Have you ever decided that it was time to be smarter about your spending? Most people, whether through necessity or curiosity, create goals to be more money conscious. One of the first steps was probably to take a detailed look at your spending. This typically involves making a list of all your categories of spending and calculating how much you spend in each category. But the secret to creating a successful maybe dividing them into just two buckets: recurring and day-to-day expenses.
Bills, mortgage, entertainment, food, clothes, video streaming subscriptions, and travel are popular expense categories. But how do you organize everything to make it easy to understand how much you can spend at any time?
A much easier way to think about spending is with just two categories: variable expenses and fixed expenses. This simpler approach to spending can help you create a healthier budget.
Weekly is an app that uses these two categories of spending and helps you manage your money. Instead of focusing on what the money was used for, we focus on whether the type of spending it is: recurring or day-to-day.
Another way to word to recurring expense might be fixed expenses or recurring expenses. Another way to think about day-to-day expenses is variable expenses.
Whether you call them day-to-day or variable, recurring or fixed, they are the same thing.
To help you understand the differences between these two categories of spending and how they affect your budget, here is a guide to variable expenses and recurring expenses.
Four Major Differences Between Recurring Expenses & Day-to-Day Expenses
There are three major differences between day-to-day expenses and recurring expenses. These differences are predictability, amounts, and autopay. Understanding these differences is the first step toward an achievable, healthy budget.
1. You have decided in advance how much you will be paying
With recurring expenses, you have decided before hand how much you will pay. So with your rent, mortgage or insurance costs for example, you know ahead of time how much you will be paying and even when you will be paying it. These are recurring expenses. Another way of thinking about this is that depending on the individual choices you make during the week, the amount on your recurring expenses does not change. But if you chose to say buy store brand groceries or choose chicken instead of steak, your grocery bill will change based on those day-to-day decision, so that makes groceries a day-to-day expense.
2. Predictability
Day-to-day expenses can change based on how your week’s turn out. You don’t always know when you’ll need to spend money on your variable expenses. Take clothes shopping, for example. If you have an event to attend this weekend, you might decide you want to buy a new outfit. But you don’t buy a new outfit on a predictable schedule.
Recurring expenses, in contrast, are predictable and occur on a regular schedule. This schedule is usually monthly. There are some expenses, such as your gym membership, that you are fixed to paying every month. If an expense occurs on a regular interval for a predictable or set amount then it is a recurring expense.
3. Amounts
Some of your expenses cost the same amount of money each time you pay them. Others are more variable. Day-to-day expenses have inconsistent costs. What you spend on something one time may not be the same the next time. Travel is a good example. How much you spend depends on how far you’re traveling, how you’ll get there, and where you’re staying. A few nights in a friend’s cabin will cost much less than a vacation to a tropical resort.
The costs of your fixed expenses are much more consistent. Even if they aren’t exact, you can usually create very close estimations for budgeting. Your electric bill might vary a little bit depending on how many appliances you use each month, but the amount is relatively consistent.
4. Auto-Pay
Automation is a great feature of modern society. One day, we might even all have cars that drive themselves. But for now, we can appreciate auto-pay, a feature where scheduled payments are automatically deducted from your account.
variable expenses don’t have this feature. They are point-of-sale transactions that take place at registers in stores or through online ordering systems.
Fixed expenses, however, frequently allow for auto-pay and automatically deduct the payment amount from your enrolled checking account or credit card.
Typical Day-to-Day Expenses & Recurring Expenses
It’s even easier to make sense of variable expenses and fixed expenses when you have an idea of the types of expenses that fall into each category. Once you understand these expenses, you’re on your way to understanding and improving your budget.
Examples of Day-to-Day Expenses
Remember, variable expenses take place at unpredictable times, have variable costs, and don’t allow for the feature of auto-pay.
Examples of variable expenses include:
- Clothing
- Groceries
- Gas
- Eating Out
- Entertainment
- Travel
- Personal Care
- Medical Bills
- Home Repairs
- Car Repairs
Examples of Recurring Expenses
Recurring expenses occur at predictably scheduled times (usually monthly), have fixed costs, and usually allow for automatic payments.
Examples of recurring expenses include:
- Mortgage
- Bills
- Car payments
- Tuition fees
- Childcare fees
- Other loan payments including student loans
- Subscriptions and memberships
Budgeting Basics
Now that you understand the differences between day-to-day expenses and recurring expenses, let’s look at how this can help you with your budgeting. We promise, with these two budget categories, saving money is easy and achievable.
Regular Income and Recurring Expenses
The first step to creating a spending budget is to figure out how much money you make every month. Calculate your guaranteed income by adding up all reliable sources of income. Write this total down.
Next, subtract all of your fixed expenses. Remember, these are your predictable and consistent payments like your mortgage, bills, utilities, and subscriptions. If you want to save a set amount of money each month, you should also consider this a fixed expense.
When you have subtracted your monthly fixed expenses from your monthly guaranteed income, the amount remaining is considered your safe-to-spend amount. This is the amount of money you can safely spend without losing money.
Safe-to-Spend Weekly Amount
Weekly takes your safe-to-spend amount and calculates it as a weekly safe-to-spend. This way, you know exactly how much money you can spend each week and stay within your budget.
You are free to use your weekly safe-to-spend however you’d like to. This money will go toward your variable expenses (what we call day-to-day expenses) but you don’t have to budget by category. If you buy a new video game you might have less money leftover to spend eating out at restaurants, but the choice is completely yours.
Weekly Makes Budgeting Easy
Making smart spending choices is achievable for anyone. With an understanding of variable expenses and fixed expenses, you are on your way to simple budgeting. Weekly makes it even easier!