How to plan for unexpected expenses
Sudden and unexpected expenses can be overwhelming if you aren't able to cover them without going into debt. Whether a fortuitous car repair, a trip to the emergency room, sick pet, or a leaky roof - these bills can leave you needing a helping hand if you aren't prepared.
What are some of the most common unexpected expenses?
Car repairs and/or traffic violations - Driving a car today is pretty expensive, but the cost can be debilitating if you start to experience significant car trouble. Even if your vehicle holds up, most of us are guilty of committing a traffic violation now and then.
Medical bills/vet bills - Even with insurance, out-of-pocket expenses can be costly before you hit your deductible. Medical emergencies can lead to some serious financial setbacks.
Home repair and expenses - A leaky roof, broken furnace...perhaps you're renting and are forced to find a new place for one reason or another. Whatever the case may be, it won't be cheap. Between paying for the material, and labor, or coming up with the first and last month's rent, you can be looking at bills in the thousands.
How to be more prepared for the unexpected
We can't predict the unexpected but there are ways to prepare for it. An inability to keep up with sudden bills can lead to further debt, and have a negative impact on your credit score. A good rule of thumb is to save 3 - 6 months' worth of expenses to help manage the extra payments. Here are a few ways to help you reach that goal.
- Set up an emergency savings account - Make saving a priority. Saving just $15 per week (essentially one meal at a fast food restaurant) can add up to $720 in a year. That savings alone could cover an unexpected car repair.
- Cut unnecessary expenses - From purchasing a daily morning coffee to paying for unused subscriptions there are many ways to cut out unnecessary daily, weekly, and monthly spending. Evaluate your budget, track your spending over the last year, and take note of where you can save.
- Sell unused assets - Unused tools, electronics, jewelry, and workout equipment can be listed on many direct selling apps. Any item of value that you don't use could help you pay a current bill or set extra money aside.
Being prepared for the unexpected is more attainable than it might seem. Take a deep dive into your spending habits, track unnecessary spending, set a goal, and you will be surprised at what can be saved! Don't let the unexpected become financially crippling.