Budget Variance

Budget variance is the difference between the amount of money planned for an expense and the amount actually spent.

Reviewing budget variances helps individuals and households understand whether their spending matches their financial plan.

Types of budget variance

A variance can be:

  • Positive: Spending is lower than planned.
  • Negative: Spending is higher than planned.

For example:

If a grocery budget is £500 and actual spending is £450, there is a positive variance of £50.

If spending is £600, there is a negative variance of £100.

Why review budget variance?

Regularly reviewing variances helps:

  • Improve future budgets.
  • Identify changing expenses.
  • Adjust spending limits.
  • Understand financial habits.