Fixed vs. variable expenses: What’s the difference?

Building a budget is a fundamental way to save smarter. But to do that, you need a basic understanding of fixed and variable expenses—and how they can impact your ability to stick to a budget.

What is a fixed expense?

Fixed expenses stay the same every month. They’re predictable and rarely change, making them easy to plan for.

Examples of a fixed expense include:

• Rent or mortgage payment
• Child care costs
• Phone bill
• Internet bill
• Loan payments
• Subscriptions
• Insurance premiums
• Tuition bill

You may have different fixed expenses than those listed. Go through your past year’s expenses to make sure you don’t skip anything when making up your budget.

How to budget for fixed expenses

With fixed expenses, you typically know what to include in your budget. These tips can help you create the most effective budget for your situation.

1. Prioritize essential expenses—the things you need to survive. Make sure your income covers essentials like housing and child-care over wants like gym memberships.
2. Convert nonmonthly costs into fixed monthly expenses. For example, if you pay $600 twice a year for car insurance, mark that down in your monthly budget as $100.
3. Add savings into your budget as a fixed expense. Whether you’re saving for unexpected expenses or financial goals like retirement, include it in your budget to ensure it happens.

Start saving with no minimum balance

Learn more

Discover, a division of Capital One, N.A., Member FDIC

Saving money on fixed expenses

Fixed expenses tend to be bigger and may take planning to reduce—like moving to reduce your monthly rent. Others are easier to cut or trim. To save money on fixed expenses:

• Cancel unused subscriptions and memberships
• Switch to a cheaper phone or internet plan
• Shop around for lower rates on insurance
• Avoid unnecessary expenses

What is a variable expense?

Variable expenses change, often monthly, making them less predictable and trickier to budget for. That makes it easier to overspend on them.

Variable expense examples include:

• Groceries
• Medical bills
• Utility bills
• Clothing costs
• Gasoline prices
• Car or home repairs

Some variable expenses are easier to manage than others. For example, you can control what you buy at the grocery store but not how much it costs to fill your gas tank.

How to budget for variable expenses

Like fixed expenses, it’s important to prioritize essential variable expenses like food and utilities. Here are two options to help determine realistic figures for your budget:

1. Calculate the average of three to six months’ spending in each category. 
2. Determine the highest amount that you spend in a month in each category, and use that maximum number in your budget to provide a cushion.

Either of these methods can help you get a better handle on how much you’re spending on variable expenses. Another tip: Keep a budget buffer in a savings account to provide a safety net when variable expenses are higher than expected (or when unexpected expenses pop up).

Saving money on variable expenses

Reducing variable expenses can free up space in your budget, making it easier to handle your fixed expenses and funnel more into savings.

Here are five simple ways to reduce variable expenses:

1. Make grocery lists and stick to them.
2. Wait for sales whenever possible.
3. Reduce your dining out and takeout orders.
4. Seek free or low-cost entertainment like local museums that offer discount days and perks.
5. Invest in a programmable thermostat to save on utilities.

Now that you understand the differences between fixed and variable expenses, you can build a budget that helps you control your spending and meet your financial goals. When you know exactly where your money is going, you can take steps to shed unnecessary expenses, plan for the unexpected, and let your money work harder for you.

Take a proactive approach to planning for fixed and variable expenses with a Discover^® Online Savings Account.

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.

The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.