Do you know the difference between fixed vs variable expenses?  If not, it’s essential when creating your budget.

Fixed expenses are monthly expenditures that stay the same.  For example, your rent or mortgage payment would be a fixed expense. It stays the same month after month.  Fixed expenses are usually based on contractual obligations and are of a longer term in nature.  Other examples could be car and other loan payments, subscriptions such as streaming services, etc.

A variable expense is a monthly expenditure that changes from month to month. Variable expenses could include restaurants, gas and/or auto repairs, groceries, etc.  You will be spending a different amount on these categories each month.  Use a 3-month estimate of your costs for your variable expenditures when first creating your budget.  Adjust your budget as needed going forward.  Variable costs are also the easiest to adjust to make your budget balance and/or to have more for savings.

For utilities, they may or may not be fixed or variable.  Why?  Because if you have them on a budget plan, they would be fixed.  If your utilities aren’t on a budget plan, then they would be variable.

Moral of the story:

When you create your budget, you want to insure you list your categories as fixed vs variable expenses.  Fixed expenses are much easier to budget than variable.  Use an estimated amount for your variable expenses and an actual amount for your fixed costs.