There are expenses which occur periodically from month to month and there are other expenses which may not be periodic or regular, but that occur from time to time unpredictably. Such unpredictable expenses are often termed as variable expenses. Irrespective of how much a person plans or budgets their expenses, there are certain expenses which are unavoidable, and which must be paid when they occur. Even experts in budgeting often struggle to fit such expenses within their monthly quotas because of their irregular nature.
Before one decides how to budget and deal with such expenses, it is first important to understand what such expenses are, and how one can factor them into their budget without any complications.
Distinguishing between fixed expenses and variable expenses
Fixed expenses, as their name suggests, are fixed. They do not change, and their pattern of occurrence is recurring. For instance, a fixed expense that you may have to pay may be something such as a mortgage payment or the school fees of your children, or expenses such as loan principal amounts and interest expenses. These payments are easier to deal with in comparison to such expenses because of their nature. They are usually a fixed sum, they occur regularly, and the one who has to make these payments knows how much of an impact such fixed payments will have to be adjusted, within their budgets.
However, it often becomes much more complicated to incorporate irregular payments or such expenses within one’s budget. It is hard to demarcate a specific amount for variable payments, and often difficult to gauge whether such payments will recur. Some examples of such expenses may include a dinner with your friends, or a coffee that you may choose to pick up before a stressful day at work – basically those expenses which you do not regularly budget for.
How do I ensure that my variable expenses are also counted within my monthly budget?
To ensure that your variable expenses are counted within your monthly budget, it is first important to set aside some amount of money as a security cover, and then decide what to do with the rest of it. The best way to manage variable expenses is by breaking big payments that may occur into smaller, more consumable chunks. Once you have a grasp of how much you will really end up spending, with a clear focus on how long you have to make these payments, it automatically becomes easier to deal with variable payments.
Another important factor to consider is how much disposable income you are likely to have. If you have a considerable amount of disposable income, it often becomes easier to deal with variable payments without too much pre-planning; however, if you find yourself running out of money by the end of the month, it may be important to set aside a small portion of your income well in time in order to ensure that you are able to meet obligations with respect to variable payments as well.
