Variable Discretionary (V/D) Expenses

As you learned in the V/N description, the variable expense column often holds the bulk of monthly expenses, especially for those new to budgeting and finances.  V/N and V/D expenses often will compete over which makes up the second largest of four squares in your grid; both include a large number of everyday expenses that many people don’t even think about.

The variable discretionary expense is the bane of your financial health. Let’s consider what goes into your V/D square – the discretionary expenses you have which vary from month to month. The money you spend on entertainment, eating out, alcohol, vacations, and many more of your tertiary categories all fit into this grid location. Any expenses that you don’t have to make but which change in amount by month fit into the V/D square. All of these expenses have one very nice feature: they can be easily cut out. Literally entire series of books have been written on the subject!

Ideal Distribution

The dollar amount found in this category is very flexible. If you are aiming for good financial health, reduce what you spend here. By definition, this category could be ZERO, but that’s impractical to expect. A good amount to start aiming for would be 20-25% of your total expenses, as most people will discover that they are spending much more than this, but the lower you get this, the better. Use tips you find throughout this website and think of on your own to make this a diminishing category!

Use of the Category Information

Virtually everything can be reduced within the variable discretionary category. The V/D square encompasses all kinds of expenses that you probably don’t really think of – entertainment, eating out, gambling, alcohol… All of the expenses that go along with the vices of life fit in here. For this reason, the V/D category is easy to reduce. Think of the V/D category just as you would another kind of VD (think veneral disease): something that for your good health you should avoid and get rid of asap!

Now we’ll take a look at your variable discretionary costs. As always: how can you reduce them? The variable discretionary category is extremely flexible, which is what makes it the easiest and best square for quick and simple financial health solutions. With only a little time and thought your monthly expenses can drop dramatically! There is such a wide range of things to reduce and ways to reduce them that I can only scratch the surface here.

Eating Out: Reducing this category is quite possibly the easiest way there is to save money. It correlates well with your grocery bill; people who spend a lot in one category spend less in the other. However, the overall (grocery + dining) expenses are dramatically lower for people who cook rather than dine out. Eat out less and learn how to cook a few simple meals if you don’t already know. The average meal at a restaurant seems to range between $8 and $15; it is easy to prepare a meal for several people for that price. Plus when you eat out you often leave a tip of an extra 10, 15, even 20%! If you are going to eat out, try to do so at inexpensive restaurants or at locations that offer discounts or coupons. It is possible to feed three people for the price of one if you find the right coupon! I recommend going one week without eating out of any sort – you might be surprised at how hard it is! No coffees, no stopping for a sandwich, nothing; all of your food must be free or prepared yourself. But how much did you spend last month on eating out? $200? $300? The average expense in America per person is just under $5,200 on dining out each year according to the Bureau of Labor Statistics.

Alcohol: Well, the simple answer here (as with the rest of the expenses in this category) is to simply cut it out. If you can’t do this, reduce the amount you use and watch for sales. Several states (such as Virginia, where I reside) have state-run alcohol boards which post the prices and sales on a regular basis. If you have a favorite beverage, wait until it goes on deep discount!

Entertainment: Another easy to reduce category. If you like to watch movies, wait until they come out onto DVD and rent them (I use NetFlix) instead of shelling out thirty bucks for a pair of tickets and some popcorn. Alternatively, there are many internet TV sources like Hulu which have movies available, in many cases before they are available to the general public! (Note: I mean in legal form, I do not condone illegal downloading practices.)

Travel and Vacation: Stay local, or if you have to fly travel on budget airlines and sleep in inexpensive hotels If you plan to take a major trip, save up so that you can afford it; NEVER go into debt for a vacation. Road trips, camping, hiking, and visiting relatives are all inexpensive methods to travel and have a vacation without paying too much. A little research can save you a ton of money if you must take that trip, so look into it! And never go to Las Vegas, which brings us to…

Gambling: There are entire cities built up around people who are bad at math. The house always wins if you play long enough. Enough said! If you have a poker night with some friends, consider a low buy-in or even betting non-monetary items: M&Ms or marshmallows are classics but tend to get devoured rather than used. Toothpicks work well, or even barter for car washes or mowing the lawn!

As I state in each of my square descriptions, there are dozens of possible tertiary categories which will fit into this block. These are easy and obvious ones which I feel give a good idea of the intent. If you think of others, please don’t hesitate to let me know, I always love getting feedback! Browse through all of the descriptions to be sure you understand them all.

Fixed Necessary,  Fixed Discretionary,  Variable Necessary,  Variable Discretionary

Tags: discretionary, expense log, The Expense Grid, tools, tracking, variable