How much do you know about the money you spend? How well does your ideal budget track with your actual budget? If you’re like many people, you have enough to cover your expenses. But when it comes to emergencies or major unexpected expense items, you are less likely to be able to pay for it. You may feel stress and not have the extra cash to pay for everything from a health scare to a car repair. That’s why many experts advocate gradually accumulating an emergency fund. Even just a few thousand dollars can make all the difference in the world. But until you do that, there are some steps you can take.
Photo by Lechon Kirb on Unsplash
Dealing With a Major Unexpected Expense
A major unexpected expense usually means it is something that must be dealt with immediately. These types of events can surprise and shock even the best budget. It’s essential to set aside money in the budget for the unexpected.
Smaller unexpected financial headaches can be handled with a miscellaneous budget category.
Allocate money every month to handle them. Months when there were no surprise expenses the money is left to build up. It then can be used for other months when it may surpass your monthly misc budget allocation. This would cover small home maintenance issues, auto servicing like oil changes or tire replacement, school needs, traffic or parking tickets, eye glasses, etc.
A major unexpected expense will require having an emergency fund.
A sufficiently sized emergency fund can take time to build up. These unexpected surprises are the more financially painful to our budgets. Things associated with medical care, complete auto breakdown, major home repair like plugged or broken sewer pipe, mid-winter furnace failure, storm damage, etc. They can challenge even the most robust emergency fund.
What else can you do?
Until a suitable emergency fund can be grown there are some other considerations. For starters you can ask if you can pay for the expense over a few months or a few payments. If you have a plan for paying off the balance, you can also consider a credit card.
What are some other ideas? This graphic offers some tips.
