Figuring Out Your Fixed vs. Variable Expenses

Budgeting starts with knowing which of your expenses are fixed and which are variable. Here’s how to tell, and ways to save on each.

Written by Catherine Hiles / December 9, 2021

Quick Bites

  • Fixed expenses include your mortgage or rent, car and student loans, utilities and insurance premiums.
  • Variable expenses include groceries, meals out, gas for your car, personal care, prescriptions, and home and car repairs.
  • It’s hard to plan for variable expenses but by building an emergency fund you can have some money socked away in case one of these expenses pops up.
  • If you’re struggling to live on your income, you should look at ways you can decrease your expenses, starting with your fixed ones.

When it comes to budgeting, expenses generally fall into one of two categories: fixed and variable. But what are fixed and variable expenses, and how do you know what type of expense falls into which category?

Answering these questions is crucial to making sure you stay on budget and on track toward your financial goals. Read on to see how to do just that.

Inside this article

  1. Fixed expenses
  2. Variable expenses
  3. Categorizing your expenses
  4. How to save on expenses

Fixed expenses

Fixed expenses are the ones you can predict. They stay the same each month or so and you can easily work them into your budget, because you know exactly what to expect. They might occur monthly, quarterly or annually. In any case, they’re regular, and you can plan for them.

Some common examples of fixed expenses include:

  • Housing, such as mortgage or rent

  • Loan payments, such as a car loan or student loans

  • Utilities such as electric, gas, internet and cell phone

  • Insurance premiums, such as health, car, home, life or personal property

  • Child care expenses, such as day care

  • Court-ordered expenses such as child support or alimony

Variable expenses

On the flip side, variable expenses are those you can’t predict. Variable expenses might pop up unexpectedly, or they might be something you pay for regularly but the amount varies each time. They can take you by surprise if you don’t leave room in your budget for them.

Some common examples of variable expenses include:

  • Groceries

  • Meals out at restaurants

  • Drinks from your favorite coffee shop

  • Fuel for your car

  • Personal care, such as shampoo, deodorant or body lotion New clothes or shoes

  • Health care expenses, such as doctor’s bills or prescriptions

  • Unexpected repairs to your home or car

  • Hobbies and recreation

Tip: It’s hard to plan for variable expenses like car or home repairs, but by building an emergency savings fund you can at least have some money socked away in case one of these expenses pops up.

Categorizing your expenses

When you’re trying to differentiate between fixed and variable expenses, you may find that it’s hard to put certain items in one bucket or another.

At first glance, it might seem that fixed expenses are necessities, while variable expenses are optional extravagances. But an unexpected trip to urgent care or a new set of tires for your car after a blowout aren’t exactly fun expenses, though they would be considered variable because they’re not the types of expenses you necessarily see on a regular basis.

A fixed expense generally:

  • Occurs on a regular basis (most often monthly, but can also be weekly, quarterly or annually).

  • Stays the same amount for each payment.

  • Is expected and you can plan for it.

A variable expense generally:

  • Varies in amount and frequency.

  • May be unexpected.

  • Doesn’t easily work into your budget.

It’s a good idea to write down all of your expenses to see whether they would be considered fixed or variable, then you can successfully budget and plan for them as best you can.

How can I save on my expenses?

If you’re struggling to live on your income, you should look at ways you can decrease your expenses, starting with your fixed ones.

Decreasing your fixed expenses takes work, but it can be worth the effort if you end up saving each month. Here are a few ways you can decrease your expenses.

Refinancing Your Mortgage

If you own your home, it may be worth looking into refinancing your mortgage to get a lower interest rate, especially if your credit score has improved since you first took out your loan. An improved credit score can help you unlock lower interest rates, which could potentially lower your monthly payment by a considerable amount.

The Federal Reserve Board[1] offers an easy-to-understand example: A $200,000 mortgage with a 6% interest rate would equal a monthly payment of $1,199. But refinancing to a 5.5% interest rate would decrease that monthly payment to $1,136, saving you $63 per month. Over a year, that equals savings of $756, and $7,560 over 10 years.

One caveat: You’ll have to pay closing costs to refinance your mortgage, so be sure to check that the additional cost still makes sense even with a lower interest rate.

Shop Around for Cheaper Insurance

Your monthly insurance premiums can make a pretty large dent in your budget, so it’s smart to see if you can find a better rate.

Many insurance providers offer discounts you might not know about. For example, if you bundle your home and auto insurance under the same provider, you could be entitled to a discount on your premiums.

Car insurance providers may also offer discounts if you’ve gone a certain amount of time without having an accident, or if you insure more than one car under the same policy. If your car offers newer safety technologies like blind spot warning, emergency braking or rear cross-traffic alert, you could get a nice discount as well.

Another way to save: Take a defensive driving class. According to insurance site QuoteWizard, car insurers typically offer a 10% discount if you complete the class.

Look for a More Affordable Cell Phone Plan

Switching cell phone providers could save you quite a bit each month. There are plenty of discount providers around that use Verizon or T-Mobile networks but offer their plans at a lower price. If you use your phone a lot (and who doesn’t?), finding a lower-cost plan could make a big difference in your fixed expenses.

Shop around to see where you can find the best deals.

You can ask friends and co-workers which providers they use, because they may be getting a really great deal through a company you’ve never even heard of. For example, cable company Spectrum provides a cell phone plan with unlimited monthly data for less than many competitors, and your rate could be even less if you also get cable or internet through Spectrum.

Consider Your Variable Expenses

While decreasing your fixed expenses can make a big difference to your budget, you can also look at where you can cut back on your variable expenses to save money.

For example, if you get takeout or eat dinner in a restaurant once a week, can you decrease that to once or twice a month? It might not seem like much, but spending $50 on takeout for two really adds up if you’re doing it frequently.

Also look at your grocery bill to see whether there are cuts you can make there. Can you be more proactive when it comes to meal planning so you know exactly what to buy each week? Can you experiment with eating more beans and grains rather than meat to cut back on your grocery bill? Again, it might not seem like you’re saving much, but over time a lower grocery bill can make a big difference.

Article Sources
  1. The Federal Reserve Board. “A Consumer’s Guide to Mortgage Refinancings.” https://www.federalreserve.gov/pubs/refinancings.

About the Author

Catherine Hiles

Catherine Hiles

Catherine is a writer and editor who has been published in The Penny Hoarder, The Insurance Bulletin, The News Wheel, WDW Magazine, and Dayton Mom Collective. When not writing and editing, you can find her training for a race, chasing my two young children around, walking her dog, or with

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