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Budgeting Tips for ‘Unexpected’ Expenses

Budgeting Tips for ‘Unexpected’ Expenses

In a perfect world, you would always have more than enough money to pay all of your bills, as well as those pesky unexpected expenses that pop up from time to time.

Of course, this world probably doesn’t exist, at least not most of the time. Like many people, having to buy four new tires for the car, pay for emergency surgery for your precious pup, or cover the cost of your kid’s soccer camp have put a serious dent in your credit card’s available balance.

Fortunately, there is hope, and it involves a two-pronged approach. First, it’s a good idea to set up an emergency fund to cover the true, honest to goodness emergencies that occur in life. The second goal is to realize that many of the “unexpected” expenses that come up should actually be considered “predictable” and should be part of your recurring budget.  With all of this in mind, check out the following tips:

Step one: set up that emergency fund

To help ease the strain on your savings account and/or Visa bills, set up an emergency fund that will cover true “out of the blue” costs — things like a hospital co-pay that is much higher than you realized or perhaps some lost wages due to an extended illness that uses up your sick days. Nerd Wallet offers some great advice on starting this fund; they include automatically transferring a small amount of each paycheck into a savings account each time you get paid. If you check your bank balance online frequently and are afraid you’ll be tempted to access the savings, see if you can “hide” the emergency account on the screen so you won’t see it. You can also try easy and even fun tips like putting all of the one dollar bills you get during the course of a week into a jar at home and then when it’s full, depositing it into your emergency fund account. While the perfect emergency amount isn’t really set in stone, shooting for $1,000 is a solid goal — remember, you don’t have to do this overnight.

Step two: realize that most “emergencies” are “overlooked” expenses

In many cases, we tend to think of any expense that is outside the realm of normal and predictable monthly bills as an “emergency.” But are they really? Go back through one year’s worth of banking account statements to see which expenses pop up that you should now start to plan for. A great example is car repair — if you own a car, you should really plan for routine maintenance like new tires from time to time, even if it’s not on a predictable basis. The same is true for vet bills, school supplies and field trip costs, holidays and birthdays, home maintenance costs and occasional landscaping bills. Once you have an idea of how much you spent over the last year for these “emergencies,” you can add them into your current budget. Take the grand total and divide it by 12 and you’ll have a rough-but-reasonable estimate of how much you should set aside each month to cover all of these extra costs.

Step three: making the bigger budget less overwhelming

In order to set aside more money each month for your bills — the recurring ones and the predictable ones, you may have to look into ways to save in other areas. For instance, to ensure that you can readily take care of any car issues that come up, look into an extended car warranty program; this way, if you do have a major mechanical car failure, you won’t have to dip into your regular budget and your emergency fund to cover it. You may also have to find ways to trim back on your regular expenses; try eating out one less meal per week, cut back on pricey smartphone plans if you are barely using any minutes, cancel a gym membership and consider mowing your own lawn if you can.

Step four: enjoy a less-stressful financial life

By realizing that most of life’s financial emergencies are as predictable as the monthly gas bill, you will have won half the battle. After that, work on both the “true emergency” fund and adjusting your monthly budget amount and you will feel much better knowing that you will have enough money each month to get through all of your bills.

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