Now that you isolated your fixed expenses, budgeting for variable expenses is the next step. In this case, “variable” refers to costs that change or differ from month to month. Likewise, these costs could also be quarterly, semiannual or annual expenses.
Similar to fixed expense budgeting, some of the variable costs outlined below will apply to you and other will not. For example, I don’t have any pets or tuition fees, so I’ll skip those areas. Even though the list is longer this time, budgeting for variable expenses should be an easier process. After all, you already have one budget under your belt! ☺
These are the categories I recommend including in your variable expense budget.
- Insurance (car, renters, life, home, liability)
- Car Registration & Taxes
- Car Maintenance (oil changes, tire rotation, new tires)
- Property Taxes (typically included in your mortgage payment)
- Professional Fees (organization dues, publications)
- Education (tuition, fees, books, supplies)
- Pet Costs (food, vet bills, insurance, supplies)
- Household Supplies (cleaning products, light bulbs, air filters, paint)
- Office Supplies (computer paper, stamps, ink cartridges)
- Personal Care (lotion, styling products, razors, shampoo, soap, toothpaste, deodorant, make-up, tampons)
- Hair Care (haircuts, color, styling)
- Home Maintenance (HVAC tune-up, water heater replacement etc.)
- Fitness (gym membership, exercise classes)
- Clothing (seasonal clothes, shoes, bras, underwear, socks)
- Health Insurance Copays (primary care provider and specialist copays)
To the right is my monthly variable expense budget for 2020. In the same way you used last year’s bills to estimate certain fixed costs, I suggest using the same process when budgeting for variable expenses, such as insurance, household supplies, personal care etc. If you don’t keep paper or digital receipts, you can find this information by logging into your bank account and using the budgeting and spending tools to search your transaction history.
- Are you a freelancer trying to craft a budget around irregular income? Here’s a resource to help you get started.
| Expense | Annual Cost |
|---|---|
| Car & Liability Insurance | $600 |
| Car Registration & Taxes | $135 |
| Car Maintenance | $100 |
| Professional Fees | $143 |
| Household Supplies | $50 |
| Personal Care | $125 |
| Hair Care | $200 |
| Home Maintenance (HVAC) | $6,200 |
| Fitness | $960 |
| Clothing | $250 |
| Health Insurance Copays | $160 |
| Variable Costs | $8,923/year |
| $744/month |
Budgeting is Subjective
As I mentioned in my last post, budgeting is a subjective process. For example, there are items on this list, like fitness and clothing, that could be budgeted under discretionary spending. Although your clothes might be outdated and starting to show their age, you could manage without buying any new clothes this year if you had to.
A Big Expense!
As you can see, I had a major expense this year: a new HVAC system. Undoubtedly, this was the least exciting purchase of my life. The last time I spent that much money in one sitting was when I bought my house. Nevertheless, I delayed this purchase as long as I could. Prior to buying, I researched the best deal and budgeted for the expense so I knew I could afford it.
Managing Money and Emotions
Well, how’d you do? Did your emotions get in the way or were you able to stay relatively calm this time around? Money and emotions don’t seem like an obvious pair, but they’re definitely linked. Because emotions can influence our decisions, it’s easy to spend money unintentionally when we experience uncomfortable emotions. Emotional spending distracts us from the issue at hand and can temporarily boost our mood. For this reason, budgets are crucial to maintaining financial health. Getting off track can happen quickly when your margin for error is tiny due to a modest income.