Variable expenses

What It Means

Variable expenses are regular costs whose amount changes from month to month, such as groceries, gas, utilities that rise and fall with use, eating out and medical billsMedical debtMoney owed for health care, such as hospital, doctor, lab or ambulance bills; unpaid bills can go to collections and, in some cases, onto credit reports. See more. The Consumer Financial Protection Bureau (CFPB) sets them against fixed expensesFixed expensesCosts that stay about the same every month, such as rent, a car payment or an insurance premium, usually due on a set date. See more, which cost about the same every month. Since the amount moves, a budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more plans them from an average of recent months and keeps track as the month goes.

How It Sounds at Home

• "Groceries were way higher this month."
• "The electric bill doubles every August."
• "Gas is all over the place lately."

The Breakdown

Worked example. One household's last three months (made-up numbers):

What the result means. Budgeting $960 for these three costs covers a typical month. If every one of them hit its high at the same time, the bill would be $1,060, so the $100 gap is the cushion a tight budget needs somewhere. A cost that runs above its average several months in a row has probably moved for good, and the plan should move with it.

Keeping them in check during the month

• Check the running total for groceries and gas once a week, instead of waiting for the month to end.
• Expect seasonal swings, such as higher electric bills in summer or winter, and use the same months from last year when you have them.
• Give each variable category its own limit, so an overrun in one shows up right away.

Good to Know

The CFPB's free spending tracker logs what you spend by category, which is a simple way to find your real averages before you set a budget. Variable costs are also where a budget usually has room to adjust inside the month, since you decide how much to buy each time, while many fixed costs are set by a contract. Watching the categories that change most, week by week, catches an overrun while there's still time to slow down.

Related Terms and Categories

• Fixed expenses

  Costs that stay about the same every month, such as rent, a car payment or an insurance premium, usually due on a set date.

• Discretionary spending

  Money spent on things you want rather than need, like eating out, entertainment and travel. In government, the spending Congress sets each year.

• Expense tracking

  Writing down every purchase and bill as it happens, by category, so you can see where your money actually goes and compare it with your budget.

• Envelope budgeting

  A budgeting method that gives each spending category its own envelope of money, and spending in a category stops when its envelope is empty.

• Budget

  A plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it.

Household money and budgeting