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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Part of creating a budget is distinguishing between fixed and variable expenses: Fixed expenses: These are costs that largely remain constant, such as your monthly rent or mortgage. Variable expenses: These are costs that vary or are unpredictable, such as dining out or car repairs. Definition of fixed expenses
Fixed expenses are those that remain constant within your budget, though they may change occasionally, for example, if you switch to a new cellphone service provider or your landlord raises your rent. Fixed expenses are paid at regular intervals and may vary slightly, change significantly or stay the same, depending on the type of expense. Monthly expenses are common, but fixed expenses may also occur weekly, quarterly, twice a year and yearly. Knowing your bills’ intervals can help in budgeting. If you pay twice a year, for example, divide the payment premium by six to get the monthly cost and add that amount to your monthly budget. Examples of fixed expenses
Examples of fixed expenses include: Rent or mortgage payments Car payments Other loan payments Insurance premiums Property taxes Phone and utility bills Child care costs Tuition fees Gym memberships Definition of variable expenses
Variable expenses change regularly and may be directly influenced by the choices you make day to day. Unlike fixed expenses, variable expenses can be less predictable and more volatile, which isn’t to say that variable expenses aren’t necessary; many essentials fall into this category. Because of their unpredictable nature, some households struggle to track and budget for variable expenses. Unless you add up every grocery receipt or , you may not know how much you spend on food every month, for example, making it easy to overspend without realizing it. For help with budgeting to categorize spending and identify ways to cut expenses. Some variable expenses can be more easily controlled than others. When purchasing clothing, for example, you can opt to buy cheaper items or wait for a sale to save money. Other variable expenses can’t be controlled, such as emergency medical expenses. If you get sick and need to see a doctor urgently, you may need to cover some or all of the costs, depending on whether you have health insurance. Examples of variable expenses
Common variable expenses include: Groceries and dining out Clothing Personal care Entertainment Gasoline Home and car repairs Medical bills Budgeting for fixed and variable expenses
for essential expenses first, such as housing, car payments and child care. Most essentials are fixed expenses, and it’s important to ensure these are covered each month before you decide how much you’ll devote to variable expenses like entertainment and dining out. It’s also important to track nonessential spending, which can target areas for if you want to save more money each month. The can help you budget for fixed and variable expenses. It calls for allocating 50 percent of your money to be set aside for things you need, 30 percent to nonessential things and 20 percent to savings. How to save on fixed and variable costs
If you’re looking for ways to reduce your monthly expenditures, start by reducing your fixed or variable costs — or both. Saving money in either category is possible, but the process for each can differ. Fixed expenses can take more time to adjust, though it’s still possible to cut costs. Rent, for example, can be reduced by finding a cheaper home or apartment, but you may have to wait until the lease expires to avoid losing a security deposit or paying a fee. On the other hand, some variable expenses are much easier to adjust in a pinch. If an comes up and leaves you short on cash for the month it can be difficult to reduce fixed expenses like car or rent payments to make ends meet. Bringing down variable expenses, however, is usually possible. For example, you can trim your grocery bill and avoid dining out or purchasing nonessential items. Bottom line
No matter how much you spend each month, your expenditures include both fixed and variable expenses. Understanding the difference is key to planning your budget and spending your money more wisely. By dividing your expenses into fixed and variable categories and accounting for all of them in a monthly budget, you can get a clearer picture of where your funds are being allocated and spot opportunities to reduce costs. –Freelance writer Lisa Melillo contributed to a previous version of this article. SHARE: Karen Bennett is a consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters. David Schepp is a wealth editor for Bankrate, focusing on deposits and consumer banking content. Chloe Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta and serving clients nationwide. Related Articles