You don’t really consider variable expenses when you are trying to make debt relief easier. Or at least, you are not consciously doing it. But if you really want to ensure that your debt relief efforts will not be in vain, then you need to make sure you keep an eye on these expenses.
Why? Because these expenses can easily bring chaos to your monthly budget. If you don’t control this, it can quickly make your expenses more than your income. When that happens, you will be forced to pay for the difference through credit. And that will make your debt situation worse.
But does that mean we should not spend on these variable expenses? Not really. Because if you stop spending on these, you will make things worse for the economy.
According to reports, consumer spending went down in March because people are not spending on nonessential expenses. These expenses are mostly those spent on bars, movie theatres, and concert halls. While it seems like this is a chance for everyone to save on money, it is taking its toll on the industries involved. The lockdown forced people to stay inside their homes and that left them unable to go out to spend.
And that is slowly taking its toll on the economy. With the recession down, people are starting to lose their jobs. In fact, millions have already filed for unemployment. These are the very same people that we expect to have a huge amount of debt soon.
If you are one of them, you need to start being cautious about how you spend your money. And you should start with your variable expenses.
What are variable expenses
What are the expenses that classify as variable ones? You need to identify what these are because it will help you lower the household spending to help you pay off debt faster.
Variable expenses are those that change in cost every month. They do not have a fixed amount like some of your bills or debt payments.
There are two reasons why the cost of these expenses vary each month.
It is based on how much you consume
The first reason is the amount is based on how much you consume. This is for the expenses that you pay for regularly. For instance, your monthly electric, water, and other utility bills are considered variable expenses. The amount that you will pay each month will depend on your consumption for that particular month. The same is true for food and groceries. And even the household supplies that you use. The cost to pay for these will depend on how much you consume.
You don’t spend on it each month
Another reason why these expenses change is that you don’t really have to spend on it every month. For instance, you don’t have to buy clothes all the time. Or you don’t have to give donations every time you get your paycheck. You also don’t have to eat out every week. All of these expenses are also known as discretionary expenses – or because they are optional.
How to manage your variable expenses
Now that you know more about variable expenses, what are you going to do about that information? You have to learn how to manage it. Your debt relief efforts will be easier if you learn how to do this.
Especially during this time when finances are really limited. Sure, you can expect the government to provide financial aid. In fact, the government decided to provide coronavirus relief payments. And the survey revealed that the recipients plan to spend it on either household expenses or paying off debt.
But will that be enough? With people losing their jobs or being unable to open their business, there are no other funds coming in. If you are one of them, you need to make this relief from the stimulus program last.
And the best way to do that is to make sure you manage your variable expenses. You will not just budget your money for the necessary expenses. You can also have enough left to make debt relief possible.
Of course, that’s where it becomes tricky. Because it’s not like the fixed expenses wherein you know how much you need to pay each month. If you know the amount you have to pay, it’s easier to set aside the money for that. However, with the variable ones, it’s harder to budget for it. You don’t know the amount that you have to secure so you have enough to pay your bills or these expenses.
So if you have limited resources, you need to make sure that your variable expenses will not threaten your budget and make you overspend.
What can you do to make sure your debt relief efforts will not be compromised?
Track your expenses
First of all, you have to learn how to track your expenses. Having limited financial resources should give you more reason to be cautious of where every penny goes. You need to know how much money you are really spending on your variable expenses. The best way to do this is to track it for a whole month so you can be really sure about your expenses. That way, you can have near-accurate data about where your money goes. It will help you make decisions about your finances in the future.
Set a limit
Once you have tracked your variable expenses, you need to set a limit on each. Ideally, you should get the biggest amount that you usually pay. That will ensure that you will not fall short. But since your budget is limited, this will not work. So you have to make sure that your expenses will not consume too much of your budget. It is how you can stretch your budget. Make sure you set a limit that is also realistic. Find ways to help you consume less so your budget will last longer. It will ensure that you have enough left for your debt payments too.
Spend with a purpose
It also helps if you make it a habit to spend with a purpose. Your variable expenses can be controlled so you can spend on what you need and have enough left to pay for your debts. And to control it, you have to learn how to be a smart spender. One of the ways to do that is to spend every amount that you have with a purpose. It’s not just about focusing on expenses that you need to survive. It’s also about spending on what you think will improve your current situation – like paying off debt for instance. If the expense will not help you survive or improve, then don’t spend on it.
Plan seasonal expenses
Finally, you will have better control of your variable expenses if you plan ahead for seasonal spending. Since you don’t spend on it on a monthly basis, there is a high chance that you will forget about it. Then when you need to spend on it, you will have to find a way to fund it. There are times when you might be forced to use credit for this expense. This will add to the balance that you already have. And that can make it harder for your debt relief efforts.