But of course, not all bills are created equal. What do you do when your transmission explodes, you break a tooth at the Saturday softball game, or your only pair of glasses lose their lenses?
Unexpected expenses almost always seem to be emergencies, and they can really derail an otherwise well-constructed budget.
Here are some suggestions for keeping your budget on track when an unexpected expense tries to trip you up.
If you haven’t already, start an emergency fund. Most experts agree that you need at least $1000 in an emergency fund to start, but you should aim for 3-6 months worth of expenses. Once you have a cushion of cash to insulate you from life’s expensive difficulties, you’ll be able to focus on keeping your monthly budget in order.
However, your general emergency fund is ideally for major life changes, such as getting laid off or dealing with the aftermath of a flood, for example. So while having an emergency fund will help with more general unexpected expenses, it is not the complete solution.
Analyze and Create an Yearly Budget
Track your annual expenses. Gather together your check registers and receipts from the past year to three years and add up all the unexpected expenses you have accrued during that time. Obviously, since these expenses are “unexpected,” you can’t extrapolate exactly how much you will need in a particular year, but it’s a good idea to see what blindsided you over the past couple of years.
If you find that you’ve regularly spent $1500 each year for life’s little problems, you’ll have a goal to shoot for. Even if you do not spend exactly that much each year, having about that much set aside using an yearly budget will put you in a much better position financially than leaving it to chance.
Reassess Throughout the Year
Reassess your needs once or twice a year. Did your car pass the 100,000 mile marker in the past six months? Can you tell that the slight twinge in your incisor isn’t going away because you’re ignoring it? You may need to adjust your unexpected expenses savings account up or down depending on what needs you think might be coming in the future.
Don’t assume that once you’ve set your budget up, you can consider yourself done. Continue to tweak as you keep better records and learn more about what your particular needs will be.
Other Ways of Dealing with Unexpected Expenses
Find free or low-cost ways of dealing with these issues. If you haven’t had a chance to really build up your unexpected savings account when life drops a bill in your lap, you may still be able to get back on track without having to blow your budget.
Dental schools are always in need of patients for their students to practice on. Each graduating dentist must have completed at least one of every type of procedure available before he or she can walk across the stage-and patients often don’t have to pay a dime for the care.
Call your local university to see if they are in need of dental patients. Similarly, vocational and technical schools need the practice in diagnosing and working on cars. Your funny engine noise could help teach a budding mechanic, and having him fix it could cost you a great deal less.
Unfortunately, surprise bills are a fact of life, but they don’t have to destroy your financial plans. As long as you plan ahead for the unexpected, you’ll always be ready for it.
What about you? How are you dealing with unexpected expenses?