Budgeting

What Is a Variable Expense?

Published on October 6, 2022

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Definition

A variable expense is an ongoing cost that changes from month to month. This can include anything from groceries to entertainment.

Key Takeaways

A variable expense is any expense that can fluctuate in amount.
Some examples of variable expenses include groceries, gas, and entertainment.
Variable expenses can be difficult to budget for because you never know exactly how much you’ll spend.

How a Variable Expense Works

A variable expense is a cost that changes and is not fixed. This could be something like utilities, which can go up or down depending on usage. Or it could be something like fuel for a car, which fluctuates with usage and gas prices. Whatever the case, a variable expense is one where the amount isn't set in stone.

Note

Variable expenses make budgeting difficult because you can never predict exactly how much you’ll spend. But keeping your variable expenses under control can go a long way in helping you reach your financial goals.

Examples of Variable Expenses

Let's talk about a big variable expense—food. How much you spend on food depends on your lifestyle and diet. Here are some examples of variable expenses related to food:

Eating out: This could include anything from fast food to going out for a nice dinner. If you eat out often, it can really add up.
Groceries: This is what you need to buy to cook at home. The cost of groceries can vary depending on where you shop and what you like to eat.
Coffee: Whether you buy your coffee every day or just on weekends, it's a variable expense that can add up over time.

There are ways to control variable expenses on account of food by making choices that help reduce your food budget.

How To Budget for Variable Expenses

One of the key elements to gaining financial stability is learning how to budget your variable expenses. Since they are unpredictable, variable expenses may come up when we least expect them and derail our spending plans for the month.

And because they fluctuate, variable expenses can be difficult to budget for. This is where calculating the average cost of your variable expenses can come in handy.

For instance, say you spent $400 on groceries in January, $500 in February, and $450 in March. That averages out to $450 a month. Now that you have this number to work with, you can budget $450 every month for groceries—even though it’s a variable expense. If you spend less than the average one month, leave the money you didn’t spend alone so it’s there if you overspend the next month.

Note

Most budgeting apps calculate how much you spend on average each month in each of your budgeting categories. So if you already use a budgeting app, you may not have to do this math yourself!

Other ways of budgeting for unreliable variable expenses could include zero-based budgeting where you assign every dollar from your income toward expenses and savings. You could also follow a pay-yourself-first budgeting approach, where you use money first to fund your goals and then work backwards to come up with money you have left over to deal with expenses. Or you could rely on the good old envelope budgeting method, creating different envelopes for income and expenses.

Variable Expense vs. Fixed Expense

There are two types of expenses: variable and fixed. So, what’s the difference?

Variable expenses: Change depending on how much you buy, like groceries or gas.
Fixed expenses: Stay the same each month, like rent or a car payment.

It's important to understand how much of your expenses are fixed and how much are variable so you can budget your money properly. Fixed expenses are always easier to account for because they don't fluctuate as variable expenses do. This means that you can easily plan for them by setting aside money each month to cover the cost.

Variable expenses are more difficult to budget for because they can change unexpectedly. This requires you to be mindful of your spending, so you can stay within budget.

Variable Expenses	Fixed Expenses
Change from month-to-month	Stay the same every month
Irregular and difficult to budget for	Predictable and easier to budget for
Includes groceries and utility bills	Includes rent, mortgage, and car payments

Note

Just like consumers, businesses also have variable and fixed expenses.

Frequently Asked Questions (FAQs)

What are variable expenses?

Variable expenses are costs that can change from month to month. This might include things like your electricity bill, which could be higher in the summer months when you use your air conditioning more, or your food bill, which could be lower if you eat out less or stock up on sale items.

What is an example of variable expense?

Variable expenses are things you have to pay for that may change from month to month. Some examples include gas, parking, and tolls. Groceries, eating out, electricity or other usage-based bills, and household items like toiletries and cleaning supplies are some other examples of variable costs in your budget.

What is an example of a fixed expense?

Fixed expenses are very predictable because they’re the same every month. This could include items such as rent or mortgage payment, car payment, gym membership, or subscription services. Cellphone (if you have an unlimited plan) and internet bills, childcare, and insurance premiums are other examples of fixed expenses.

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