Fixed vs. Variable Expenses: The Difference and How to Budget for Both

I’ve been teaching people how to budget for years—and budgeting always starts with listing out two things: your income and your expenses. But those expenses can get tricky when some stay predictable month to month and others seem to have a mind of their own.

So, let’s break down what fixed and variable expenses are, how they differ, ways to save on both, and how to fit them into your budget.

What Are Fixed Expenses?

Fixed expenses are the bills and payments in your budget that generally cost the same amount each time you pay them. Think rent, your gym membership or that streaming subscription you keep telling yourself you’re going to cancel.

And here’s the thing: A fixed expense doesn’t have to show up every month. If you pay the same set amount once or twice a year—like an annual subscription renewal—that can be a fixed expense too.

What Are Some Examples of Fixed Expenses?

Common fixed expenses include:

• Mortgage or rent
• Gym memberships
• Most insurance premiums
• Streaming services
• Phone bill
• Internet
• Subscriptions
• Day care

Now, some of these costs go up annually, like how your TV streaming service costs more after your first year (sneaky, sneaky). And some go up if you have a life change, like adding a new line to the phone bill for your teen. But overall, fixed expenses don’t change much from one payment to the next.

(Notice that fixed doesn’t mean essential, though. Your streaming subscription is a fixed expense you could live without, while your rent is fixed and not something you can skip.)

What Are Variable Expenses?

Variable expenses change in dollar amount from month to month, usually based on how much you use them. That makes them a little trickier to predict than fixed expenses—but you can absolutely plan for them. (I’ll show you how in a minute.)

Think of variable expenses as your behavior categories. This is where you usually have the most control because your everyday choices can move the numbers up or down. Spend more on groceries or restaurants this month? Those numbers go up. Cut back? You’ll see them come down.

What Are Some Examples of Variable Expenses?

Common variable expenses include:

• Water
• Electricity
• Eating out
• Date nights
• Groceries
• Entertainment
• Gasoline
• Car repairs
• Medical bills
• Copays

A couple of those expenses might pop up one month and be gone the next—like if everyone in your family gets their teeth cleaned the same week and you have to dish out cash for all those copays. Planning ahead is how you’ll stay on top of these expenses!

And just like “fixed” doesn’t always mean essential, “variable” doesn’t always mean optional. Groceries are a perfect example. The total changes from month to month, but unless your family has figured out how to survive without food, it’s definitely essential.  

Also, I know a few of those variable expenses, like your electric bill, can be put on a payment plan that evens out the spending over time. But here’s why it’s usually better to pay for the exact amount you use each month instead of an assumed average: You’ll know that any changes you make (like cracking down on your kids leaving lights on all over the house) will make an immediate difference in your next bill.

Which brings me to my next point: Yes, there are things outside our control (like inflation) that affect how much we spend on variable expenses. But the definition itself calls out our part in these changing costs.

How does that play out? Well, if you start taking hot, relaxing baths every day, you’ll pay more for electricity (or gas) and water. If you hit the drive-thru for Chick-fil-A more, you’ll pay more for restaurants. And if you meal plan, you can lower your grocery spending—even with rising food costs. You also get to decide how much fun money to budget for variable expenses like eating out, date nights and entertainment once your Four Walls—food, utilities, shelter and transportation—and savings goals are covered.

So when it comes to variable (and even fixed) expenses, you’ve got way more control than you might think!

What Is the Difference Between Fixed and Variable Expenses?

The main difference between fixed and variable expenses is whether the dollar amount changes based on your usage or choices.

And don’t let the due date confuse you! A fixed expense could show up every month, once a quarter or even once a year. Variable expenses can too. Just look at what happens to the dollar amount, and you’ll know which category you’re dealing with.

Fixed vs. Variable at a Glance

How Do You Save on Fixed and Variable Expenses?

With fixed expenses, look for ways to lower the bill itself. With variable expenses, look for places where you can change how much you use or spend.

Savings Tips for Fixed Expenses

• Try free exercise videos to get fit and healthy without the gym.
• Switch cellular carriers or plans to save on your phone bill.
• Spend less on rent by getting a roommate.
• Check out free TV streaming service options. (The ads are worth the savings!)
• Take our Coverage Checkup to make sure you aren’t overpaying or underinsured.

Now, saving on fixed expenses doesn’t mean you just stop paying the bills you don’t feel like paying. Nice try! Your rent or mortgage still has to get paid, and you definitely don’t want your insurance coverage to lapse. So when money’s tight, take care of your essential expenses first. Then look for ways to lower the fixed expenses you actually have some wiggle room with.

Savings Tips for Variable Expenses

• Meal plan and shop sales to save on groceries.
• Join gas rewards programs (not credit cards!) at your grocery store to save on transportation.
• Lower your electric bill by lowering the water heater temperature.
• Get creative with some cheap (and still fun) date night ideas.
• Order water instead of a soda or tea to spend less at restaurants.

And pro tip: If you want to get super serious about saving, go through your budget and see which expenses you can cut out completely.

Maybe you’ll do without for just a month or two. Or maybe you’ll realize you prefer having that money in the bank over having that expense in your budget. Either way, you’ll give your savings goals a great boost.

One member of THE Ramsey Baby Steps Community Facebook group shared how she does it:

“Go through your bank account and write everything you spent money on for the last three months. Then cut from there. Each person is going to be different. . . . Pretty much, if I can do it, I won’t pay someone else to do it. I also shopped around on services I needed. Internet, alarm, insurance, etc.”

How Do You Budget for Fixed and Variable Expenses?

You budget for fixed and variable expenses by planning for both before the month begins. Fixed expenses are easier to plug into your budget because you know what’s coming, while variable expenses take a little more estimating (and sometimes a little trial and error).

First, let’s cover the five steps of budgeting:

1. List your income. Plan for everything coming in.
2. List your expenses. Set planned amounts for everything going out.
3. Subtract your expenses from your income. This should be zero, meaning you gave every dollar a job.
4. Track your expenses all month long. See where you still have room to spend—so you can keep from overspending.
5. Make a new budget before the next month begins.

Honestly, fixed expenses are easier to nail down when you’re doing that second step. Pull up your bank account, check last month, and boom—you’ve got a pretty good idea of what to budget this month.

Variable expenses are harder to figure out, especially that first month. Once again, groceries are a prime example. You probably go shopping a few times a month. So you aren’t glancing at one transaction in your bank account or one receipt. You’re looking back at every Kroger, Publix or ALDI trip from last month and adding them all up to get an idea of what you spend on groceries.

Listen: It usually takes three months of budgeting to get the hang of things. Plan those variable expenses as best as you can to start—it’ll get easier as you go!

Here are five tips to help you budget for both fixed and variable expenses:

1. Start With the Four Walls

When you’re listing out expenses (after you’ve budgeted for giving and saving), don’t start with fixed or variable—start with essential. That means covering your Four Walls (food, utilities, shelter and transportation) first. That’s right: Needs come before wants every time.

2. Create a Miscellaneous Budget Line

Put some money in a miscellaneous line each month to cover those random expenses that pop up. And if you planned too low for a variable expense, you can move money from this line to cover the difference.

3. Plan High for Variable Expenses

When you’re not sure exactly what a variable expense will cost, give yourself a little wiggle room. If your electric bill comes in lower than you planned, great! Throw some confetti and then throw that extra cash at your current money goal! (Well, maybe don’t throw literal confetti, unless you like vacuuming.)

4. Adjust Your Budget When Needed

If a variable expense comes in higher or lower than you planned, adjust your budget to match. Move some money around, get your budget back to zero, and keep going. That’s why it’s called a planned amount to spend and not a set-in-stone-or-else amount.

5. Get a Budgeting App

Keeping up with it all—the planning, the tracking, the adjusting—is way easier when you’ve got a budgeting app.

That’s why we made the EveryDollar budgeting app! Tracking variable expenses can take some extra attention, and EveryDollar makes it way easier to see what you’re actually spending in each category so you can adjust before the month gets away from you.

Just download the app, answer a few questions, and we’ll build you a personalized plan, based on your situation, to free up margin and make the most of every dollar, every day. (See where we got the name?)