When creating our budgets, most of us tend to only account for the fixed expenses, which are costs that do not change without notice and are usually paid monthly. Has there ever been a time that you’ve drafted a budget, and the budget completely goes out of shape between the month or week? If yes, there is no need to worry since you aren’t the only one to experience this; such scenarios are usually caused by variable expenses.
What Are Variable Expenses
Variable expenses are those expenses that tend to recur monthly, but the payments you make for them differ every time you make a payment. Because of their unpredictability, variable costs usually make it hard for one to create the perfect budget.
The most common variable expenses tend to occur in the spur of the moment or some essentials you forgot to include in your budget; hence keeping track of them becomes even more complex. Also, variable costs may consist of your discretionary spending, like when you have to pay a fine or a ticket.
Example Of Variable Costs
First, it’s essential that you remember that variable costs are usually different for every person, but some are similar. So, some of the most common variable expenses include:
- Parking
- Restaurant charges
- Parking fees
- Healthcare expenses
- Entertainment expenses
- Contribution to charities
- Personal grooming expenses
- Clothing
- Property repair and maintenance fees
- Trips and vacations
As you have noticed, some of the expenses listed above tend not to occur regularly (trips and vacations), but when they do occur, the costs usually vary.
How Do Variable Expenses Affect Your Budget?
As stated above, variable costs are usually quite unpredictable, thus making it hard to account for them; As a result, your budget draft can take a massive hit that would render it useless. For example, if you earn about $100 and your budget for the month amounts to $70, which means that $30 goes to your savings account, but within the month, you fall sick and your insurance doesn’t cover whatever ails you and the hospital charges amount to $50. So, with such an expense, your budget would suffer since you’ll either have to dip into your savings or take from a budgeted expenditure rendering your budget useless.
How To Budget for Variable Expenses
Budgeting for variable expenses can be challenging, but here are some tips that you can use:
Always Be Aware of Your Spending
Whenever you create a budget is always wise to stick with it. One simple trick is to split your budget into 50/30/20 ratios. The 50 is for essentials,30 for your discretionary fund or variable expenses and 20 for your savings account.
Keep Track of Your Variable Expenses
Since variable expenses are unpredictable, you should always keep a detailed record. This will help you approximate the amount to allocate to your discretionary fund.
Calculate Your Average Variable Expense
Ensure that you find the average variable expense; this will help create a realistic budget.
Create A Buffer for Your Budget
When drafting your budget, ensure that you add a 2-4 % buffer on each expense.
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Annual Reassessment
At the end of each year, take your time to determine what variable expense are the most occurring and how you can effectively budget for them.
With variable expense, it’s tough to ignore them, so it’s wise if you embrace them and find a way to account for them in your budget to avoid unplanned surprises.
