The Difference Between Fixed Expenses vs. Variable Expenses

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Did you know there are steps you can take to increase the power of your budget? One way to have a better budget is to define “fixed” vs. “variable” expenses.

Seeing the difference between the two categories can be helpful. It can help you minimize wasteful spending. That, in turn, can help you maximize wealth growth. It can quicken debt payoff or other financial goals too.

Working to fine-tune the details of your budget is important. Having clear knowledge of fixed and variable expenses can help do that.

What is a Fixed Expense?

A fixed expense is an expense that stays the same every single month. Some examples of fixed expenses you may have can include:

  • Your mortgage or rent payment
  • The payment for your car, student loan or other installment loan
  • Health care costs or other benefits deductions
  • Daycare costs for your children or pets
  • Child support or alimony payments
  • Gym or other membership costs
  • Homeowners’ association payments
  • Home alarm system
  • Education costs such as school tuition
  • Car insurance costs, if paid each month

Any payment that stays the same each month is a fixed payment. These payments are easier for you to budget for. This is because the amount you spend in fixed payment categories doesn’t change.

Let’s discuss variable expenses.

What is a Variable Expense?

A variable expense is one that fluctuates each month. Some examples of variable expenses you may have can include:

  • Utility bills such as electric, gas and water
  • Food expenses
  • Salon expenses
  • Expenses for personal items and toiletries such as toothpaste, shampoo, etc.
  • Recreation expenses such as eating out, concerts, etc.
  • Home maintenance costs such as light bulbs, cleaning supplies, etc.
  • Payments for activities for your kids (if they don’t occur year-round)
  • Money spent on gifts
  • Credit card payments
  • Medical and dental costs above your regular health care insurance dues
  • Auto costs such as gasoline, car maintenance and repair costs
  • Home repair costs
  • Vet bills for your pets

Variable expenses are expenses that change every month. Or, they are expenses that don’t occur every month.

Variable expenses can add trouble to your budget. This is because they cause you to spend more in a month than you’re used to spending. Some examples include car or house repairs. If you get a large, unexpected repair bill it can ruin your budget big time.

However, there are steps you can take that will help avoid those surprises. As a result, your budget will bring less stress and more peace.

How to Manage Fixed and Variable Expenses

You can create a budget that accounts for fixed and variable expenses. Doing so will help you bring peace to your financial plan.

Managing fixed expenses is easy. They’re the same every month. You know what you have to pay for your house payment, your car payment, etc.

As you budget for fixed expenses there’s less fear and stress about those numbers. This is because you know what’s due for payments..

However, there are still ways you can reduce fixed expenses.

Reducing Fixed Expenses

Did you know that you can reduce many fixed expenses? Here are some tips on how you may be able to do that.

Comparison Shop

You can reduce some fixed expenses by comparison shopping. By doing some comparison shopping, you may find cheaper prices for:

  • gym memberships
  • salon costs
  • daycare costs
  • auto insurance

And more. Do some comparison shopping on these types of expenses. Check out the different options available in your area. Call different insurance companies. Talk to different daycare providers.

Search prices at other salons. Work to get the same quality service for less money.

Refinance or Trade Down

You can find ways to reduce fixed expenses such as car or house payments. Some ideas for reducing those types of fixed expenses include:

  • Pay off your car and commit to driving it into the ground
  • Trade your car in for a cheaper model
  • Refinance your home to get a lower interest rate and thus, lower payments
  • Downsize from your current home into something less expensive
  • Refinance student or other installment loans to a lower interest rate

Work to reduce the totality of fixed expenses where you can. You’ll  gain income to put toward other financial goals by doing so.

Stabilizing Variable Expenses

Those variable expenses can bring havoc to your budget. Do you have a family? Do you find yourself spending $1000 on food one month and $1200 the next?

Or spending $300 on toiletries one month and $150 the next? You might have a large vet bill in a given month. Utility bills (such as the furnace or air conditioner) can fluctuate. So can recreation expenses.

Those changes in your budget can make it difficult to manage money. That uncertainty can create stress. Here are some tips for stabilizing variable expenses. Doing so will help bring peace to bill-paying time.

Create Your Budget in a Manner that Stabilizes Variable Expenses

Commit to only spend a maximum amount for each variable expense.

For instance, you can set a grocery spending limit of $300 if you’re single. If you’re feeding a family you can set a limit of $1000. Find a number that works for you and stick to it.

Or give yourself a maximum to spend on recreation each month. Maybe that number is $150. Maybe it’s $300. When the money in a given expense category is gone, it’s gone. If you run out of grocery money you’ll have to eat from what you have. Recreation ideas will have to be free.

Using the Cash Envelope System can help with managing variable costs. Put your budgeted amount for each category in its own envelope. Pay expenses out of the cash in the envelope. This helps ensure you won’t go over the budgeted amount.

Managing food costs in this manner will take work. You may have to create a plan each week. Menu plans can help you stay on track with grocery spending.

For recreation expenses, you may have to choose other ideas. You can say “yes” to some ideas. Or you may have to choose a less expensive alternative instead.

As an example, let’s say your friends want to go to a theater. Movies at theaters can be costly. To save money you could offer to host a movie night at home with your friends.

Give yourself a cap on spending in certain categories each month. Doing so can help you budget better. In addition, it can help keep a cap on fluctuating expenses. This will ensure overspending doesn’t send your finances into a tailspin. That can happen when you’re spending without a budget.

Divide Your Fluctuating Expenses into a Fixed Monthly Amount

Some expenses put a serious dent into a budget if they’re unplanned. Think annual car insurance or car repairs. Or unexpected home repairs.

You don’t get an advanced letter stating which month your water heater will go out. Or when your transmission will fail.

The solution? Budget for unplanned expenses. Have a fixed amount that will go into a separate envelope each month. Or into a separate savings account.

For example, let’s say your car insurance costs $600 per year. It’s due in January. To prepare, you can put $50 per month into a separate savings account each month. This way the money is there to pay your car insurance when necessary.

Or, you can put $100 per month into a car or house repair fund. This way you’ve got cash set aside to cover large car or house repairs.

Budgeting amounts each month is a great way to save for other expenses too. You can use this method to save for vacations. Or to save for replacement vehicles and other larger expenses.

Plan a fixed amount that will go into each separate fund. This will help you stabilize your budget and reduce the surprise expenses.

Doing so will help you avoid having to put unplanned expenses on credit too.

Pay Off Debt Faster

Creating a fixed expense can work to pay credit cards off faster too. When you pay on your credit card, the minimum payment amount goes down each month.

This reduction in payments may seem like a bonus to your budget. However, it will increase how long it takes to pay your credit card in full. In addition, it’ll increase the amount of interest you pay each month.

Instead, choose to pay a fixed amount on your credit cards each month. Do this even though your required minimum payment is going down.

Using this technique will help you stabilize your budget. Bonus: it’ll help you become debt free faster as well.


Knowing fixed and variable expenses in your budget is important. It can help you create a budget that reduces your stress level. And it can increase your financial stability at the same time.

Better money management helps create the financial peace we all desire.

Have you ever considered the difference between fixed and variable expenses? How do they impact your budget? Have you ever had an unplanned expense throw your finances into an uproar? Share your thoughts on Facebook.

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