3 Main Types of Expenses to Put in A Budget – Variable, Fixed and Periodic Expenses

Last updated on September 21st, 2024 at 10:28 am

 

While preparing a budget it’s wise to recognize the three main types of expenses to effectively be in control. These include variable, fixed, and periodic expenses at any one time.

However, you might not immediately notice how specifically providing for such expenses plays a very important role. But controlling your expenses positively works upon your financial health if you put in the work.

It’s not miles away to put in the work just spare a few minutes reading through this article and you’re good to go. However, I can understand why it’s hard for some people since have been through it all but gone are the days.

By then I always wanted to look at my checking account every end of the month to hang out and look good too. It took me some time to grasp the idea of budgeting it was just about having a life.

As you know with money when you have it, surely speaks any language you want. But for money to speak right and just, you must recognize the three types of expenses in a budget.

This means that you have to fairly account for the bar, and gifts or maybe find a nice cheap house around. All this relates to catering for expenses in the budget hence allocating money to good use with best practices.

Doing this helps you have enough money available for spending towards expenses all throughout the year. So, specific expenses like rent, car insurance, and groceries can never be an issue to clear off.

And ever since I started catering for variable, fixed, and periodic expenses it transformed the way forward. Controlling expenses while doing things correctly on budget improved my finances.

 The Three Main Types of Expenses You Must Put in Your Budget

A budget items list should purposely be put in place to control household income and expenditure in different periods of the month. And there’s no way you’re going to manage your finances right without controlling expenses.

Some expenses usually vary most of the time during the month and some expenses are always constant every month.

Am not yet done, also predictable and unpredictable less frequent expenses that come up during the year. And these less frequent expenses might present every quarter, half a year, or at any time during the year.

The categories mentioned just above are all under variable, fixed, and periodic types of expenses. So, let’s get more about what these types of expenses are and also understand how best they can apply to a budget.

 Variable Expenses

These are expenses that can be adjusted within the budget according to consumer behavior. Also, there are two ways in which variable expenses can be further classified that is discretionary and essential.

What about discretionary and essentials? All in this guide.

Discretionary under here include wants say a bottle of wine, entertainment, and a new perfume. Yes, you want discretionary but they should be down the list after basic needs are done.

Essentials also known as variable expenses are things that you can’t do without though can be adjusted. Essentials, therefore, include groceries, car gas, and monthly water bills.

All these expenses can fluctuate or can be adjusted during the month according to your spending patterns. Sometimes when I want to cut spending on food during the month I stop eating out and make meals at home.

Cutting spending on groceries you could use cash-back apps like Ibotta and Rakuten to save more. With discretionary, it’s also very easy to cut spending since all you have to do is spend less or give up on them because it’s possible.

So, that is why they are called variable or flexible expenses in budget practice. Variable expenses are very easy to cut back on just in case you want to save more to grow your savings like me.

Fixed Expenses

Compared to variable expenses, fixed expenses are a type that is predictable in terms of costs at the end of the month since they can’t easily be adjusted. Am telling you out of experience these are the best and simplest types of expenses to cater to in the budget.

The period in which they come up and the amount that you put aside to cover them don’t change. Take an example of rent, mortgage, car loan, and telephone charges they never change that much throughout the month or year.

Fixed expenses are not that hard to work on since even the changes that could happen are negligible. Usually, my monthly fixed expenses never fly like it would be the case with variable expenses at times

And you can also sometimes get some balance carried forward to the next month in case you’re living a frugal lifestyle.

Additionally, always keep a record of your spending on fixed assets such that you keep up on your forward the following month. Yes, though they’re fixed you still have to stay in control the right way with your eyes wide open.

Cutting Back on Fixed Expenses in A Budget

Because fixed expenses are predictable it makes it much easier to cut back spending on them within the budget. That is why when you track fixed expenses for the previous months it gives you a clear picture of how you can go about the present.

And the good thing about reducing fixed expenses is it’s possible to consistently save. Therefore, whenever you cut back on expenses and save, it improves your financial health in case the practice is sustainable.

I know some people don’t have time to negotiate for rent and internet but you’ve got to be the type in case you want to lower costs.

It saves just in case you didn’t know now you know. The $15 off your rent can grow your savings account every year by $180 or even more when compounded.

• Reduce internet bills

Internet bills might sometimes get you off guard which might lead you into debt. Yes, the internet is good in this modern world of making money online and some other engagements.

But you shouldn’t be exploited at any one time because there are lots of options with service providers. You can easily get better cheap services if your service provider can’t offer better cheap monthly plans.

It’s possible to save some extra dollars every month when given a price-friendly plan.

• Negotiate rent

Rent is a fixed expense though, but the payout shouldn’t go beyond manageable cost. And when there is room, you can negotiate for lower costs to save up on rent.

If rent is high it limits you from having a life because you may not be able to easily save up on anything or have fun. In case negotiation for lower costs fails then the best option would be to look for a cheaper apartment.

Most landlords can listen when you explain unless your records are not good from the past. But there are also nice apartments out there that you can get at cheaper costs so that you can save.

• Clearing off debts

Try as much as possible to clear off debts that you service every month under fixed expenses. This will enable you to get out of debt and also avoid penalties that end up accumulating on your debt all the time.

Monthly debt payments are fixed expenses since they are long-term commitments. And the only way to reduce spending on them is by paying them off in time.

Periodic Expenses

As we’ve seen managing any type of expense in a budget it’s not something simple. It’s a process that needs tracking to identify any loose ends that must be tightened just in case.

Most times periodic expenses are a type that is neglected since they come up less frequently in a year. And others don’t at all account for periodic expenses yet they impact a lot on your budget over the year.

Your budget can’t be lively during festive seasons no matter how frugal or cheap you act in pinching the dollar. Whatever, gone are the days when I used to borrow to clear off a debt on periodic expenses.

Am now budgeting way ahead of time to let expenses come up this side of life where everything is under control.

Wondering how am doing it? A budget helps you determine where your money should go to avoid asking where it went.

More clarity on Periodic expenses!

What are periodic expenses? These are a type of expense whose costs don’t come up every month but rather just a few times within a year.

Periodic expenses are also not that hard to control because some costs are predictable say car registration though others are variable.

Fixed expenses and variable expenses impact the monthly budget as we’ve seen. The same applies to periodic expenses no matter the period they present during the year.

Your monthly budget is also affected in case they weren’t accounted for when drafting the budget. That is why there’s a need to create a budget that will take into consideration periodic expenses when they occur.

Periodic expenses shouldn’t be underestimated since they also have a big impact on your financial health. Indeed, these expenses can easily be forgotten to be catered for within the budget most times.

And this is because they come once in a while during the year and sometimes outweigh the monthly budget. But to streamline the budget providing for periodic expenses concerning past performance is key.

Still more on periodic expenses as in examples, right? Specifically identifying these expenses will help you properly allocate resources effectively on a budget.

You don’t want to be hit off guard when they’re demanding thus it’s wise to prepare yourself on time. Listing them down would work best but keep in mind that there are fixed and variable periodic expenses.

Some fixed periodic expenses (infrequent with predictable amounts) that you can refer to are listed below

• Car insurance
• Property taxes
• Tuition
• Car registration
• Domain Registration

Here are also some variable periodic expenses (infrequent with unpredictable amounts) you can relate to your list.

• Medical costs
• Home maintenance
• Car repairs

So, car registration presents less frequently in predictable amounts whereas medical costs present less frequently in unpredictable amounts. Creating a budget with periodic expenses inclusive will enable you to stand the unpredictable times.

No matter how smart you can be with your income and monthly expenses neglecting periodic expenses will fail the budget.

Just in case a huge medical cost comes up it will affect your monthly budget since it was not budgeted for at all. But when something has been put aside the impact will not be that much and it can be contained.

Here’s the best part, most of these costs may come up in different intervals which frustrates us in case they weren’t catered for in the first place.

You, therefore, need to have a defined approach towards periodic expenses in your budget to keep safe and on budget.

Questions to Ask Yourself to Effectively Account for Periodic Expenses in the Budget.

• How much did I spend last year on each periodic expense?
• What’s the overall total amount that was spent on each periodic expense last year?
• On a monthly budget, what would be the monthly expense for each category?
• How much can I set aside monthly to cater to each category?

These questions are key in guiding you on how you can meet the budget expenses fully accounted for with reasonable costs.

Why Should You Budget for Expenses?

It’s not an easy task but as you know there’s no free lunch in this world. And if you don’t budget for expenses you’ll keep on questioning your spending which is not good practice.

Budgeting for expenses has a lot of benefits but let’s bullet a few of them that can motivate you.

• Reduces financial stress
• Streamlines debt management
• Attaining financial goals sooner
• Reduces unnecessary expenditures
• It enables you to get in control of your finances
• Budgeting for expenses improves savings
• Preparation for emergencies
• Effectively allocating resources

 End Thought – Main Types of Expenses

It takes a lot of effort to make money and at the same time, you have to spare time to budget how best to spend that money. Therefore, you have to take into consideration variable, fixed, and periodic expenses in the budget to effectively control your finances.