Monthly expenses to include in your budget

Everyone has monthly expenses, for everything from housing and transportation to groceries and internet. But how people manage their expenses—and whether they use a budget—isn’t as universal.

Budgets can provide a big-picture view of finances, showing what money is coming in and what’s going out over time. There may not be a quick and easy solution to change what’s coming in. But if you identify key monthly expenses, you might be able to take better control of what you’re spending.

What you’ll learn:

• Creating a budget can be a simple and effective way to plan for monthly expenses.

• Knowing where you spend your money can help you identify where you can cut unnecessary expenses and save.

• Classifying expenses between fixed and variable can show you which expenses are most predictable.

There are two types of monthly expenses: fixed and variable expenses. 

• Fixed expenses typically don’t change from month to month. They might include rent, mortgage and car payments. 

• Variable expenses are more dynamic from one month to the next. Examples include groceries, utilities, transportation costs such as gas and car maintenance, healthcare costs and entertainment spending.

The first step in creating a budget is knowing which monthly bills and expenses to include. Fixed expenses are easier to estimate. In the case of variable expenses, looking back and coming up with an average based on past spending could give you a place to start.

According to the latest data available from the U.S. Department of Labor Statistics, housing accounts for the largest share of annual spending by consumers. 

Housing costs can go beyond mortgage or rent payments to include insurance, maintenance and property taxes. If property taxes are part of your mortgage payment, you may not need to account for them in your budget until they change.

The average cost of utilities may vary from month to month. Utilities might include electricity, gas, water and sewer bills.

If you own a car, you may need to add payments for a car loan and auto insurance to your budget. The same goes for maintenance costs, such as inspections and oil changes. Variable gas or charging costs, paid to keep your car running, are also worth including. The same goes for parking, tolls and any public transportation (bus tickets, train tickets). Ride-booking services and taxi fares might also be factors.

Variable grocery costs may include food, toiletries and other household essentials. Groceries and related purchases could be a place to start when you’re trying to trim expenses.

Cellphone costs can depend on the type of phone you have and the plan you’re on. Opting for a high-end phone could add to your monthly costs. The same can happen when you exceed your data plan.

Internet and cable are other household bills that may be part of your monthly expenses. If you bundle your service with  landline phone service, you might consider them as one expense.

Gym memberships, magazine subscriptions, streaming services and other recurring expenses generally have fixed costs. With so many out there, a subscription management tool could help you keep track.

Health insurance premiums, prescription costs and routine care represent fixed healthcare costs. If the unexpected happens, having a budget in place can help you figure out how best to manage additional bills.

If you drop your children off at a daycare center or employ a nanny, you could add that expense to your budget. Although childcare is considered a fixed expense, you might also build in room for additional costs like field trips or late-pickup fees.

If you’re a pet owner, your budget may include the cost of pet food, veterinary bills, pet sitting or boarding, and pet insurance.

Setting aside money for an emergency fund may seem ambitious. But the Consumer Financial Protection Bureau (CFPB) says “even a small amount can provide some financial security.” If you want to set a savings goal, the agency recommends having enough to cover expenses for at least three months.

Loan and credit card payments typically have minimum payments due each month. You might start there. But if you’re only paying the minimum on your credit cards you could be charged interest that costs you more in the long run.

If you’re contributing to retirement accounts, such as IRAs or 401(k) plans, that might be worth accounting for. If those contributions are being taken out of your paycheck, you could still consider how those deductions affect your take-home pay.

Travel can involve all kinds of costs, including flights, hotels, rental cars, tours, excursions and meals. You can earn rewards on those expenses with a Capital One travel credit card.

When you budget, you can make room for fun alongside the necessities. And planning for nights out at the movies, restaurants and other fun places could help you identify other expenses you might cut back on if you want more wiggle room in your budget.

Once you’ve identified your monthly expenses and created a budget, it’s time to implement it. Consider incorporating these tips from the CFPB into your monthly budgeting and financial planning:

• Review monthly expenses and update as needed. 

• Don’t let unnecessary spending derail you. 

• Make it a habit to think before you spend. 

• Look for ways to reduce nonessential expenses if you need to free up money.

Budgeting could help give you more control and peace of mind. And using a credit card could offer flexible spending options and rewards opportunities. Plus, monthly statements offer a centralized place to track spending. 

You can find out whether you’ll be approved for a card in as little as 90 seconds, with no harm to your credit scores.