How to calculate flexible-budget variance

Written by phillip chappell
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How to calculate flexible-budget variance
Calculating your flexible budget variance gets you a better read on your money. (Jupiterimages/BananaStock/Getty Images)

Calculating a flexible-budget variance differs from a fixed-budget variance in that the former requires more attention due to the constant monitoring of costs associated with a flexible budget. For example, a budget containing a category for food requires you to enter new items to the list of expenses almost every day. A fixed budget has static expenses, such as rent or car insurance, which cost the same amount every month.

Skill level:
Moderately Easy

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Instructions

  1. 1

    Add all your expenses in each flexible category in your budget. You need to ensure you have written down every expense throughout the month, or year if you are calculating an annual budget.

  2. 2

    Subtract the monthly total of each category from what was budgeted, the result becomes your category variance. If the result is negative, you went over budget. If positive, you are under budget.

  3. 3

    Add all categories together to get your total expenses for the month and subtract that from the total budgeted for the month. If the number is negative, you went over budget. If it is positive, you are under budget. This number is your flexible budget variance.

  4. 4

    Check the number for accuracy by subtracting the total amount of money you have at the end of the month, by the total at the end of the last month. The difference between the months should be identical to your flexible budget variance.

Tips and warnings

  • Note that it is important to input in Step 4 any credit card expenses you have not paid for the month, even if not applied to your bill yet.

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