What are Fixed, Savings and Variable Costs and Expenses, and How Will They Help Me Learn How to Budget My Money Properly?

By Christi Posner

Fixed expenses, savings expenses, and variable costs are the three categories that make up your budget, and are vitally important when learning to manage your money properly. When you’ve committed to living on a budget, you must know how to put your plan into action.

Once you’ve created your budget and you’re ready to take it off of the paper and play it out, you will need to divide it into three categories. First, learn the difference between fixed, variable, and savings costs, and then grab 3 different coloured highlighters and begin going through your budget, line by line.

Fixed Expenses – Definition, Examples and Lists

The definition of fixed expenses is “any expense that does not change from period to period," such as mortgage or rent payments, utility bills, and loan payments. The amounts may vary slightly, which may be the case with utilities, but you know they are due on a regular basis. Here is a list of categories to include in your fixed expenses: 

• Mortgage(s)
• Rent
• Property taxes (if paying monthly)
• Strata fee / condo fee
• House / tenant insurance
• Utility bills (cable, cell, electricity, water, etc.)
• Lease / car loan payment
• Vehicle insurance (if paying monthly)
• Life / Disability / Extended health (or other) insurance
• Bank fees
• Debt payments for your debt repayment plan

Savings Expenses – How to Save Money and What to Save For

Learning how to save money is as simple as first figuring out what expenses you need to save for, and then simply getting the money out of your hands. There are two types of savings categories that you need to save for, irregular expenses and goal-oriented savings.

Irregular Expenses – How to Budget Your Money Properly

Irregular expenses are costs that come up throughout the year, that you need to budget your money properly for or else you’ll find yourself reaching for a credit card when those expense comes up. You must save for these expenses in advance, and not feel guilty when you spend the money. Consider it “planned spending.” Examples of irregular expenses include:

• Property taxes (if paying quarterly or annually)
• House insurance (if paying annually)
• Vehicle insurance (if paying quarterly or annually)
• Clothing & shoes (if you shop once or twice per year)
• Health expenses
• Vet bills
• Gifts
• Vehicle maintenance

Goal-Oriented Savings – Save for Retirement, Education, Down Payment, Trip or Emergencies

If you have a goal of saving for retirement, education, a down payment on a home, a trip or for emergencies (which should absolutely be a goal), make sure you have included these goal-oriented savings in your budget.

Simply figure out how much you need to save, when you need to save it by, and divide by the number of months you have left until that date. This will indicate how much you need to save each month. These types of savings are not meant to be touched until that event happens.

Variable Costs – Definition and Examples

The definition of variable costs can differ, but we like to define them as anything you can buy in a store (for example groceries, gas, or coffee) or expenses that are within your control. You can decide how much and if you will spend on these items. Here is a list of what you can include in your variable expenses category:

• Groceries
• Personal care items (drugstore)
• Fuel / public transportation costs
• Parking
• Clothing & shoes
• Daycare
• Work lunches & snacks
• Eating out
• Entertainment
• Tobacco / alcohol
• Lottery
• Babysitting
• Sports & recreation, other hobbies
• Hair care / salon services
• Magazines / newspapers / books
• Children’s lessons and activities