There are two categories of costs: essential and discretionary. Essential costs are those that must be paid each month. These include payroll, taxes, health insurance, housing, and transportation. Then there are the optional expenses, which are those that you can skip without much consequence. However, you should still try to save some money for the future. The following is a breakdown of essential and discretionary costs. Make sure to prioritize your expenses accordingly.

Variable costs are expenses that fluctuate. They aren’t necessarily necessary to keep the lights on in retirement, but they can have an impact on your budget. For example, your gas and grocery expenses can increase or decrease depending on the season. You might be surprised by the amount of entertainment costs you can cover in one month if you plan on using air conditioning. However, your entertainment expenses, including hobbies, are all considered discretionary expenses.

Discretionary expenses are those that you can delay if you have enough money in your budget. These can include things like expensive movies, novels, or TV shows. Other non-discretionary expenses include taxes, groceries, and accommodations. These types of expenses are often referred to as luxury items or wants and can be postponed as necessary. This is especially useful when you want to spend a bit more on entertainment.

Variable expenses include those you can control. These are the ones you can cut, such as the digital cable bill. Cutting these bills can save you a significant amount of money, without affecting the basic necessities of life. Discretionary expenses can also include things like restaurant dining or a five-dollar cup of coffee at the coffee shop. If you don’t need to buy an expensive new television, you can reduce your digital cable bill to save money.