Variable Expenses VS Fixed Expenses

Variable Expenses VS Fixed Expenses

Variable expenses (or flexible expenses) are expenditures over which an individual has considerable control. Food, entertainment, and clothing are variable expenses Some categories, such as savings, can be listed twice, as both fixed and variable expenses.

The following are examples of fixed and variable expenses that you might include in a cash-flow statement:

Fixed Expenses

• Savings and investments
• Retirement contributions to 401(k) plan and IRA account
• Housing (rent, mortgage, loan payment)
• Automobile (installment payment, lease)
• Insurance (health, life, liability, disability, renter's, homeowner's, automobile)
• Installment loan payments (appliances, furniture, electronics)
• Internet service
• Telephone payments
• Taxes (federal income, state income, local income, real estate, Social Security, Medicare, personal property)

Variable Expenses

• Meals (at home and away)
• Utilities (cell phone, electricity, water, gas)
• Transportation (gasoline and maintenance, licenses, registration, public transportation, tolls)
• Medical expenses
• Child care (nursery, baby-sitting)
• Lunches at work
• Dry cleaning
• Clothing and accessories (jewelry, shoes, handbags)
• Snacks (candy, soft drinks, other beverages)
• Education (tuition, fees, books, supplies)
• Household furnishings (furniture, appliances, curtains)
• Cable television
• Personal care (beauty shop, barbershop, cosmetics, dry cleaner)
• Entertainment and recreation (hobbies, socializing, health club, downloads, movie rentals, movies)
• Charitable contributions (gifts, church, school, charities)
• Magazine subscriptions
• Vacations and long weekends
• Credit card payments
• Savings and investments
• Miscellaneous (postage, books, magazines, newspapers, personal allowances, domestic help, membership fees)

There is no rigid list of categories to be used in the expenses section, but you do need to classify all of your expenditures in some way that suits your needs. Rather than just use fixed and variable expenses categories, you might also separate expenditures into savings/investments, insurance, taxes, and household expenses. The more specific your categories, the deeper your understanding of your budget.