Personal Finance

Fixed vs. Variable Expenses: What to Know to Master Your Budget

4 min read
Mar 13, 2023

Creating a budget is essential to saving for your life goals, and an important part of establishing one includes knowing the difference between your fixed and variable expenses.

Fixed expenses are costs that typically remain the same in price and frequency, while variable expenses are costs that can change regularly.

If you have a good handle on where your money is going every month, it can help you master your budget and plan for the future. Let’s dive a little deeper.

What is a fixed expense?

Fixed expenses, like a mortgage or rent payment, cost the same amount on a routine basis. They’re the costs you can plan for and are likely already factored into your regular budget. These costs can occur at any interval, but they’re typically monthly or yearly payments.

Fixed expense examples

Here are some common fixed expenses:

  • Rent or mortgage payments
  • Car payments
  • Insurance premiums (auto, home, renters, health, dental, life, etc.)
  • Subscriptions and memberships (streaming services, meal kits, fitness memberships, etc.)
  • Property/school taxes
  • Tuition and/or childcare costs
  • Cell phone and internet services
  • Student loan payments

What is a variable expense?

Variable expenses are those that change in cost and occurrence. These expenses are more difficult to plan for, as they can vary depending on several factors, such as unforeseen events and discretionary spending.

Variable expense examples

Some common variable expenses include:

  • Groceries
  • Gas
  • Dining out
  • Entertainment (concerts, movies, etc.)
  • Personal care (haircuts, massages, etc.)
  • Home, auto, and property maintenance
  • Medical care
  • Hobbies 
  • Clothing
  • Utilities (electricity, water, and gas)

Budgeting for fixed vs. variable costs

When it comes to budgeting for fixed and variable expenses, fixed expenses tend to be easier to plan for, since they are typically due at set times. Variable expenses are less consistent, making them harder to plan for in advance.

Overall, a large part of budgeting is determining the difference between wants and needs. The best way to do this is to remember that needs are the things you can’t live without, while wants are things you enjoy but aren’t necessary to your daily life.

For example, many fixed costs are “needs,” like rent and insurance. Meanwhile, some variable costs — like eating out and buying new clothes — may fall under the “wants” category. (Of course, some variable costs are needs, too, such as groceries, medical care, and utilities).

According to the 50/30/20 budget rule, 50% of your income should be allocated to “needs” and 30% should go toward your “wants.” The remaining 20% is dedicated to savings and investments.1

As a rule of thumb, here’s how to budget for fixed and variable expenses.

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How to budget for fixed expenses

Because a number of essentials are fixed expenses, it’s generally recommended that you prioritize and budget for those costs first.  For variable costs, things get a bit more complicated.

How to budget for variable expenses

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. As time goes on, you can reassess to ensure you’re budgeting the proper amount.

Saving on fixed and variable costs

If you’re aiming to reduce your spending, taking a closer look at your fixed and variable costs to determine where and how you can save is a good place to start.

Reassess your fixed costs

It can be difficult to save on fixed expenses, but it’s not impossible. There are a few things you can do to lower these costs.

For example, you can search for a less expensive phone or internet plan and drop subscription services you no longer use or can live without. When it comes to insurance, you can take advantage of discounted rates through an employee benefits program.

Cut variable costs

To save on variable expenses, there are a few behavioral changes you can start implementing in your daily life.

For example, before purchasing something, take a moment to think about it. Ask yourself if this purchase is a want or a need. If it’s a want, consider if it makes more sense to wait if you haven’t saved enough for it yet.

By first determining how important the variable cost is to your happiness and well-being, you can help reduce your spending.

Fixed vs. variable costs: The bottom line

Both fixed and variable costs are a crucial part of keeping any budget on track.

If you’re building your budget, you can start by taking a detailed look at your fixed and variable costs and determining where you can cut expenses and save more money. You can’t plan for everything, but you can identify patterns and use that knowledge to hit your financial goals.

Future-proof your finances

Learn more about Upwise™, a free app from MetLife that helps you create better financial habits so you can feel more confident about your future.

1 “The 50/30/20 Budget Rule Explained With Examples” Investopedia, 2022

Upwise is a product of MetLife Consumer Services, Inc. (MSC). Upwise is available at no cost to all individuals and regardless of any MetLife relationship or product. Upwise is for educational purposes. Each individual is advised to consult with their own attorney, accountant, and financial professional regarding their specific circumstances. MCS does not provide legal, tax, or investment recommendations or advice.