expenses?

Variable expenses are costs that change over time, such as groceries or movie tickets. Because these costs might fluctuate over a week, month or year, it can be challenging to pinpoint what you’ll spend. These costs might fluctuate over a week, month or year. Some are vital, like groceries, and others, like movie tickets, are optional.

Variable expenses are costs that change over time. They might fluctuate over a week, month or year.

Costs can vary due to price changes — say, if your city’s bus fare increases — or because of how much of something you buy and how often you do so. For example, say your neighborhood bakery is famous for its $1 muffins. You might normally treat yourself to one muffin each week, spending $4 on average per month, but some months you might indulge more and spend $10 or $15.

Some variable expenses fit both scenarios. The cost of gas and certain utilities such as electricity and water depend on how much you consume and changing rates. Other examples include clothing, vacation costs, holiday gifts and eating out.

Before you build a budget
NerdWallet breaks down your spending and shows you ways to save.

Tally your variable expenses

As with all expenses, find out how variable expenses affect your overall financial health. First, track your monthly spending and deduct the total from your income. Ideally, you’ll have money left over rather than a zero or negative balance.

Separate your variable expenses from your fixed expenses to estimate how much you spend on the former. Then you can decide if that amount aligns with your budget.

Set limits and find ways to save

Use the 50/30/20 budget calculator to learn how to divvy up your money toward needs, wants and savings, noting which category each variable expense falls under. Don’t forget to include your emergency fund; some variable expenses, like car repairs, pop up unexpectedly.

While you can’t control the changing prices of categories such as gas and groceries, you can take charge of how you manage these costs. Explore ways to save money on groceries, car costs and other specific variable expenses, or try a budget app.

The envelope system is one budgeting method that can help you balance your variable expenses. You start by assigning categories such as entertainment and transportation to individual envelopes. Then, allocate a certain amount of money to each one and spend only what you’ve designated. This way, you’ll know exactly how much cash you have to cover these shifting expenses.

Revisit your spending

Because variable expenses are not steady, it might be hard to anticipate what you’ll pay for them each month. But examining your transaction history can help you learn your patterns and be aware of the general cost so you can adjust your budget if necessary. Even if you can’t control prices, you still have the power to set a limit on how much and how often you spend.

Lauren Schwahn is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @lauren_schwahn.