Planning for Fixed, Variable and Periodic Expenses (2024)

FAQs

What are fixed expenses variable expenses and periodic expenses? ›

Fixed expenses, like rent, stay the same month-to-month. Variable expenses, like food and groceries, can vary month-to-month, and generally aren't due on a set date. Periodic expenses include expenses that are billed quarterly or annually, as well as expenses like vehicle maintenance that come up now and then.

Though variable expenses are inconsistent, it's still possible to budget for them. The best way to do this is to assess your typical spending in these categories for a few months before making your budget. You can take an average of your monthly spending for each variable expense and include that amount in your budget.

Fixed expenses generally cost the same amount each month (such as rent, mortgage payments, or car payments), while variable expenses change from month to month (dining out, medical expenses, groceries, or anything you buy from a store).

Create a Budget

Understanding your fixed, periodic and variable expenses is the first step to making an effective budget. A “fixed expense” is a cost that does not change from time period to time period, or changes only very slightly.

Periodic expenses are irregular yet predictable expenses. Unlike fixed expenses, they don't occur on a monthly basis. For example, tuition payments would be a periodic expense. Tuition can be paid quarterly, but isn't paid on a consistent, monthly basis.

Variable expenses are costs that change over time, such as groceries or movie tickets. Because these costs might fluctuate over a week, month or year, it can be challenging to pinpoint what you'll spend.

Loan payments: Payments for auto loans, student loans and other types of installment loans are the same every month. Cell phone and internet bills: These are usually fixed bills that are based on what service level you choose, rather than how much of the service you use within a month.

Budgeting for fixed and variable expenses

The 50/30/20 rule can help you budget for fixed and variable expenses. It calls for allocating 50 percent of your money to things you need, 30 percent to nonessential things and 20 percent to savings.

Variable Expenses

Just as the name says, these are your expenses that will vary month-to-month and are probably the largest spending category. Variable expenses include such things as groceries, gas for your vehicle, utilities, entertainment expenses, and clothing.

Typical fixed expenses include car payments, mortgage or rent payments, insurance premiums and real estate taxes. Typically, these expenses can't be easily changed. On the plus side, they're easy to budget for because they generally stay the same and are paid on a regular basis.

What is a fixed variable example? ›

Fixed costs are expenses that remain the same no matter how much a company produces, such as rent, property tax, insurance, and depreciation. Variable costs are any expenses that change based on how much a company produces and sells, such as labor, utility expenses, commissions, and raw materials.

Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees.

The three biggest budget items for the average U.S. household are food, transportation, and housing. Focusing your efforts to reduce spending in these three major budget categories can make the biggest dent in your budget, grow your gap, and free up additional money for you to us to tackle debt or start investing.

“A fixed cost will not change, regardless of the amount of goods produced or services provided, while a variable cost will change if the company sells more or fewer goods or services,” explains Fisher. Semi-variable costs, on the other hand, may or may not change with the amount of goods produced or services provided.

A fixed expense continually remains the same amount month to month (Ex. Rent Payment). The amount of a variable expense varies month to month (Ex. Utilities).