How to budget for variable expenses

How to Budget for Variable Expenses


If you keep busting your budget, I want to let you in on a little secret: and that’s how to budget for variable expenses.

Let me break it down for you with a simple question. Would you rather: fight a 100-pound shark in one epic battle or one 20-pound shark in five different battles? 

Unless you’re moonlighting as the Hulk, you probably chose the 20-pounder and ate your Wheaties for breakfast. Stay with me and we’ll explain why this choice is the secret to mastering your budget.

It’s a familiar story in budgeting land: you’re doing great at the beginning. You pass on a Five Guys cheeseburger in the name of your budget (and the fries…ohhhh the fries), you bar yourself from Target (because you cannot be trusted roaming those perfectly curated aisles). You sail past month one and month two with your new budget (this isn’t so bad!). In month three, your twice-yearly car insurance comes due: a whopping $700 bill. This single blow busts your budget in one fell swoop. Ouch.

You might want to give up on budgeting at this point, because a busted budget is demoralizing. But what if there was a nifty little trick to bulletproof your budget—to give it a Kevlar coating the next time a big expense sneaks up on you? I’ll let you in on a secret—here at You Need a Budget (or YNAB for short), we call it Rule #2: Embrace Your True Expenses. 

You want to look into the future at your upcoming variable expenses and bake those costs into today’s budget, but in smaller, more digestible pieces. Here’s the reality:

  • You’ll pay car insurance in a few months. 
  • You will likely spend a chunk of money on gifts around the holidays.
  • You might want to take a vacation in six months. 

When you don’t embrace these true expenses, these costs take a bite out of your budget like a 100-pound shark. Instead, we say treat them like five 20-pound sharks. Fight them off one month at a time. Suddenly, big bills don’t elicit the same feeling of a bottomless pit in your stomach.

Here’s how to prep for this common budgeting battle:

1. List Out Large Upcoming Expenses

Pull out that crystal ball and take stock of big costs in the next year. When’s the next insurance payment? Is your laptop on its last leg? Make a list.

Want some ideas? Here’s an exhaustive list to get you started.

Here’s an example:

  • Car insurance: $1400/year
  • Christmas presents: $500/year
  • Amazon prime subscription: $119/year
  • New laptop: $1200
  • Flights and hotel for your friend’s destination wedding sometime next year…or maybe the year after… $800 

*cough*…we said TRUE expenses

  • Oh right. It’ll probably cost more with food, airport parking, gifts, and I guess that hotel is a littttle more expensive than originally thought: $1600 

*coughcough*…but are you really going by yourself?

  • OK FINE! All-in costs for two to attend your friend’s destination wedding: $2800

2. Break Them Down Into Monthly Costs

Here’s the same list broken down as if these costs hit in 12 months.

  • Car insurance: $117/month
  • Christmas presents: $42/month
  • Amazon prime: $10/month
  • New laptop: $100/month
  • Friend’s destination wedding: $230/month

3. Tweak Your List

If this list of true expenses puts your usual monthly budget into the negative, pull out that red pen and do some slashing.

Our example tweaks might look like this:

  • New laptop: $100/month $33/month (save for Chromebook instead of Macbook)
  • Friend’s destination wedding: $230/month $75/month (you decide to book flights with points and share an Airbnb with friends)

4. Add A Cushion

There will be something you inevitably forget to budget for: a haircut, passport renewal, car tabs. Your cushion just builds a soft, pillowy foam pit for any unexpected budget backflips.

  • Stuff I forgot to budget for: $100/month

5. Treat Variable Expenses Like Monthly Costs

And now, here’s the clincher: start treating your variable expenses like monthly costs—just like your groceries or your gas. Save money for these true expenses each month—so when it’s time to pay them, the money is there. 

Include non-monthly expenses in your budget

This should be simple, right? Well, some budgeting tools make this pretty hard—it’s easy to track what you’ve spent but it’s tough to save for future costs. If you want to be more intentional about saving for future expenses in bite-sized chunks, check out our award-winning budget software: You Need a Budget.

YNAB’s easy-to-use budgeting app makes it simple to turn those 100-lb sharks into less scary, smaller sharks by giving you clear goals to save for each month.

Gonna pay for Christmas in cash this year!

You’ll finally stop those inconvenient, overlooked bills from sneaking up on you. Our four-part proven framework will help you take back control of your finances (and you’re well on your way—you’ve just learned Rule Two: embracing your true expenses). 

That’s It! No More Ugly Budget Surprises

Now you’re covered for the big one-off bills and even the stuff you don’t see coming with your cushion. By embracing your true expenses, you’ll be financially strong for whatever budgeting battle comes your way.

Ready to stress less about your money? Try a 30-day free trial with YNAB and take back control of your financial life.