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How to Budget for Variable Expenses with Examples

Inside: Are you struggling to keep up with your variable expenses? Whether it’s groceries, gas, or rent, managing these costs can be daunting. This guide will teach you how to budget for variable expenses and reduce the strain they put on your wallet.

Understanding and effectively managing your variable expenses is a crucial aspect of maintaining financial health.

These are expenses that fluctuate on a monthly basis, such as groceries, fuel, and entertainment. Their inconsistency can make budgeting a challenging task.

For many people, this is where they give up on budgeting because variable costs can sway too much for the average budgeter to know what to do.

Around here at Money Bliss, we know those who efficiently manage their variable expenses tend to fare better in achieving their financial goals. Furthermore, it empowers you to anticipate, plan and manage costs better, and avoid unnecessary financial stress.

Our focus here will be on explaining how variable expenses can make notable changes to your personal budget and offer strategies to manage them effectively.

Are you struggling to keep up with your variable expenses? Whether it's groceries, gas, or rent, managing these costs can be daunting. This guide will teach you how to budget for variable expenses and reduce the strain they put on your wallet.

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What is a Variable Expense?

A variable expense is a cost that changes from month to month.

Unlike fixed costs that are paid at regular intervals and may endure only slight fluctuations, variable expenses undergo a higher degree of fluctuation depending on consumption or quantity used. These expenses can comprise costs such as groceries, entertainment, and fuel for your car.

What primarily distinguishes a variable expense is its potential to vary from one period to the next, making it an important calculation in accounting for a comprehensive monthly budget.

Knowing the intervals of these variable costs can enhance the accuracy of your budgeting, turning this challenging aspect into an opportunity to reduce costs.

What is an Example of a Variable Expense?

Image of the groceries stuff and defining as one of the examples of variable expenses.

Variable expenses typically entail a high degree of personal discretion and vary substantially between individuals. While one person may see dining out as a variable expense, for another, it may be a rare treat. Either way, it is still an example of variable expenses.

Here are a few typical examples:

  • Groceries: You decide what food to buy, and it depends on your food preference, the number of people at home, and special dietary needs.
  • Gasoline: This expense is dependent on how much and how far you drive.
  • Utilities: Electric, water, and gas bills fluctuate based on usage.
  • Clothing: The cost can vary each month depending on how often and how much you choose to buy, such as seasonal shopping, special occasions, or replacing worn-out items.
  • Gifts: Costs can fluctuate depending on the occasion, person, and your personal budget for the period, making them unpredictable and potentially impacting your monthly budget plans. Especially for Christmas gifts.
  • Entertainment: Costs such as movie tickets, concerts, or amusement parks may vary depending on your social life.
  • Repairs: Costs for home and car repairs are unpredictable and can markedly vary. Essentially, any expense that is not fixed (like rent or car payment) can be considered a variable expense.
  • Taxes: Yes, even your taxes are variable based on your income.

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Difference between Fixed and Variable Expenses

Understanding this difference is a significant step toward setting realistic savings goals

Fixed expenses are constant costs that remain the same each month, like rent, insurance premiums, car payments, or childcare. They’re predictable, making them easier to incorporate into your budget without unexpected surprises.

On the contrary, variable expenses fluctuate month-to-month and include items like groceries, utilities, gas for your car, or entertainment. The unpredictability of these costs can cause potential challenges in budgeting and limit the consistency of your financial output.

Nevertheless, variable expenses often present more opportunities for saving.

You have greater control over these costs, giving you a chance to limit expenditure and prioritize savings.

How to Budget for Variable Expenses

Image of a woman computing and budgeting her variable expenses in a month.

Personal budgeting is an essential tool. Despite variable expense’s unpredictability, it is possible to plan for these expenditures by applying practical tactics and strategies.

From using budget apps to examining previous spending patterns, this type of budgeting enables you to maintain control over your finances and make adjustments as necessary.

50/30/20 Budget: An Effective Approach

The 50/30/20 budgeting approach is a simple yet effective method that can help you manage both fixed and variable expenses.

This method suggests you divide your after-tax income into three categories: 50% on necessities, 30% on wants, and 20% on savings or debt repayment.

By categorizing this way, you ensure your most critical outlays (the necessities ) first. You then allocate your income towards discretionary spending (your wants), and finally squirrel away a portion for savings (hopefully 20%) or paying off debts. This budget calculator strategy can serve as a foundation to guide your spending, helping you to stay on top of your finances.


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Zero-Based Budget

A zero-based budget is a technique where you make a budget from scratch or “zero” and allocate every dollar of income towards different categories of expenses until they sum up to zero at the end of the month.

This budgeting strategy, very popular due to the budgeting app, YNAB, can be a rewarding technique that solicits justifying every expense’s worth as you give every dollar a job.

Distributing money toward fixed costs is usually shoo-in, but budgeting for variable costs can be tricky because you won’t know how much you’ll spend on them. The solution is to estimate as closely as possible.

The beauty of a zero-based budget is that it ensures your money is purposefully allocated, leaving no room for unexplained spending especially when used with sinking funds.


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Envelope Budgeting System

Picture of the envelope with cash inside as a representation of envelope budgeting system.

The envelope budgeting system is a successful method for managing variable expenses. By dividing your income into envelopes assigned to different categories like entertainment, groceries, or transportation, control over fluctuating costs is established.

With each paycheck, you determine a specific amount for each category and stuff that envelope with cash. By strictly adhering to this limit, you thereby avoid overspending.

This hands-on approach provides an exact idea of available cash and creates a stronger sense of financial accountability. In fact, recent data indicates that the envelope system has successfully helped many people stay within their budget, primarily by making expenditures more tangible and easier to track.1

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What is most likely the reason variable expenses should be planned after fixed expenses?

When preparing a budget, it’s typically suggested to plan for fixed expenses first before variable expenses.

The primary reason is that fixed expenses are generally non-negotiable costs that are essential to your daily life and take up much of your budget. These costs are predictable and regular, making them easier to budget for.

Variable expenses, on the other hand, tend to fluctuate and often include discretionary spending like dining out, shopping, or entertainment. This category, despite its variability, carries a certain upside as you possess more control over these expenses than your fixed ones.

By planning for fixed expenses first, you ensure to cover your essential needs before budgeting for lifestyle choices and discretionary spending, which can flex more easily around your remaining income.

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Tips to Control Variable Expenditures

Picture of tips for variable expenditures and how to control and budget it.

Managing and controlling variable spending is an essential aspect of sound financial planning.

Honestly, the more proactive you are in monitoring the continuous changes in variable expenses and introducing strategies to suppress any unnecessary hikes, the faster you will reach your goals.

This section will provide insights into various effective methods to control variable spending, as well as the behavioral adjustments needed for successful implementation.

Tip #1 – Save on fixed and variable costs

Everyone wants to save money and here are a few tips on reducing both fixed and variable costs:

  • Fixed costs: Considering these costs are more constant, savings can usually only be achieved by longer-term changes. This could be refinancing your mortgage for a lower rate, negotiating a lower car insurance premium, or switching to a cheaper phone plan.
  • Variable costs: Changes in habits can lead to significant savings. For instance, cooking at home instead of dining out, carpooling or using public transport to save on gas, or unplugging electronics when not in use to save on utilities.

By scrutinizing both types of costs, you can identify opportunities to cut back and increase your savings over time. Being frugal green is a huge topic! Remember, the little things can add up!

Tip #2 – Set expense limits and find ways to save

Picture of tips and ways to save and limit your expenses.

Budgeting requires discipline, and setting limits on your variable expenses is a big part of that. You can do this in three ways:

  1. Start by reviewing your spending patterns: examine your transaction history to identify areas of overspending. Once you’re aware of these, set spending limits that align with your financial goals. Drawing from my experience, I can assure you that awareness of overspending areas, followed by setting spending limits, can significantly align with your financial goals.
  2. Consider taking part in a no spend challenge. Personally, that is when I realized I spent a lot of money on things that didn’t matter to me in the end.
  3. Adopt practical money-saving habits like adopting DIY approaches (e.g., home repairs, sewing, cooking), utilizing coupons and cash backs, shopping secondhand, or carpooling.

Remember, you have control over your variable expenses, and setting restrictions doesn’t mean depriving yourself. It just means making informed decisions and prioritizing your spending according to your financial goals.

Tip #3 – Use Sinking Funds

A sinking fund is an effective money management strategy that can help handle variable costs. It’s a fund where you regularly set aside a certain amount of money for a specific expense. For instance, you might establish a sinking fund to cover property taxes or unexpected costs (but they will happen) like car maintenance, vet bills, or holiday gifts.

When the time comes for these expenses, you won’t have to scramble to find the money because you’ve already collected a fund over time.

This approach can ease financial stress and prevent unplanned debts, making sinking funds an excellent remedy to unexpected variable expenses. For us, this is when we maximize the placement of our hard-earned money across multiple bank accounts.

FAQs about Variable Costs and Budgeting

While all expenses matter, we generally advise budgeting for fixed expenses first. These are critical costs that typically stay constant month-to-month, like rent or mortgage payments, insurance, and fixed utilities.

Allocating money toward these essential costs first ensures that you’re covering your necessities. Once you’ve accounted for these, you can then budget for variable expenses which are discretionary and fluctuate based on personal usage.

Thus, it helps you realize your spending habits and identify areas where you can cut back if needed.

Yes, entertainment is typically considered a variable expense. These costs vary month-to-month based on your discretionary spending habits.

For instance, your spending on concerts, movies, dining out, or subscriptions can fluctuate based on your lifestyle, events, or personal choices. Remember, since entertainment costs are discretionary, they can often be trimmed when looking to make budget adjustments.

Ready to Master your Variable Budgets?

Image of the woman hand budgeting and computing the variables expenses.

Understanding the ins and outs of variable expenses and strategizing accordingly can empower you to manage your money more effectively.

By distinguishing between your fixed and variable expenses, budgeting effectively, and identifying potential savings, you’re setting yourself up for financial success.

Whether you’re using the 50/30/20 budget approach, a zero-based budget, or sinking funds, the goal is to ensure your money is being used wisely. It’s all about creating a balance that nurtures a comfortable lifestyle while paving the way toward your future financial goals.

So review your inconsistent costs, implement new financial strategies, and take control of your variable expenses.

The key takeaways is a well-planned budget is not just beneficial for controlling spending, but also integral to your financial freedom.


  1. Ramsey Solutions. “How to Budget With the Cash Envelope System.” https://www.ramseysolutions.com/budgeting/envelope-system-explained. Accessed November 28, 2023.

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