A guide to managing and tracking household expenses

Household expenses are the essential costs of running a home. Common types of household expenses include rent and mortgage payments, utilities, cell phone bills, and groceries.

Knowing exactly what household expenses are and when they’re due can potentially help people stay on top of their budget, take control of spending, and plan for the future.

What are household expenses?

In order to manage one’s household finances, one must first take account of their household expenses. Households have a combination of fixed expenses that are the same during every period and variable expenses which fluctuate in cost during different periods. For instance, while a household may pay the same in rent every month of the year, they will likely spend more on their energy bills as heating costs increase in the winter months.

While these expenses may fluctuate over time, being cognizant of them is the key to maintaining a financially harmonious household.

Whatever one’s household income, understanding the importance of household budgeting may help to substantially increase savings by cutting unnecessary costs and reducing financial stress. Failing to account for household experiences can lead to blind spots and unpleasant surprises every time the monthly bank statement arrives or a banking app is checked.

Common types of household expenses

These are the most common bills for both homeowners and renters. Some are paid monthly, but others can be daily, weekly, or annual bills.

• Rent/mortgage. Housing is many people’s largest monthly expense. This is usually a monthly payment to a landlord or a mortgage company, depending on whether someone owns or rents their home.
• Utilities. These include electricity, gas, and water bills, which could fluctuate based on usage. Internet and cell phone charges may also fall under this expense category and are often fixed monthly payments.
• Groceries. Food and other grocery items may vary in price, depending on where someone shops and what they put in their cart.
• Transportation. Gas, car payments, or public transport fees add up throughout the month, whether someone’s commuting or traveling for fun.
• Insurance. Common household expenses may include health, car, pet, and home insurance.
• Entertainment. This includes streaming services, dining out, hobbies and sports, travel, and other leisure activities. The cost of these expenses may vary depending on usage and budget.
• Debt repayments. Debt from consumer borrowing such as loans, credit cards, store cards, and deferred payments should also be factored into a household’s expenses.

Other household costs may include childcare, pet supplies, personal care, charity donations, seasonal holidays, clothing, and more.

What are the different categories of household expenses?

Categorizing expenses can help people plan their finances and potentially save. Organizing household expenses into categories could highlight how monthly income is spent, and where it might be wasted. For example, if a high proportion of monthly household income is spent on eating out, planning meals and buying groceries instead could lead to savings, freeing up cash to spend on other things.

Expenses can be fixed, variable, or semi-variable, which determines how much a cost could vary over time. Variable and semi-variable expenses may require more forward planning and careful budgeting, whereas fixed expenses may be easier to predict.

What are fixed expenses?

A fixed expense is a predictable cost which doesn’t fluctuate or change considerably. Examples of fixed expenses may include rent, mortgage, car payments, and insurance premiums.

What are variable expenses?

A variable cost changes over time, rising or falling depending on usage and need. This includes gas and transportation, groceries, healthcare expenses, and home repairs.

What are semi-variable expenses?

A semi-variable expense has both fixed and variable elements. These payments may go up or down when contracts end or are renewed. Utilities and internet costs can be semi-variable, depending on the contract type.

How to track monthly expenses

Tracking monthly expenses may help some households understand where money is spent and where it could be saved.

This section will offer budgeting practices for households in any income bracket and help demonstrate how to track expenses effectively.

Step #1: Create an expense list

List all household expenses in a spreadsheet. Include each bill and outgoing payment, as well as the fixed or variable amount, payment date, and frequency. Don’t forget expenses which come around once or twice a year, like car insurance and repairs.

Step #2: Set up a tracking system

An expense tracking or banking app may be able to automatically categorize and add up expenses, as well as factor them into a budget. The app may send notifications when a payment is due and potentially offer the ability to automate regular savings transfers.

Step #3: Collect receipts and statements

Tracking receipts and statements may help people keep track of past expenses and maintain accurate records.

Step #4: Monthly review

Regular reviews may help people monitor how well a household is sticking to its monthly budget. This could help highlight which categories are over or under budget and demonstrate how much is left to spend or save.

Step #5: Adjust and update

As variable and semi-variable expenses change, budgets can too. Being able to predict a new or larger expense may make it easier to plan for.

Step #6: Annual review

Reviewing a budget at the end of each year may provide a detailed view of how expenses fluctuated over the previous 12 months, opportunities to save, and how financial planning could change the next year.

Strategies for managing expenses

Tracking expenses and planning ahead could potentially help households reduce costs and save.

Canceling underused subscription and streaming services, or alternating between services, may help save a significant amount each month. Using the cheapest method of travel and minimizing restaurant spending and takeout may cut the cost of leisure time. Creating savings goals could also be a motivating way to put cash aside for vacations, holidays, and home improvements.

To build savings, savers could set up a direct deposit to a savings account at the beginning of each month or utilize a savings app to help facilitate savings goals. Instead of renewing contracts automatically, price comparison tools could possibly help find good insurance and utility deals. Finally, if online shopping or takeout food keeps eroding a monthly budget, kicking the habit could also grow that savings pot.