Preparing For Unexpected Expenses

Being prepared for unexpected expenses is one that many people wonder about and struggle with. The essence of saving money is to get us prepared for life’s eventuality. Be it a new baby or a sudden sack from work.

 

How do we plan for unexpected expenses? Here is my thought:

Plan in Advance

While there are some expenses that blindside you, there are many more expenses that you can plan for. For instance, your car will eventually break down or need repairs, you will have medical expenses at some point, and your home will need repairs.

Start expecting these things to happen and begin planning for them ahead of time. Look at your budget from the last year and see what categories were most likely to have those unexpected extra expenses.

Pad Your Budget Categories

You won’t know exactly how much you’re going to need in each budget category, but begin thinking ahead to what could possibly be breaking down or needing repairs in the next few months or few years and start preparing for those extra expenses ahead of time. By doing this, you aren’t completely caught off guard when you need to pay those unexpected bills.

I usually set aside extra money in a number of my budget categories each month — money for medical expenses that may be coming, money for home repairs that may need to happen, money for car repairs that will likely be needed. Each month, if I don’t need this extra money, I just keep setting it aside and building up a reserve. This way, when the “unexpected” expenses pop up, we’ve already planned ahead for them.

Note: If you don’t have any extra room in your budget to pad your budget categories, look at your budget as a whole to see if there are any areas you can cut back in to free up money to pad those categories that you’re continually in the red in right now. If there aren’t any areas or things you can cut, it’s probably time to start looking for ways to increase your income.

3) Build Up Your Emergency Fund

I also highly recommend beefing up your emergency fund. If you end up with extra expenses one month and your pre-budgeted money doesn’t cover it, you have your emergency fund to fall back on. This makes the unexpected expense an inconvenience rather than a true emergency.

You can consider making short-term sacrifices, taking on a few short-term side jobs, or selling old items you no longer need to give you some extra income to put toward building and increasing your emergency fund.

 

Comments
Blog post currently doesn't have any comments.
 Security code