Unexpected Expenses

You've got a budget, and you're stickin' to it. Except--the car breaks down. Or Jimmy needs new softball cleats. Or something else happens.

No matter how carefully you budget, unexpected expenses always happen. Life is unpredictable. It's difficult to know what you will need next week or next month.

So how can you keep these unexpected expenses from wrecking your budget? Here are some of the strategies I've used.

1) Have an emergency fund. Experts recommend that you set $1000 aside in a savings account specifically for unexpected expenses. This prevents you from falling back on credit cards when things come up. Start with small amounts if you can't save much: Even $50 a month will give you a good start.

2) Find alternative ways to deal with unexpected expenses. If your car breaks down, could you have a relative fix it in exchange for an equally valuable service you could provide? (housecleaning, yard work, cooking) Kids' clothing resale shops may carry cleats for less, and if the kids have outgrown some clothes, you may get credit for them to pay for the cleats. For every emergency, there is a creative way to handle it for less or for free.

3) Satisfy needs, delay wants. Is the unexpected expense a need or a want? Does Junior NEED that new toy? Do you NEED a new dress for your cousin's wedding? Don't deny yourself everything you want, but delaying purchase of some of your want items will make that emergency fund last longer, enabling you to meet your other financial goals.

4) Use the envelope system. Many people find that several types of unexpected expenses crop up repeatedly for them. If you have an old car, expect frequent repairs. One friend has cats who get sick a lot, so vet bills are a frequent (but unpredictable) expense. To handle these bills, label one envelope for each type of bill. Put a set amount of cash into each envelope every pay period. Then when you have bills of this type, the money will be there. At least, you will be closer than you would have been.

The envelope system also works for short term savings, such as for vacations, stereo equipment, or computer upgrades. But that's another article.

Getting a handle on these unexpected expenses can make the difference between a balanced budget and slowly increasing debt. Do what it takes to be ready. You won't be sorry!

Go To Page: 1

Articles in this Topic    Discussions in this Topic