As a consumer, you most likely understand that an expense is a cost you pay for products and services that you buy or use every day. Some expenses are fixed—payments you make regularly that stay the same from month to month, like rent or car payments—and others are flexible, meaning the total cost of these expenses changes regularly.
Alternate names: Variable expense, controllable expense
A few examples of flexible expenses include what you pay for monthly groceries, clothing, and transportation, as the total cost of all of these things will most likely vary.
How Do Flexible Expenses Work?
Chances are you’re aware of how much income you earn every month. It’s just as crucial to know how much money you’re spending and what you’re spending it on. Generally, every budget should consist of both fixed and flexible expenses. Flexible expenses represent the variable spending you make on a daily, weekly, or monthly basis. They can be categorized into needs and wants. Necessary flexible expenses include things like electricity and groceries. In contrast, flexible expenses that are considered wants or discretionary include things like recreation, new clothing, and entertainment. Let’s say you frequent a movie theater and always purchase popcorn. This is something you may want to do, but you don’t need to. Since both of these expenses are discretionary and flexible, you could save money by choosing not to go to the movies, and instead, watch a film at home with homemade popcorn.
Flexible Expenses vs. Fixed Expenses
There are two types of expenses: fixed and flexible. Find a bit more detail about both below.
Flexible Expenses
Your flexible expenses are your bills and payments that typically vary in amount from month to month that you also can routinely control. This could include wants like eating out, coffee runs, or the amount you spend on live entertainment. But flexible expenses can include necessities, too, such as how much money you spend on services like electricity, water, and gas bills that can change by adjusting your monthly usage.
Fixed Expenses
Fixed expenses are the items in your budget that you have little or no control over. Typically, they do not change, and you pay the same amount for these expenses every month. For example, lease agreements, mortgage payments, and car insurance generally have contracts with set payment amounts that do not vary from month to month. Your payments would only change if the terms of the contract changed. When budgeting your expenses, it’s always a smart idea to shop around for the best value before committing to fixed payments.
Types of Flexible Expenses
Saving money on flexible expenses is doable. However, it may require taking a close look at your spending and making a few lifestyle adjustments. And when you’re aware of your spending habits, you can look for opportunities to cut back on (or even cut out) certain expenses, at least temporarily. Here are some details on some of the everyday variable expenses most consumers encounter:
Food: The average U.S. household spent about $7,316 on food in 2020, including eating at home and eating out. One way to get a handle on food expenses is to make dining out less of a priority, as restaurant meals tend to be more expensive than groceries.Transportation: Consumers spent an average of $1,568 in 2020 on gasoline compared to nearly $2,094 in 2019. To cut the cost of gasoline specifically, consider alternative, less-expensive modes of transportation when commuting, if possible, such as walking or biking.Entertainment: Entertainment admission and fees dropped from $880 in 2019 to $425 in 2020. Since entertainment costs are purely a want, spending in this area is 100% controllable. Plus, they are the easiest to cut out or cut back on when looking for ways to decrease your spending.
