Examples of Variable Expenses
Let’s talk about a big variable expense—food. How much you spend on food depends on your lifestyle and diet. Here are some examples of variable expenses related to food:
Eating out: This could include anything from fast food to going out for a nice dinner. If you eat out often, it can really add up.Groceries: This is what you need to buy to cook at home. The cost of groceries can vary depending on where you shop and what you like to eat.Coffee: Whether you buy your coffee every day or just on weekends, it’s a variable expense that can add up over time.
There are ways to control variable expenses on account of food by making choices that help reduce your food budget.
How To Budget for Variable Expenses
One of the key elements to gaining financial stability is learning how to budget your variable expenses. Since they are unpredictable, variable expenses may come up when we least expect them and derail our spending plans for the month. And because they fluctuate, variable expenses can be difficult to budget for. This is where calculating the average cost of your variable expenses can come in handy. For instance, say you spent $400 on groceries in January, $500 in February, and $450 in March. That averages out to $450 a month. Now that you have this number to work with, you can budget $450 every month for groceries—even though it’s a variable expense. If you spend less than the average one month, leave the money you didn’t spend alone so it’s there if you overspend the next month. Other ways of budgeting for unreliable variable expenses could include zero-based budgeting where you assign every dollar from your income toward expenses and savings. You could also follow a pay-yourself-first budgeting approach, where you use money first to fund your goals and then work backwards to come up with money you have left over to deal with expenses. Or you could rely on the good old envelope budgeting method, creating different envelopes for income and expenses.
Variable Expense vs. Fixed Expense
There are two types of expenses: variable and fixed. So, what’s the difference?
Variable expenses: Change depending on how much you buy, like groceries or gas. Fixed expenses: Stay the same each month, like rent or a car payment.
It’s important to understand how much of your expenses are fixed and how much are variable so you can budget your money properly. Fixed expenses are always easier to account for because they don’t fluctuate as variable expenses do. This means that you can easily plan for them by setting aside money each month to cover the cost. Variable expenses are more difficult to budget for because they can change unexpectedly. This requires you to be mindful of your spending, so you can stay within budget.
