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Fixed And Variable Expenses: What They Are and How to Save on Them

No matter what your financial situation is, doing a regular budget and keeping track of your fixed and variable expenses will help you create the life you want to live.  

Did we just say fixed and variable expenses? Yep. While those money terms sound like you just bought a one-way ticket to snooze fest, stick with us. Budgeting isn’t just for personal finance nerds or accountants. It’s for everyone. And trust us, it’s definitely not as intimidating (or boring) as it sounds. Believe it or not, you already know what fixed and variable expenses are—even if you didn’t know what they’re called.

So, buckle up. We’re going to walk you through everything you need to know about managing your money with fixed expenses and variable expenses (and what the heck they have to do with budgeting).

Ready? Let’s dive in.

What Are Fixed Expenses?

Fixed expenses are the items in your budget that stay the same month after month . . . after month. We’re talking about your mortgage or rent payments, gym membership, life insurance, medical insurance or even streaming service costs (Netflix, Disney+ or Hulu).


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So, when you’re creating your monthly budget, these expenses are probably going to stay the same (as long as you haven’t moved across the country or bought a house). Around here, we love fixed costs because they make budgeting that much easier. (And all the free spirits out there say, “Amen!”)

How to Budget for Fixed Expenses

Let’s talk about fixed expenses from a zero-based budgeting perspective. A zero-based budget sounds a little scary, but stick with us. It’s when your income minus your expenses equals zero. That doesn’t mean you have zero in your bank account—it just means you’ve accounted for every single dollar of your paycheck and told it where to go.

Part of that zero-based budget includes those fixed costs that happen month after month. Each one of those bills gets its own line in your budget. Want to try it out? Download EveryDollar and set up your own zero-based budget. For your fixed expenses, all you have to do is make a line item with the name (like Rent) and amount ($1,200). Then don’t touch it—it stays the same. EveryDollar will automatically copy it over for the next month.

And don’t forget: The key to successful budgeting is tracking your expenses. Make sure those fixed costs don’t end up changing when it comes time to pay the bill. (That can happen if your insurance has an annual renewal, for example, or if your rent goes up.) If that happens, you’ll need to adjust your line item and make up the difference somewhere else in your budget. Now, you just have to remember to budget the new amount for next month!

What Are Variable Expenses?

Variable expenses are things you pay for each month that don’t have a set amount. Variables in your budget could be your utilities (water, electric or gas) that change based on how much you use them. But they could also be things like a trip to visit your sister, dinner with a friend, gas for your car, an oil change, or even that weekly coffee shop habit you were hoping we wouldn’t bring up.  

Variable costs are a bit harder to budget for. And honestly, they’re the reason it’s so important to come back to your budget (and track expenses) every single month before the month begins. If you don’t, it’s easy to lose track of changing costs and dwindle your bank account faster than you can say, “Let’s go shopping.”

How to Budget for Variable Expenses

If a budget was only about our fixed expenses, we wouldn’t have to do too much, would we? But unless you’re one of the most disciplined people in the world with a routine that doesn’t change, you will have other costs pop up. Some of those are fun (like vacations), one-offs (like a new rug), and the regular buys (like groceries). Food is actually one of the biggest variable expenses—and there are plenty of opportunities to save on it.

When you’re putting together that zero-based budget we talked about earlier, it’s important to think through the month as a whole. Will you need to buy gifts for any upcoming birthdays? Are you going to dinner with friends this month? Do you need new tires for your car?

Sure, the unexpected can come up, but the key in budgeting for variables is making the best educated guess you can. When you’re tracking your expenses throughout the month, you may find you have a little extra money left over from that dinner date that got cancelled. That money can help you when something you didn’t budget for comes up out of the blue.

How to Lower Fixed and Variable Expenses

Just because an expense is fixed, it doesn’t mean you can’t save money on it. That’s right. When it comes to fixed and variable costs—negotiation, shopping the market, and the power of paying in advance can go a long way in saving some of your hard-earned Benjamins.

How to save money on fixed expenses:

1. Pay up front and save.

Don’t underestimate the power of cash. (We like to say cash is king.) Whether it’s your auto and homeowners insurance, paying a chunk of money up front can often save you some money.

2. Negotiate.

Everything is negotiable. Yup—even fixed expenses like your rent or internet services. You never know, maybe painting the trim on your rental might be enough to get your landlord to knock a few hundred off your rent here and there. Just remember, it never hurts to ask.

3. Shop around.

Always shop around. Even if you’ve been with the same insurance company for years, it doesn’t mean you’re getting the best deal—you might be overpaying or even overinsured. Take our coverage checkup to see where you land and if you can save some money.

4. Cancel any unused subscriptions.

An app here, a streaming service there. With so many memberships and subscriptions out there, it can be easy to sign up and forget about them. Take an inventory of the ones you use and cancel the rest. Instant savings!

How to Save Money on Variable Expenses:

1. Cut those coupons!

Whether it’s buying school supplies, new clothes, or even groceries, coupons can be your best friend when it comes to saving you money. But be warned: Just because you have a coupon for something, that doesn’t mean you should buy it. Spending money to save money is the opposite of saving money!

2. Shop at discount stores.

You don’t need to blow your whole paycheck at a fancy grocery store to eat well. Shopping at stores like Aldi, Walmart or Kroger (with coupons) can help you save some big bucks.

3. Brew your own coffee.

We all love a good coffee shop—but not those coffee shop prices. A 16-ounce Americano can often cost you over $5, and when you’re hitting up that drive-thru more than once a week . . . let’s just say it adds up fast. Instead of drinking your money away, brew your beans at home and save the coffee shop for special occasions.

4. Pack your lunch.

We know, no lunch is better than a Chick-fil-A sandwich and fries. But (don’t hate us) packing your lunch instead of eating at a restaurant can help you keep more of your hard-earned money. It’s true, a ham sandwich you packed yourself won’t taste the same, but trust us, it’s worth the savings!

When it comes to saving money, it’s all about hard work, sacrifice and remembering your goals. If you don’t have a goal you’re running after, it can be hard to remember why you’re eating the same homemade lunch day after day after day.

Working with your fixed and variable expenses can really free you up to do more with the money you work so hard for. But how? With the premium version of EveryDollar. It connects to your bank account, allowing you to see your spending habits, track your purchases, and keep your budget in line with your goals. Download the app and start your free trial today!

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Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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