Budgeting for Unexpected Expenses

Unexpected Expenses - Car Breakdown

How do you budget for this?

So you’ve got your budgeting system down, and you’re no longer caught flat-footed when your monthly bills arrive.

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.

Emergency Fund

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?

Last Edited: July 31, 2015 @ 8:06 am The content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Emily Guy Birken

Emily Guy Birken is a former English teacher, and an excellent freelance writer. She's also a stay-at-home-mom. She resides in Lafayette, IN, with her engineer husband and son. Emily's thoughts on parenting and life in general are found at The SAHMnambulist.

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  1. In addition to my yearly budget items ie Prop taxes, insurance, etc in my ing acct, I fund my “What Life Throws At You” account. When my water heater failed last year, the cash was there, did not have to touch my REAL Emergency account.

  2. Emergency funds are key, I finally made it to $5000 and it feels great! Next is paying off my last $4000 of my car, then I’m home free!

  3. 20 and Engaged says:

    After using our small emergency fund after Thanksgiving and after a lay off, it’s hard to rebuild an emergency fund. We’re literally scraping coins together to keep a balance in our savings, but it definitely gets difficult. I would love to reach $10K but it’s going to take a while with everything going on.

  4. @20 and Engaged – I know you will make it. You know, anyone who “gets it” like you do and sets their sights on financial goals will eventually achieve them. It’s just a matter of time. Good luck getting that built back up.

  5. I must admit that I changed my tune on this. I just save money in my ING savings account in an account creatively titled “Random.” I have money there for no absolute reason. And as much as it sucks it’s the money that I use to cover the curve balls that life will throw us. Some surprise bills are my fault. Other times they come out of nowhere, I suck it up and pay it off.

  6. I have an Emergency Fund and then I also have a couple of other funds in ING for unexpected expenses. One is actually called ‘unexpected expenses’ and one is called ‘car fund’. The car fund is used to pay for emergency repairs (like when the windshield cracked last time).

  7. Having an emergency fund is key. I’ve had two hiccups in my finances before (ER visit in Greece and unexpected car repairs) and have been so thankful for having a bit of extra cash in the bank. They key is to grow your emergency fund as you grow and have more stuff to cover financially.

  8. We are finally getting around to building our emergency fund to a decent level for a self-employed sole bread-winner. I’ve pretty much decided it needs to be enough to cover any of these type of expenses. Kill it with cash. Easy to say that these days though cause it’s hard to know what else to do with your money.

  9. Expect for the worse, hope for the best. I find this statement extremely helpful when dealing with finances. It’s OK to create financial scenarios which you’d likely experience in the future (a.k.a. unexpected expenses) but that’s only half of the equation. Do hope for the best. Hope that your emergency fund would be enough and don’t stop paying yourself first.

  10. I need an emergency fund for my emergency fund.

  11. Robert Tally says:

    The way I started my fund is by cutting stuff from my monthly costs so I could be in the positive to save. I cut my cable which was a quick $150 in the fund every month, if budgeted correctly. I also changed cell phone carriers to Net10. It’s a no contract phone and I can change my plan every month to customize it by usage, with no extra charge.

  12. I have a fund I call “Extra” and I seed it with random deposits here and there from “found money” – i.e., gifts, rebates, credit card reward checks, the occasional bonus, tax refunds, etc.  You’d be surprised at how quickly this adds up, and it allows me to keep my REAL emergency fund virtually untouched.