Variable monthly expenses6/18/2023 ![]() If you’ve paid this variable for any length of time, you can look back at previous years' bills or financial statements, like bank account statements or credit card statements. However, they aren't an absolute mystery, as there is historical data to help you determine what you can reasonably expect to pay every period. Variable expenses can be intimidating because you don't know what the bill will be every month. How can you budget for variable expenses? For example, you could fall ill and have medical bills, your car might break down or a scorching summer could dramatically increase your electric bill. ![]() In some cases, an unexpected expense in your variable costs can throw your budget into turmoil. You can always wait for the bill to arrive and then add it to your budget, but the ability to plan ahead is a key part of securing personal finances. Total variable costs are a different breed because you don't always know how much your bill will be each month. Then, divide $1,000 by 12 to get the monthly cost of $83.33. If you happen to have a fixed expense you pay less frequently, you can determine the monthly expense by figuring out what you pay on that expense annually and dividing it by 12.įor example, if you pay $250 per quarter on car insurance, you'd multiply that by four to get the yearly cost of $1,000. Just add up all the monthly payments, and you're done. ![]() When creating your budget, calculating your total fixed costs is fairly simple. This figure gives you an idea of how much discretionary income - extra income you can spend on other items, like debt repayment or retirement savings - you have leftover each month. Then, you can understand your cash flow by subtracting these expenses from your monthly income. One of the first steps in budgeting is collecting all your expenses and converting them into a monthly payment. How can variable expenses impact your budget? Some examples of these fixed costs include: Generally, these expenses have a predetermined payment amount set forth in your agreement or contract. While a variable expense has a different cost each month, a fixed expense is an expense you regularly pay that is the same total each time you pay it. How does a variable expense differ from a fixed expense? Utility bills (electricity, water, gas, etc.) Some examples of variable expenses include: However, some can fluctuate dramatically, making it difficult to estimate it in your monthly budget. In some cases, the variable cost only shifts by mere pennies each month, making them easier to estimate. What is a variable expense?Ī variable expense is a bill you regularly pay with a cost that changes with each period. We'll help you along the way by explaining what a variable expense is, how to account for it in your budget, some of the risks variable expenses present and how to mitigate those risks. With proper planning, a little foresight and basic math, you can work these variable expenses into your budget and even account for the occasional unexpected fluctuation. These variable expenses can be a stumbling block for some folks when building a budget, but they don't have to be. When setting up a monthly budget, it's critical to account for all your expenses, even those that change regularly.
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