Home Financial Education How Flexible Is Your Budget?

How Flexible Is Your Budget?

Published February 2021 by Jordan Semprevivo
Dollar bills with blocks on top reading Flexible Budget

A traditional budget is an exercise in basic arithmetic. Knowing your fixed income, you set spending targets and try to stick to them. This means, however, that any substantial unexpected expense can upend your budgeting. Some people find it difficult to stick to their budgets due to this inflexibility.


Key Points
  • You need a flexible budget to accommodate your income fluctuations.
  • Categorize your expenses into fixed and variable.
  • Assign percentages to your expense categories rather than fixed dollar amounts. 
    Estimate your likely monthly income and trim your variable expense percentages accordingly.
  • Use leftover money to pay off your debt or increase your savings. Try to keep your budgeting simple. 

Flexible budgets accommodate unexpected expenses better. Instead of specific dollar amounts, they feature percentages, are more adaptable, and thus easier to follow. For those who have trouble following a traditional budget, or for those who do not have a fixed monthly income (such as people who work on commission or are self-employed), a flexible budget is likely a better option.

Tracking Your Fixed and Variable Expenses

The first step in setting up any budget is to track your expenses. You need to know where your money goes and how much you need to keep afloat financially. 

Your expenses are either fixed or variable. Fixed expenses are your rent, car payments, insurance and loan payments, etc. These are all regular bills that come around at set intervals and in set amounts. 

Variable expenses are expenses over which you retain some degree of control. You know you have to buy groceries every month, but you can trim your grocery expenses by shopping in a different store, buying non-brand items, bargain hunting, etc. Entertainment, clothing, and transportation fit into this category as well, together with your utility bills. 

When adding up your expenses, do not forget about savings. Add savings to your variable expenses if you are not sure how much disposable income you earn from one month to another. If you can afford to set aside a fixed sum every month, add savings to your fixed expenses instead.

Tracking Your Income

Adding up income sources is a simple budgeting exercise for those who earn fixed incomes. If you are self-employed or live off a variable income for whatever reason, produce an estimate based on the money you earned over the last three to six months. 

Determining the Monthly Budget Percentage for Your Fixed Expenses

Go through the fixed expenses you have listed, and set a monthly budget percentage for every entry. If you earn $3,500 and pay $700 in rent, you spend 21.4 percent of your monthly budget on keeping a roof over your head. Add up all your fixed expense percentages. 

Determining the Monthly Budget Share of Your Variable Expenses

Estimate the amounts you spend in each of the variable expense categories. This is the flexible part of your budget, so you can adjust these percentages to reflect your financial goals. The flexible part of your budget is the one that will also reflect the variations of your income. 

By adding the fixed and the flexible parts of your budget together, you get the total as a percentage of your income. If your total falls below 100 percent, use the leftover money to invest, increase your savings, or pay off debt. 

If you already have six months’ worth of essential expenses socked away, make debt relief your top priority. Since your debt almost certainly costs more than what savings of similar size could earn you, prioritizing debt relief makes perfect mathematical sense. 

A flexible budget allows you to decrease spending in the variable category if your overall budget requires it. 

Keeping Your Budgeting Simple

You can make your flexible budgeting as simple or complicated as you want. You can break down spending categories all the way to individual items and assign budget percentages to all of them.

Woman calculating bills

Such an approach would make budgeting a time- and energy-consuming activity, however. Sticking to such a budget would quickly turn into a burden and thus become unsustainable. 

Try to keep things as simple as possible. The objective of a flexible budget is to make it easier for you to formulate achievable financial goals and stick to them. 

  • Align your goals and interests with your budget. 
  • Plan ahead for predictable financial events such as Tax Day
  • Make sure your income and expense-tracking are accurate. 
  • Keep an eye on small expenses that can add up quickly. 

The beauty of flexible budgeting is that it allows you to continue pursuing your financial goals while granting you some breathing room. You can decide how aggressively you want to pursue a goal like debt relief. Focusing your budget on debt relief is a healthy financial approach. 

Address your debt as soon as your budget allows it. Contact a ClearOne Certified Debt Specialist today at 866-481-1597 and find out what your best debt relief option is or get a free savings estimate.

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Topics: Financial Education