Money Saving Mom®

Every Thursday in 2025, I’ll be answering a question on money and/or budgeting. If you have a question you’d love for me to answer in an upcoming post, please submit it here.

Today’s question is about variable expenses from Lori:

“How do I budget for variable expenses and then stick with my budget?” -Lori

One of the biggest hurdles I hear from women when it comes to budgeting is this: “I can’t figure out how to budget for variable expenses!” Variable expenses are those expenses that don’t fit neatly into a monthly box — things like gifts, car maintenance, and medical bills. The costs vary and they don’t have a set cadence as to when you’ll be paying the bill or needing to buy that gift.

We have a whole page on our free budgeting worksheet dedicated to variable expenses because there can be so many different ones and I don’t want you to forget any of them! Why? Because if you don’t plan ahead for variable expenses, they will pop up out of nowhere and can throw your budget off track — and maybe even make you feel like it’s impossible to stick to a budget at all.

How to Budget for Variable Expenses

The good news is, budgeting for variable expenses doesn’t have to feel like herding cats. With a few simple strategies and a shift in perspective, you can not only create a realistic budget but also stick to it — and maybe even enjoy the process!

Step 1: Identify and List Your Variable Expenses

The first step to budgeting for variable expenses is to know what they are. Take a look at the past 6-12 months of your spending. Comb through your bank statements and credit card bills, and make a list of any expenses that don’t show up every single month but still occur regularly.

Some common categories include:

• Gifts (birthdays, weddings, holidays)
• Car maintenance (oil changes, repairs)
• Medical expenses (co-pays, prescriptions)
• Annual subscriptions or memberships
• Home maintenance (repairs, seasonal upkeep)
• Clothing
• Activities for your kids
• Vacations/outings with friends

Download our free budgeting worksheets and go through the Variable Expenses page to help you think through all the different categories you might be spending money on occasionally or regularly that aren’t fixed expenses. Once you’ve identified your variable expenses, group them into categories. This will give you a clearer picture of where your money tends to go.

Step 2: Calculate an Average for Each Category

Now that you’ve got your list, it’s time to figure out how much to budget for each category. Since these expenses are variable, you won’t have an exact number, but you can calculate an average based on past spending.

For example, if you spent $600 on car maintenance over the past year, divide that by 12 months. You’ll get $50, which means you should aim to set aside $50 each month for car maintenance.

Use the Variable Expenses page from our free budgeting worksheets and write down the amount you need/want to budget for each category. You might find that some categories are more sporadic — like gifts, which tend to spike around the holidays. In those cases, break down the total annual cost and spread it out evenly over the year.

This is one of the keys to financial success! You have to plan ahead for the upcoming expenses, even if they aren’t things that are regular line items in your budget. And don’t just plan ahead, set aside the money, too!

Step 3: Set Up Sinking Funds

Once you’ve calculated how much to budget for each category, create sinking funds. A sinking fund is simply a pool of money you set aside for a specific expense. Think of it as a mini savings account within your budget.

We view our sinking funds as already spent money, even though we are just setting it aside. It’s set aside and designated for a future expense, therefore, it should never be touched.

You can set up sinking funds in several ways:

1. Cash Envelopes: If you prefer to work with cash, you can create labeled envelopes for each category and add money to them every payday. This can work well for budget areas like clothing or gifts. We did this for years and it worked really well. When we needed to buy clothes or a gift, we’d just bring that envelope to the store and that was the amount we had to use (and I’d recommend not using it all because it’s always nice to have some money in the envelopes and waiting to be used if a need or want arises!)
2. Separate Savings Accounts: Some banks allow you to create multiple savings sub-accounts, which is a great way to keep track of different sinking funds digitally.
3. Budgeting Apps: If you like the convenience of apps, many tools (like YNAB or EveryDollar) have built-in features for tracking sinking funds. After using cash envelopes for years, we switched over to using YouNeedaBudget. We have all of our money in our bank accounts accounted for through this program. Instead of looking at how much we have in our bank account, we look at how much we have saved in individual categories when we need to spend money on something like a gift or car maintenance, etc.

Sinking funds prevent that “Oh no, where will the money come from?” panic when a variable expense pops up. Instead, you’ll have a stash of cash ready and waiting when it’s time to spend.

Step 4: Build Flexibility into Your Budget

Here’s the thing about variable expenses: they’re, well, variable. That means no matter how carefully you plan, you’ll still have months when things don’t go exactly as expected. That’s okay! The key to sticking to a budget is giving yourself permission to adjust when life happens.

To build flexibility into your budget, try these tips:

• Create a Miscellaneous Category: Set aside a small amount each month for unexpected expenses that don’t fit into any specific category. Jesse and I both have a budgeted amount that is our blow money. This is money we can spend on anything we’d like. Sometimes, we’ll use it to pay for variable expenses — like lunch out with a friend, a new item of clothing, or a gift for someone else.
• Roll Over Unused Funds: If you don’t spend all the money in a sinking fund one month, always roll it over to the next. This helps build a buffer for months when expenses are higher. Sometimes we’ll have sinking funds (such as for car repairs) that we don’t touch for months at a time. It just builds up and up and then when something happens, we have the money ready!
• Reassess Regularly: Life changes, and so do your expenses. Make it a habit to review your budget monthly and adjust your sinking fund contributions as needed. We have definitely had times where we’ve “robbed Peter to pay Paul” — meaning we’ve had a lot of money in one category and just haven’t been spending as much there so we’ll move some of it over to another category that is pretty empty. This is fine to do on occasion. However, I recommend that you adjust the categories if you are doing this often.

Remember: Give Yourself Grace

No budget is perfect, and no one sticks to their budget perfectly 100% of the time. There will be months when you overspend or forget about an expense. When that happens, don’t throw in the towel. Instead, give yourself grace, learn from it, and keep moving forward.

If you have a budgeting mishap, instead of giving up, ask yourself, “What can I learn from this so I don’t make this same mistake again?” Then ask, “What can I do right now to help myself dig out of this and get back to a strong budget again?”

I’m over here cheering for you as you seek to be more intentional with your finances. As always, keep in mind that budgeting is a work in progress, not a one-time event. But by planning ahead for the future through budgeting for variable expenses, you will set yourself up for so much less stress and strain in the future, even if it means that you don’t have as much breathing room in your budget in the present. It will be so worth it when that unexpected variable expense pops up and you have the money set aside and waiting!

P.S. Need some step-by-step help to set up a budget? Check out my brand-new resource: The One-Hour Budget. A simple, effective guide to walk you through the process of setting up a realistic budget in just 60 minutes!