Unexpected expenses can cause a great deal of financial hardship if you don't have the funds on hand to take care of them. Following are seven examples of expenses you should prepare for.
1. Appliances Breaking Down
Appliance failures can be a big disruption to your everyday life. If your refrigerator or washing machine, for example, stops working, you're looking at issues with storing food or piling up laundry until you get a replacement. Depending on your lifestyle, this can result in varying degrees of inconvenience. If you aren't prepared for a big repair bill or even replacement of a major appliance, it can be disruptive to your budget. Consider a homeowners warranty policy that covers appliances, or set aside some money in savings as an emergency fund.
2. Car Problems
Car problems might be even more disruptive than appliance issues if they are severe enough and if you rely on your vehicle on a daily basis. If you aren't good at auto repair yourself, you're most likely looking at significant costs for major repairs. You might also have to rent a vehicle to get around as you wait for your own to be fixed, which can be a further financial setback. Make sure you keep up with regular maintenance like oil changes to keep your vehicle in good shape. Again, a savings account can be a useful tool to help you be prepared.
3. Medical Issues
Medical issues obviously carry greater concerns than just finances, but the reality is that they can also get very expensive. Even if you have health insurance, you have a deductible to meet, and if you have a family, you will have more doctor visits to account for than just your own. So, take care of yourself and your family. Ask your employer if they offer a Health Savings Account (HSA), which can help you build up a cash reserve for medical expenses. Perhaps the expense of a pool or gym membership might be a good investment to keep you healthy and, hopefully, help avoid medical expenses.
4. Pet Emergencies
Pets are members of the family, and they too can have medical emergencies. Keep pets up to date on vaccinations and other care, such as heartworm, flea, and tick prevention. Consider getting pet insurance to minimize any major, unexpected expenses.
5. Unexpected Travel
Travel can be expensive, and when you haven't been planning on the trip, it can catch you off guard. If a relative dies or needs assistance, for example, you might find that you need to quickly get away. If you have a distance to go, you're going to face expenses whether you fly, drive, or take the train or bus. If you aren't staying with someone, you'll also have lodging costs.
"You never know when an unexpected trip is going to pop up – but you can pretty much count on it to happen every year or so," says Amy Livingston at Money Crashers. (1) "To deal with the cost, set aside a little money each month in a special slush fund that’s earmarked for travel costs. Then, the next time you get a wedding invitation, you’ll have the money for the trip ready."
6. Home Repairs
You've probably already invested a lot of money in your home, and when things go wrong, you can expect to invest quite a bit more. Even simple maintenance can get costly.
"One good rule of thumb is that 1% of your home's value should be set aside each year for home repairs and maintenance," says Paula Pant at The Balance. (2) "If you live in a $250,000 home, you should save $2,500 per year or about $208 per month. You won't spend $2,500 every year. Some years you'll spend just $100 or $200 on basic maintenance, like cleaning the gutters. But in other years, you'll spend $7,000 replacing the roof. The 1% rule is intended to be a long-term annualized average, and you can budget for these types of expenses by setting aside money in a 'home repairs and maintenance' fund. During months when you have smaller (or no) expenses, the money will remain available until you have a large expense."
7. Higher Bills
Inflation has hit the country hard this year, and that means you're likely facing higher bills for things like utilities. While you might expect these increased rates by now, it pays to be prepared for future price hikes.
Ultimately, the best thing you can do to prepare for any unexpected expenses is to save as much money as possible. Take the time to plan out a budget and consider putting more money into a savings account than you have in the past.
1. https://www.moneycrashers.com/types-unexpected-expenses-plan/
2. https://www.thebalance.com/what-is-an-unexpected-expense-453899