What Is a Flexible Expense?

Woman with laptop at home writing in booklet
•••

Westend61 / Getty Images

DEFINITION
A flexible expense is a regularly occurring cost with an amount that changes from month to month.

A flexible expense is a regularly occurring cost with an amount that changes from month to month. Unlike fixed costs, flexible expenses allow you to have more control over the amount of money you spend.

Knowing the difference between which expenses are flexible and which are not is the first step to managing your cash flow and maintaining a successful budget. Learn how flexible expenses work and why accounting for them matters.

Definition and Examples of a Flexible Expense

Flexible expenses, also known as variable expenses, are costs you pay that can change from week to week or month to month.

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.

The biggest difference between flexible and fixed expenses is that flexible expenses give you more control over how much money you spend on them.

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.

Trying to budget for flexible expenses can be tricky because they can change frequently. Creating a spending plan or using a budgeting app can help you calculate the average amount you spend on flexible expenses, making it easier to track and edit your spending habits.

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.

When money gets tight, flexible expenses are the ones that you can readily cut back on to mitigate the strain on your finances. Often when people start tracking their spending for the first time, they’re surprised by how much they spend on things they don’t need. Gaining control over your flexible expenses makes it easier to cover your fixed expenses, avoid late fees, and achieve your financial goals.

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.

Key Takeaways

  • There are two major types of expenses: fixed and flexible.
  • Flexible expenses are controllable costs that vary from week to week or month to month.
  • Cutting costs by adjusting flexible expenses is easier than cutting fixed expenses, as fixed expenses remain constant, typically based on contractual agreements.

Article Sources

  1. Federal Deposit Insurance Corporation. “Budgeting and Savings Tools,” Pages 1-2. Accessed Dec. 8, 2021.

  2. U.S. Bureau of Labor and Statistics. “Consumer Expenditures—2020,” Pages 5-6. Accessed Dec. 8, 2021.