Financial Education

How to budget for variable expenses: take control of your finances

Are you having trouble budgeting for your variable expenses? This guide will show you how to take control of your finances and make sure they don't spiral out of control.

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It is essential to consider all expenses in your budget

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Learn how to budget for variable expenses! Source: Adobe Stock

Most people know how to budget for fixed expenses like rent, car payments, and insurance. But when setting a budget for variable expenses, they can be less sure of how to proceed.

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This can lead to a lot of financial stress if something unexpected comes up.

Fortunately, there are some tips you can follow to make sure you have the money you need for variable expenses. Keep reading to learn more!

What is the difference between fixed and variable expenses?

Before setting your variable expenses budget, it is important to understand the difference between fixed and variable expenses.

Fixed expenses are the ones that won’t change monthly. They are related to your essential expenses and monthly needs to maintain your basic living standards.

The most common fixed expenses include rent or mortgage payments, cell phone service, internet service, health insurance, life insurance, childcare expenses, and student or car loan.

On the other hand, we have variable expenses, which can fluctuate month to month based on what’s going on in your personal life. The most common variable expenses will include:

  • Gas
  • Electric bills
  • Water
  • Parking fees
  • Personal care expenses
  • Groceries
  • Entertainment
  • Clothing
  • Home maintenance
  • Personal care expenses
  • Healthcare expenses

The variable expenses will increase or decrease depending on your current needs.

Knowing which expenses are which can help you create a realistic budget and stay on track with your spending goals.

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Should you include variable expenses in a budget?

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Find out if your should start budgeting for variable expenses or not! Source: Adobe Stock

If you’re wondering if adding in variable expenses when creating your budget is necessary, the short answer is yes!

Variable costs are not always concrete, and it’s hard for them not to show up until after you’ve already spent the money!

But if we want to create an accurate budget that will help us stay on top of our financial lives, then this is one area where adding those little extra numbers from time-to date won’t hurt at all.

On the surface, it may seem like there’s not much room for variable expenses in your budget since they’re harder to adjust.

But with some clever planning and delegation skills, you can ensure that everything gets done!

5 ways of managing variable expenses in a budget

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Learn five tips on how to budget for variable expenses! Source: Adobe Stock

No matter how diligently you plan your budget, there are always going to be some expenses that vary month to month.

Managing these variable expenses is key to keeping your budget on track. Here are five ways to do just that!

Track your variable spending

This is the best way to get a handle on how much you spend each month on variable expenses.

When you track your variable spending for a few months, you can understand where your money is going.

Also, this will help you identify the areas you spend more or less and give you an overview of your expenses. This way, you can adjust your budget to match your current finances.

Negotiate a fixed amount for utilities

Negotiate fixed-rate billing with your service provider to avoid the hassle of switching between different rates for your utility services.

This will ensure the same monthly amount and help reduce budget fluctuations for long-term projects or goals.

This stability will decrease costs over time instead of increasing them yearly, as some companies might do.

Use finance software for variable expenses

Variable expenses, such as electricity and water, vary on what you’re doing at any given time, making it difficult to predict how much will be spent each month!

That’s why investing in technology is always a good option! This will help you plan ahead so you know exactly where every penny goes without having surprises.

Plenty of finance software options help you track and manage your budget and stay on top of your finances.

Create some cushion

Once you’ve estimated your monthly variable expenses, review the past five years to see how they worked.

When you have this baseline, add 3% to 5% as a cushion for any price increases and other anomalies that are outside your control!

The leftover amount can then go towards discretionary funds if needed.

Build an emergency fund

If you’re looking for an extra safety net against unexpected volatility, save any extra money left over at the end of your budgeting process.

This way, you can use these savings for a rainy day. You can set up a special bank account for it. This will provide not only peace of mind but also interest in those funds!

Bottom line

It can be tough to budget for variable expenses, but it’s worth it!

By taking control of your finances and tracking your spending, you can stay in control and be prepared for unexpected emergencies! And most importantly, start today!

Now that you know how to set a budget for any variable costs, it’s time to learn the types of income you can have.

After all, the more we know about finances, the more control we have! So read the next article to learn more!

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About the author  /  Beatriz Vieira

Beatriz Vieira is a producer and copywriter who is part of the finance writer team in this portal. She has a degree in Journalism and aims to improve her bilingual writing skills. Her subjects of most significant interest are culture, finances, and self-development.

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