What Is a Variable Expense?

You may already know that tracking your expenses is one of the first steps in learning to manage your finances. Fortunately, it’s easy to track payments that stay the same every month, like rent and car insurance. 

Along with these regular payments, you’ll also have variable expenses. If you don’t track them carefully, they can derail your budget without you even knowing. But what is a variable expense? Let’s take a closer look at how this type of expense can affect your financial goals.

What is a variable expense?

When you create a budget, you list each of your monthly expenses. Some of those expenses, such as rent, mortgage, or car payments, don’t change very often. Other expenses fluctuate from month to month. These are your variable expenses.

Variable expenses may change based on your needs, the economy, and your spending choices. Because they aren’t predictable, they make it harder to plan and track your finances.

At the same time, variable expenses can give you an opportunity to save money and have a little extra financial freedom. You might not be able to shave a hundred dollars off your rent each month, for example, but you could lower your grocery budget significantly by shopping at a less expensive store.

Common examples of variable expenses

If you’re wondering, “What is a variable expense?” it’s easier to understand the answer when you’re familiar with some common examples.

Utilities

For most utilities, you are charged based on usage. Costs tend to go up in the summer (when you might rely heavily on air conditioning) and the winter (when you might need to use your heater).

You can take a few steps to lower your utility costs. For example, setting the thermostat a few degrees cooler in winter could save you a little money every month.

Groceries

You can’t control rising food prices, but you can still probably lower your total grocery bill. Planning meals ahead of time, switching to less expensive brands, and shopping at discount grocery stores can give you a little breathing room in your grocery budget.

Gasoline

Your fuel costs can vary based on changes to your commute and fluctuating prices. Control what you can by avoiding unnecessary trips and trying to fill up your tank when fuel prices are low. 

Personal care

The personal care category includes haircuts, toiletries, and cosmetic purchases. Many people buy personal care products on an as-needed basis, so these expenses may be $0 one month and $100 or more the next.

Entertainment and dining out

Optional spending on restaurants, takeout, concerts, and other nonessentials can brighten your life. However, this is one of the easiest variable expenses to cut back on. If you’re running low on funds, keep your entertainment budget to a minimum for a while.

Car and home maintenance

In many months, your vehicle and home maintenance costs may be zero. However, if you need a sudden repair, this expense can skyrocket.

Variable vs. fixed expenses

Almost every budget includes both fixed and variable expenses. Fixed expenses are recurring costs that stay the same from month to month. These are some common examples:

• Rent or mortgage payments
• Homeowners’ or renters’ insurance premiums
• Health insurance premiums
• Car payments and car insurance premiums
• Internet service payments

If you’re like most people, fixed expenses will take up the majority of your budget. This makes it easier to plan ahead and anticipate your near-future cash flow.

How variable expenses factor into your budgeting goals

If you’re having trouble building an emergency fund or saving extra money, too much of your budget could be going toward variable expenses.

These are a few strategies for managing variable expenses to keep your finances on track.

Create a buffer

If one of your variable expenses is higher than you expected one month, you don’t want to find that you don’t have enough money to cover it. That’s why it’s a good idea to add a buffer to your monthly budget. 

In months where your variable expenses are lower, you should set aside that extra money. If you save it instead of spending it, there will be enough in your account when your variable expenses are higher.

Use the 50/30/20 budgeting rule

Budgeting is highly personal, but many people use some variation of the 50/30/20 rule:

• 50% of your money goes to needs
• 30% goes to wants
• 20% goes to savings

Some variable expenses (like utilities) are classified as needs, but things like entertainment and dining out belong in the “wants” category. Making sure they stay within the designated 30% can help you avoid overspending.

Set category caps

If there are particular variable expenses you tend to overspend on, set specific monthly caps. For example, you might decide to spend no more than $150 on dining out and no more than $100 on miscellaneous, nonessential purchases.

Why you should track your variable expenses

Keeping a close eye on your variable expenses helps you accomplish two important goals: getting a precise sense of your cash flow and identifying opportunities to cut your spending.

However, when you’re caught up in the challenges of daily life, it can be difficult to create an effective system for tracking expenses. That’s where we come in.

Grant Cash Advance helps qualified people access cash between paychecks. We also provide tools for tracking your spending and offer regular insights on how to better manage your money. It only takes a few minutes to get started. Create your account with us today!