Here’s How to Plan for Variable Expenses

You may feel like losing control of your finances if expenses are going out of hand, or are something that you feel is behind your control.

There are two types of expenses basically: fixed expenses and variable expenses. Fixed costs or expenses are those that remain the same over time, while variable expenses vary over time. These are not fixed, and therefore can be hard to budget for. These are not predictable, but there is one advantage in them. They do allow for a certain amount of flexibility in your budget that can be invaluable.

In this article, we shall show you how you can plan for variable expenses.

What are variable expenses?

Variable expenses, or variable costs, are those which change over time. These include grocery costs, movie tickets, and the like. Since these costs fluctuate within weeks, months or over years, it can be hard to budget for them or to save up for them.

However, you should remember that some variable costs are vital while others are optional. For instance, groceries are vital while gym membership can be optional and you can workout at home!

Another reason behind the variable expenses is due to a fluctuation in price. For instance, you may suddenly see that your transport costs have risen over just a few days, or even on the very next day! Even a rise of a few rupees can have an impact on some budgets.

Or for instance, let’s say that you like to treat yourself each day after work to Rs. 20 burgers. However, suddenly you see that the price has increased to Rs. 50/burger. In such a case, you may choose to discontinue treating yourself like this, or you may choose to cut down on some other expenses to continue treating yourself like this.

Then again, there are some variable costs or expenses which fit both scenarios. Costs of gasoline and utilities like water and power depends on how much you consume. Want more examples? How about vacation costs, clothing, holiday gifts, eating, and etc.?

Like all expenses, you not only need to keep a track of these, but also need to find out how these variable expenses are affecting your personal finance overall. Here is what you can do: 

1. Track your month expenses

2. Deduct this from your monthly income

You’ll most likely get a positive balance. Rarely, and we hope not, will you get a zero balance or a negative balance. 

Deduct your variable expenses from your fixed expenses. This shall give you an estimate of how much you’ll have to spend on the former. You can then decide and determine the amount which aligns with your budget.

Find how you can save

The easiest way to find out how much you can and should save, use the 50/30/20 budget. According to this budget strategy, you set aside 50% of your monthly income for your needs, 30% for your wants, and 20% for your savings.

As you can see, this budget gets all elements of your personal finance covered. It’ll be even better if you can automate these tasks. Oh and by the way, the 20% includes contributing to your emergency fund and retirement fund too. In the 30% set aside for wants, this is the place for variable expenses.

Wants are something you can do without if you choose to, and therefore you can save quite a bit here. You can’t control price changes of groceries and of gas, but you can control how to manage how much goes into them and how. 

Revisit your spending

It is hard to anticipate for and pay for variable expenses. However, by examining your transaction history, you can get to learn your spending patterns. You can know about the general cost as well, which allows you to adjust your budget when needed.