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It can be hard to feel in control of your finances when so many costs are out of your hands.
Even if fixed expenses, such as rent and car payments, stay the same, variable expenses can change, sometimes rapidly.
Let’s take a closer look at the difference between these two types of expenses and 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. Some variable expenses are vital, like groceries, and others, like concert tickets, are optional.
Variable expenses that you may be paying include:
- Gas.
- Groceries.
- Dining out, takeout and delivery.
- Entertainment (concerts, movies, sporting events, etc.).
- Clothing.
- Travel.
Costs can vary due to rate changes — think gas prices — 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 mini 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 certain utilities, such as electricity and water, depend on how much you consume and changing rates.
What are fixed expenses?
Fixed expenses are costs that usually stay the same over time, meaning they are regularly occurring and generally don’t change in dollar amount. Unlike variable expenses, fixed ones tend to be predictable and therefore easier to plan for.
Common examples of fixed expenses include:
- Rent and mortgage payments.
- Phone bills.
- Insurance premiums.
- Car or other loan payments.
- Cable or streaming service bills.
- Subscription services.
- Child care or tuition costs.
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How to budget for any expense
Tally all of your expenses
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 both.
Many budgeting apps and bank websites will highlight your recurring expenses or break down your entire transaction history by category. Then you can decide if the amounts you're spending align with your budget.
Set expense limits and find ways to save
Use the 50/30/20 budget calculator to learn how to divvy up your money between needs, wants and savings, noting which category each variable and fixed expense falls under.
How to save on variable expenses
You can’t control the changing prices of categories such as gas and groceries, but you can change how you manage these costs. Explore ways to save money on groceries, car costs and other specific variable expenses. For example, you could use coupons or cash-back credit cards to reduce costs.
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.
» Learn more ways to budget
How to save on fixed expenses
The term “fixed expense” can be somewhat misleading. Just because an expense is fixed doesn’t mean there’s no wiggle room.
You still have the power to negotiate prices and explore alternatives in certain cases. For example, you might be able to lower your cable bill, save on car insurance or refinance your student loans.
If you’re spending more on fixed expenses than you prefer, consider canceling the services you don’t need and revisiting the ones you do.
Setting up automatic bill payments can also help you stay on top of fixed expenses and avoid late fees.
Revisit your spending
Keep an eye on your variable and fixed expenses over time. 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.
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