A variable cost, compared to a fixed cost, is something in your budget which will vary from month to month, sometimes widely. Consider your electric bill, which will typically be the lowest in the spring and fall, but summer and winter when you run the air conditioning or heater, it could be 30-50% more.
These are often a little harder to determine, and thus it is smart to get an average. If you only have a few months, work with that, but if you have a year’s worth of information, that is even better.
We’ve been tracking our expenses for years, and we can see when our costs go up and when they go down, and try to plan accordingly, but we also save money when the costs are cheaper, to pay for the up coming more expensive months.
Variable costs cover a lot of areas however, besides your utilities. Food and gas, will also be highly variable because of all of the outside price pressures.
However, some of their costs changes are also seasonal, so we plan ahead for them when we can by tracking what it costs month by month, and finding an average where possible.
“Surprise” expenditures also fit into variable costs. And these are things that shouldn’t surprise us, but are easy to over look because we don’t buy them all the time. I’m thinking about things like birthday gifts, holiday presents, etc. By setting aside a little bit each month, you’ll make sure you have the money ready for them when you need it.
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